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Energy Generation Project Board Meeting September 7, 2010 Prepared by: Mr. Douglas Barge Mr. Art Hand Y: Business Services\Financial Modeling\Construction.

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Presentation on theme: "Energy Generation Project Board Meeting September 7, 2010 Prepared by: Mr. Douglas Barge Mr. Art Hand Y: Business Services\Financial Modeling\Construction."— Presentation transcript:

1 Energy Generation Project Board Meeting September 7, 2010 Prepared by: Mr. Douglas Barge Mr. Art Hand Y: Business Services\Financial Modeling\Construction Planning\QECB\Presentation B09-07-10 Qualified Energy Construction Bonds

2 Table of Contents A. Opening Comments B. Process C. Financing Plan D. Recommendation E. Appendix i 1 2 - 5 6 - 11 12 DESCRIPTIONPAGE NUMBER

3 Opening Comments The District has the opportunity to construct a solar power generation facility at no cost to the District Financing will be subsidized by the Federal government Income cost savings from the project will provide sufficient resources to pay off the debt Project should generate a net reduction in utilities costs to the District This project will be located at a number of District locations 1

4 Process ii

5 Project Scope The target photovoltaic (solar) system sizes are: Approximately 1.95 Megawatts (MW) total from installations at McNair HS, Bear Creek HS and Christa McAuliffe MS in the PG&E service territory 150 kW for sites (District Office) located in the Lodi Electric service territory. The respective sizing was based upon various factors For the Lodi Electric territory, the system was sized based upon the maximum allowable rebate value ($375,000 one-time apportionment per application) For the PG&E served sites, sizing was based upon available rebate monies ($0.15 per kilowatt), as well as feedback from District administration and the Board's Energy Subcommittee. 2

6 Contractor Selection Process Staff identified the largest and most experienced photovoltaic contractors and integrators in California. These companies - along with all companies that had previously contacted the District regarding PV installations - were invited to participate in the Request For Proposal (RFP) process RFP’s were issued to fifteen (15) companies. Ten attended the mandatory job walk District received five responses, some of which included multiple companies joining together in their response. The five companies that responded were: Cupertino Electric, SunPower, Sun Edison/SPG, SPP/DRI, and Diede Construction/SPI Each company provided a comprehensive response that met the requirements of the RFP. All respondents had significant experience in designing, developing, installing and financing medium to large PV projects. 3

7 Pricing Details Each of the respondents were asked to provide pricing in one or all of the three formats Lump sum purchase price Power purchase agreement (PPA) with a fixed escalator PPA with a discount to utility tariff Of the five respondents only Cupertino Electric provided all three pricing methodologies Based on the pricing information received and the District’s desire to purchase the photovoltaic system outright, Cupertino Electric was the apparent best responder 4

8 Cupertino Electric DiedeConst.SPP/DRI Sun Edison/SPG Solar Sun Power System Size 2,089 kW DCp 1,658 kW DCp 2,357 kW DCp 1,471 kW DCp 2,221 kW DCp PPA Rate $0.1546$0.1872$0.1745$0.1730$0.1771 Year 7 Buyout $5,511,000n/a$10,112,000$5,207,340n/a Lump Sum Purchase Price $9,579,052$8,326,850$11,822,083n/a$11,644,285 Purchase Price/Watt $4.59$5.02 n/a$5.24 5

9 Financing Plan iii

10 The Players Federal Government California Debt Limit Allocation Committee (CDLAC) California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) Lodi Unified School District Capital Facilities Corporation (Lessor) Lodi Unified School District (Lessee) Financial Consultant (Stone & Youngberg) Legal Counsel (KMT&G) Cupertino Electric (solar contractor) 6

11 How Does the Financing Work? 7 CDLAC CAEATFA State Private Sale Public Sale Corporation District Private Sale Public Sale District Project or

12 Why District Private Sales? The District would pay an additional fee if sale was done by the State (CAEATFA) District will still have to pay fee of $5,000 for processing the application Banks are showing interest in this kind of transaction with: Lower cost to the District over the life of the debt Less risk in the ability to sell all of the bonds Lower issuance expenses than with public sale 8

13 COPs Transaction 9 A. Bond Proceeds $9,915,000 F. Silva Elementary School will be used as collateral for this debt B. Project Resources$9,790,917 C. Cost of Issuance120,000 D. Contingency4,083 E. Total$9,915,000 DescriptionSourcesUses

14 Debt Service Plan A. Energy Sales - Electricity$14,984,925 G. Debt payments will be made from the Lodi Unified School District Capital Facilities Corporation C. Debt Payment$15,095,780 D. Maintenance Expenses120,207 E. Insurance185,934 F. Total$15,401,921$18,139,299 DescriptionSourcesUses 10 B. Federal – Direct Subsidy3,154,374 $2,737,378 Savings Thru Term of Loan

15 Net Savings By Year 11

16 Staff Recommendation Board direct staff to proceed with the projects outlined in this report, including the project funding model District to sell COPs through a private sales agreement District will use half of the annual estimated profit for ongoing maintenance of the system The remaining will be used to help fund the District’s utility budget Board approve resolution (separate attachment): Authorizing the District to proceed with development of the project with Cupertino Electric Authorizing preparation of financial documents for Board approval Authorizing professional financial and legal services Authorizing the payment of certain costs prior to bond date of issuance 12

17 Thank you! iv

18 Appendix A.Analysis Assumptions B.Income Sources C.Cost vs. Savings v

19 Analysis Assumptions 1. 2011 is a partial year with savings projected to begin in mid May 2. Power generation estimates are based upon the installation of a 2,089 kW PV array with a.5% annual degradation 3. PG&E cost are escalated at 3.75%/year 4. Lease payment is based upon a financed amount of $9,915,000 5. Financed amount includes all soft costs including loan issuance, consulting fees, DSA inspection and the cost of an inverter replacement at year 10 6. Lease payment is based upon a Qualified Energy Conservation Bond (QECB) at a net rate of 2.31% for a 16.5 year term 7. California Solar Initiative (CSI) is a performance based rebate estimated at $.15/kWh for 5 years, is based upon the current Step 8 of the tiered program 8. REC revenue is calculated at $0.015/kWh of produced kWh and escalated at 5%/year 9. Insurance cost is escalated at 1%/year 10. Net Present Value calculated using a 4.0% discount rate A

20 Income Sources B

21 Cost vs. Savings C * Net of Federal interest subsidy *

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