06-15-2009 ERMU MIN SPECIAL - Laserfiche WebLink

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Special City Council and ERMU Commission Page 2 June 15,2009 o Costs&Financing Mr.Davis,with R.W.Beck,provided an evaluation of projected power supply costs for various power supply alternatives under multiple market condition scenarios. He reviewed current power supply arrangements and resources.Four power supply alternatives were discussed. Mr.Davis was asked to outline some of the risks for the city to become a co-owner. Those risks included: ■ Possible Co2 charge • Loss of Load • Modelings (scenarios)were very conservative • Project becomes a"no-go"vote on September 11 by current co-owners • Possible$3 million loss if there is no closing ■ Interest rates and capital cost runs. • Fuel costs • Performance at the plant • Project incompletion or delay • Financing Ms.Johnson asked for an explanation of the financing for this project. Mr. Schulte outlined the following costs to the city for the Big Stone II project with 30 megawatt(MW) of a 500 MW plant and a 2015 in-service date. • Total capital cost: $96 million • Estimated one-time catch-up payment:$2.6 million • Estimated ongoing monthly payments: $51,000 Mr.Schulte stated by fall 2010 all co-owners must have their financing for the project in place at the financial close.Elk River would need to finance$90-110 million if they want 30 megawatts. Two options were outlined: • Elk River could bring its own money to the table by marketing its own bonds. • CMMPA could raise the money for the city for its share based on a contract the city would need to sign as collateral. CMMPA sells bonds in the marketplace to raise the money. Mr.Beck noted the city would most likely have to use CMMPA and the bonds would be revenue bonds.The interest rate would only be valid until 2010 then ERMU would be responsible for the$90-110 million debt. Mr.Zerhinger stated this would equate to 2.7 cents per kilowatt hours. It was noted that there would be no payments between the financial close date and the in- service date. Users of the facility would end up paying the interest and costs.The benefit goes to the user who is paying for it.