5.4. ERMUSR 03-15-2016 - Laserfiche WebLink

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Elk River Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: Elk River Municipal Utilities Commission Theresa Slominski—Finance and Office Manager John Dietz—Chair Al Nadeau—Vice Chair Daryl Thompson—Trustee MEETING DATE: AGENDA ITEM NUMBER: March 15, 2016 5.4 SUBJECT: MMPA Buy-In; Bond Refunding Options BACKGROUND: When a purchase power contract was negotiated with MMPA to be our power provider commencing in 2018, it was noted that Elk River Municipal Utilities would have to buy-in to the agency for its proportionate share of the infrastructure and assets in order to be a member and receive power. As interest rates are currently lower and will most likely be higher in 2018,we met with Springsted to discuss options for an early payment towards our buy-in. In addition to any payment made this year, in 2018 there will have to be a"true-up"of the buy-in amount based on our size and load at that time,and a final payment made. Springsted also provided us with a refunding opportunity for our 2007A Electric Revenue Bonds. DISCUSSION: Discussions with Springsted centered around being able to take advantage of current low interest rates, and the timing of bonding so as not to jeopardize any bonding the City would be doing. This year would be a good year in terms of timing as the City is not planning on bonding this year,but may in 2017. With the last refunding that the Utilities did in 2014 of$2,030,000,we structured it so that the bond would be paid off in 2018,when the new bond funding for MMPA buy-in would begin. With the proposed refunding of the 2007A bonds for$1,480,000,we would want to see if we could structure it the same way. These are the only two bonds specific to the Electric Department. (We also have a General Obligation Bond Issue for the refunding of the City Hall/Utility facility that is shared between the Electric and Water Departments.) Any additional bond now would be structured to pay interest only until 2018. In preliminary conversations with MMPA,Elk River Utility's buy-in today is projected to be just under $14,000,000,and as high as $18,000,000 in 2018 when we actually become a power purchasing member. This is greater than originally projected in 2014 because of two factors: first,ERMU has grown in load and customer size faster than almost all the other members of MMPA effectively increasing our load ratio share which is a determining factor for the buy-in amount; second,MMPA has and continues to have high level performance adding assets,growing reserves,and building load. This would effectively increase the amount from which ERMU's load ratio share would apply in the buy-in calculation. • IP�ONEAEA AI Page 1 of 2 MATURE Reliable Public Power Provider P 0WE 0.E D T O S ERV E 176