Ohio-based American Municipal Power will sell $56 million of bonds Tuesday to refinance debt it used to prepay for solar power from 13 solar power plants.
AMP’s prepayment was negotiated between DG AMP Solar, a subsidiary of NextEra Energy Resources LLC and AMP, under a March 2018 power purchase agreement for solar facilities behind meters of AMP members. The seller builds, owns and operates all of the systems.
The initial systems consist of 13 systems with a rated capacity of approximately 36.825 megawatts located in Delaware, Michigan, Ohio and Virginia. AMP and its members own or have long term contracts for approximately 1,900 megawatts of generation and renewable resources made up approximately 21% of its members’ energy needs.
AMP has prepaid for 25 years of output starting in the commercial operating date of each system. Under the 25-year PPA with DG AMP Solar, LLC, AMP takes 100% of the solar output from the already constructed solar facilities that are located throughout AMP's service footprint. Over the term of the PPA, the prepayment balance is reduced by the value of the actual output credit until the prepay balance is $0.
The bonds are secured by the power sales contract between AMP and 22 participants. AMP sells the output it receives under the PPA to the participants who are obligated to pay their share of a demand charge sufficient to cover 110% of aggregate annual debt service. The PCS contains a step up provision implemented in the event if a default.
“Under the OSC, AMP will bull the participants for all costs payable thereunder, including debt service, if any energy is delivered from any system in a calendar month,” AMP said in an investor presentation.
Moody’s Investors Service rates the bonds A2 and S&P Global Ratings rates the bonds A.
Piper Jaffray is the senior manager. Citi and Huntington Capital Markets are co-managers. Ramirez &Co. Inc. is the financial advisor and Dinsmore & Shohl LLP is bond counsel.
“The solar project is part of AMP’s strategy to diversify its power supply and meet members' peak demand needs through the addition of cost-effective renewable energy which also lowers the members' carbon emission footprint,” Moody’s said.
The bonds are AMP's first to be issued under its solar prepayment indenture. AMP may issue additional bonds to fund the prepayment on 23 MW of solar power now under development or study, according to Moody’s. AMP has $5.1 billion of outstanding revenue bond debt related to its financing of other generation projects.
As of Dec. 1, 2018, AMP had a $600 million line of credit with a syndicate of banks led by Royal Bank of Canada. It has drawn roughly $259 million from the line for various purposes including the initial prepayment for the solar electricity prepayment financing, which will be repaid with the bond proceeds; refunding certain obligations or providing working capital for other AMP projects.
The line of credit is a general obligation of AMP’s 135 members with draws approved by the AMP Board of Trustees. The expiration date is May 2, 2022.
