BRADENTON, Fla. — The Palm Beach County Solid Waste Authority in Florida will use the proceeds from $750 million of short-term, tax-exempt revenue bonds to provide initial financing for one of the first state-of-the-art waste-to-energy facilities to be built in the U.S. in many years.
The authority closed on the bonds four days before the Dec. 31 expiration of the alternative-minimum tax holiday.
Though final maturity of the bonds is 2031, the deal is structured with a mandatory put date of Jan. 12, 2012. At that time, the bonds will be remarketed or refunded.
Citi was the sole underwriter on the offering, which priced to yield 0.42% with a 1% coupon.
The structure allows the SWA to move forward with selecting a contractor for the facility and to complete site permitting while preserving the AMT exemption during the remarketing or refunding in 2012, according to Richard Miller, a partner at Edwards Angell Palmer & Dodge LLP, the county’s bond counsel.
The SWA is reviewing three bids for the contract to design, build, and operate a 3,000-ton-per-day plant. The winning bid is expected to be chosen in April. The site permit is expected to be approved by the Florida Public Service Commission later this year.
“The reason for doing the deal is that [the SWA] needed money to enter the contract,” Miller said, adding that the deal was sold at a time when the authority “would get a good market rate.”
The AMT exemption was a “nice benefit” but not the primary reason the bonds were sold before Dec. 31, he said.
The American Recovery and Reinvestment Act of 2009 provided a two-year AMT holiday on private-activity bonds as one of several stimulus provisions that sunsetted at the end of 2010. There have been unsuccessful attempts to extend the expired provisions, including the AMT exemption.
The short-term financing structure offered the county a number of benefits, according to SWA chief financial officer Charles Maccarrone.
The AMT exemption alone is estimated to save the county 50 basis points, or $40 million, on financing costs over the life of the bonds, he said.
The structure allows for termination of the bonds at no additional cost if the project is cancelled due to unforeseen difficulties, including permitting issues.
The offering “reduced the borrowing cost for the initial period, 13 months, by issuing short-term debt at much lower cost than the long-term bonds,” Maccarrone said.
The bonds received short-term ratings of AAA/F1-plus by Fitch Ratings and A-1-plus by Standard & Poor’s.
The financial adviser was Spectrum Municipal Services Inc.
Co-bond counsel was Carol D. Ellis. Disclosure counsel was Greenberg Traurig PA. Underwriters’ counsel was Ruden McClosky PA.
The authority began working on the massive project in October 2005. At the time, an existing 2,000 ton-per-day waste-to-energy plant was operating at 30% above its design capacity. Additional waste had to be disposed of in landfills.
The new plant will be a state-of-the-art facility that burns household garbage in a process that produces electricity.
Bids for the contract to build the plant have been received from Babcock & Wilcox Power Generation Group Inc., Covanta Energy Corp., and Wheelabrator Technologies Inc.
According to the Energy Recovery Council, 86 waste-to-energy plants operate in 24 states with the capacity to process more than 97,000 tons of municipal solid waste per day. Those facilities have the capacity to generate the energy equivalent of 2,790 megawatt hours of electricity.
“In the past three years, three facilities have completed construction on expansion units, and more expansions are both planned and under construction,” the council said in a report last year. “Several communities are also in the process of developing Greenfield waste-to-energy facilities.”
Since it can be significantly less costly to use landfills in many areas of the country, the expense of building waste-to-energy facilities is one reason why few have been developed in the U.S. in at least 15 years. The technology is widely accepted and used throughout Europe and Asia.
“Economic issues surrounding energy prices and landfill prices were the primary drivers limiting the construction of new facilities,” Energy Recovery Council president Ted Michaels said in an interview last year. “A number of those factors have changed, which is why there has been renewed interest in waste-to-energy around the country.”
With land and hauling costs at a premium in much of Florida, the construction of Palm Beach County’s new waste-to-energy facility is expected to extend the life of an existing landfill until 2040.
The county’s first 2,000 ton-per-day waste-to-energy facility opened in 1989 and is operated by Palm Beach Resource Recovery Corp., a subsidiary of Babcock and Wilcox Corp. The SWA sold $320 million of bonds in 1984 to finance that project.
In April 2009, the authority issued $261.5 million of bonds to refurbish the existing facility and to provide $5.2 million toward the preliminary design and engineering costs associated with the new project. Under the current schedule, 85% of the new plant is expected to be complete by December 2013.
The new facility, along with other improvements in the county’s integrated solid-waste facilities, will provide at least 50 years of capacity. Currently, the annual solid-waste fee for a single-family home is $156. That is expected to peak at or near $180 once the improvements are completed.
Palm Beach County is the third-most populous county in the state with nearly 1.3 million residents. It is located on Florida’s southeast coast about 70 miles north of Miami. The SWA is a dependent special district created by the Florida Legislature and governed by the county’s seven commissioners. It had $944.8 million of debt, including principal and interest, outstanding through 2029, according to the 2009 comprehensive annual financial report.