A $464.5 million offering of taxable revenue bonds by the City of Austin, Texas, to fund the acquisition of a biomass-fired power plant for the city’s electric utility, Austin Energy, has been awarded the Deal of the Year-Southwest from the Bond Buyer.
Austin Energy noted that the Bond Buyer’s editorial board considered a range of factors when judging entries, including: creativity, the ability to pull a complex transaction together under challenging conditions, the ability to serve as a model for other financings, and the public purpose for which a deal’s proceeds were used.
The Bond Buyer is a trade publication that covers the municipal bond industry.
Southern Power, a subsidiary of investor-owned Southern Company, on June 13 completed the sale of the Nacogdoches Generating Facility to Austin Energy. The plant is a wood waste biomass-fueled power plant in East Texas.
The transaction created a clear path to eliminate an above-market power purchase agreement, which will allow Austin Energy to save its electric utility customers almost $300 million of net costs over the next 12 years.
“This acquisition provided us a way to eliminate the obligations associated with an above market power purchase agreement and replace escalating capacity payments with long-term, fixed-rate taxable bonds,” said Jackie Sargent, general manager of Austin Energy, in accepting the award.
She noted that Austin Energy “maintained strong credit ratings and during this process we received an upgrade from Fitch Ratings. They and others have recognized the financial benefits of eliminating the PPA and gaining ownership of a significant regional power source.”
A video posted on the Bond Buyer’s website about the transaction is available here.