Bonds and Financing

Silicon Valley Clean Energy Project Bond Deal to Result in $4.5 Million Savings Annually

California community choice aggregator Silicon Valley Clean Energy closed its second prepayment transaction to finance its clean energy supplies, resulting in significant savings to the agency, it said on Feb. 7.

The savings are approximately $4.5 million annually, a 10 percent discount on the cost of power supply contracts representing about 55 megawatts. The Clean Energy Project Bonds are valued at $841,550,000, the CCA said.

The goal of the prepayment transaction is to reduce the cost of power purchases on quantities delivered under the prepay structure with minimal risk to SVCE.

The prepay structure enables publicly owned utilities, including CCAs, to reduce their energy costs by financing the acquisition of long-term energy supplies with tax-exempt bonds. For decades, municipal utilities have used the prepayment structure as an industry standard practice to reduce costs for the purchase of natural gas.

In June 2021, four CCAs, Central Coast Community Energy, East Bay Community Energy, Marin Clean Energy and Silicon Valley Clean Energy, jointly formed the California Community Choice Financing Authority, a Joint Powers Agency.

CCCFA was created with the goal to reduce the cost of power purchases through a pre-payment structure. These prepayments allow CCAs to reduce customer costs and increase funding available for local programs.

A tax-exempt public electricity supplier, a taxable financial counterparty, and a municipal bond issuer enter into a long-term supply agreement called a Clean Energy Project Revenue Bond to pre-purchase wholesale zero-emission clean electricity from sources like solar, wind, geothermal, and hydropower.

The municipal bond issuer – in this case, CCCFA – issues tax-exempt bonds to raise the funds for the transaction, flowing the funds to the financial counterparty. The financial counterparty utilizes the bond funds and provides a discount to the CCA on the power purchases based on the difference between the taxable and tax-exempt rates.