The Western Minnesota Municipal Power Agency (WMMPA) has executed two interest rate swaps to lock in current low interest rates for the potential future refunding of previously issued tax-exempt bonds. The total value of the swaps exceeded $85 million.
The swaps were executed because WMMPA no longer has the ability to issue tax-exempt advance refunding bonds to take advantage of today’s low interest rates, WMMPA said on March 25.
The first WMMPA swap for $50.5 million has an effective date in January 2023. This swap was related to bonds issued in 2012. The fixed interest rate under the swap is 0.971 percent, which is estimated to result in a net present-value savings in excess of $5 million between 2023 and 2029.
The second swap for $35 million has an effective date of January 2026 and relates to bonds issued in 2015. The fixed interest rate under this swap is 1.117 percent, which is estimated to result in a net present-value savings in excess of $7 million between 2026 and 2035.
WMMPA has provided financing for, and is the owner of, all electrical generation and transmission facilities used by Missouri River Energy Services (MRES) to serve its 61-member municipal electric utilities in the states of Iowa, Minnesota, North Dakota, and South Dakota.
MRES and WMMPA have a power supply agreement under which MRES is entitled to the output of all facilities owned by WMMPA. They also have an agreement under which MRES provides all administrative services on behalf of WMMPA, which is made up of most of the Minnesota members of MRES.
The MRES and WMMPA boards approved execution of the swaps at their March 11, 2020 meetings.
“We are pleased that we could take advantage of today’s historically low interest rates to lock in savings that we couldn’t realize by conventional methods,” said MRES CFO and Senior Vice President of Administration and Finance Merlin Sawyer. “MRES staff and consultants worked very hard to get these transactions finalized, and they are to be commended for their efforts.”