Energy Generation Energy Generation ProjectProject

Board MeetingSeptember 7, 2010

Prepared by: Mr. Douglas Barge Mr. Art HandY: Business Services\Financial Modeling\Construction Planning\QECB\Presentation B09-07-10

Qualified Energy Qualified Energy Construction Bonds Construction Bonds

Table of ContentsTable of Contents

A. Opening CommentsB. ProcessC. Financing PlanD. RecommendationE. Appendix

i

12 - 5

6 - 1112

DESCRIPTION PAGE NUMBER

Opening CommentsOpening Comments

The District has the opportunity to construct a solar power generation facility at no cost to the District

Financing will be subsidized by the Federal government Income cost savings from the project will provide

sufficient resources to pay off the debt Project should generate a net reduction in utilities costs

to the District

This project will be located at a number of District locations

1

ProcessProcess

ii

Project ScopeProject Scope The target photovoltaic (solar) system sizes are: 

Approximately 1.95 Megawatts (MW) total from installations at McNair HS, Bear Creek HS and Christa McAuliffe MS in the PG&E service territory

150 kW for sites (District Office) located in the Lodi Electric service territory.

The respective sizing was based upon various factors

For the Lodi Electric territory, the system was sized based upon the maximum allowable rebate value ($375,000 one-time apportionment per application)

For the PG&E served sites, sizing was based upon available rebate monies ($0.15 per kilowatt), as well as feedback from District administration and the Board's Energy Subcommittee.

2

Contractor Selection Contractor Selection ProcessProcess Staff identified the largest and most experienced

photovoltaic contractors and integrators in California. These companies - along with all companies that had previously contacted the District regarding PV installations - were invited to participate in the Request For Proposal (RFP) process

RFP’s were issued to fifteen (15) companies. Ten attended the mandatory job walk

District received five responses, some of which included multiple companies joining together in their response. The five companies that responded were:

Cupertino Electric, SunPower, Sun Edison/SPG, SPP/DRI, and Diede Construction/SPI

Each company provided a comprehensive response that met the requirements of the RFP.

All respondents had significant experience in designing, developing, installing and financing medium to large PV projects.

3

Pricing DetailsPricing Details Each of the respondents were asked to provide

pricing in one or all of the three formats

Lump sum purchase price Power purchase agreement (PPA) with a fixed escalator PPA with a discount to utility tariff

Of the five respondents only Cupertino Electric provided all three pricing methodologies

Based on the pricing information received and the District’s desire to purchase the photovoltaic system outright, Cupertino Electric was the apparent best responder

4

Cupertino Cupertino ElectricElectric

DiedeDiede

Const.Const.SPP/DRISPP/DRI

Sun Sun Edison/SPEdison/SP

G SolarG Solar

Sun Sun PowerPower

System System SizeSize

2,089 kW DCp

1,658 kW DCp

2,357 kW DCp

1,471 kW DCp

2,221 kW DCp

PPA RatePPA Rate $0.1546 $0.1872 $0.1745 $0.1730 $0.1771

Year 7 Year 7 BuyoutBuyout

$5,511,000 n/a $10,112,000 $5,207,340 n/a

Lump Sum Lump Sum Purchase Purchase PricePrice

$9,579,052 $8,326,850 $11,822,083 n/a $11,644,285

Purchase Purchase Price/WattPrice/Watt

$4.59 $5.02 $5.02 n/a $5.24

5

Financing PlanFinancing Plan

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The PlayersThe Players Federal Government

California Debt Limit Allocation Committee (CDLAC)

California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA)

Lodi Unified School District Capital Facilities Corporation (Lessor)

Lodi Unified School District (Lessee)

Financial Consultant (Stone & Youngberg)

Legal Counsel (KMT&G)

Cupertino Electric (solar contractor)

6

How Does the Financing How Does the Financing Work?Work?

7

CDLACCDLAC

CAEATFACAEATFA

StateState

Private SalePrivate SalePublic SalePublic Sale

CorporationCorporation

DistrictDistrict

Private SalePrivate Sale

Public SalePublic Sale

DistrictDistrict

ProjectProject

or

or

Why District Why District Private Private Sales?Sales?

The District would pay an additional fee if sale was done by the State (CAEATFA)

District will still have to pay fee of $5,000 for processing the application

Banks are showing interest in this kind of transaction with:

Lower cost to the District over the life of the debt

Less risk in the ability to sell all of the bonds

Lower issuance expenses than with public sale

8

COPs TransactionCOPs Transaction

9

A. Bond Proceeds $9,915,000

F. Silva Elementary School will be used as collateral for this debt

B. Project Resources $9,790,917

C. Cost of Issuance 120,000

D. Contingency 4,083

E. Total $9,915,000$9,915,000

DescriptionDescription SourcesSources UsesUses

Debt Service Debt Service PlanPlan

A. Energy Sales - Electricity $14,984,925

G. Debt payments will be made from the Lodi Unified School District Capital Facilities Corporation

C. Debt Payment $15,095,780

D. Maintenance Expenses 120,207

E. Insurance 185,934

F. Total $15,401,921$18,139,299

DescriptionDescription SourcesSources UsesUses

10

B. Federal – Direct Subsidy 3,154,374

$2,737,378$2,737,378Savings Thru Term of Savings Thru Term of LoanLoan

Net Savings By YearNet Savings By Year

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

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Staff RecommendationStaff Recommendation Board direct staff to proceed with the projects outlined in

this report, including the project funding model

District to sell COPs through a private sales agreement District will use half of the annual estimated profit for

ongoing maintenance of the system The remaining will be used to help fund the District’s utility

budget

Board approve resolution (separate attachment): Authorizing the District to proceed with development of the

project with Cupertino Electric Authorizing preparation of financial documents for Board

approval Authorizing professional financial and legal services Authorizing the payment of certain costs prior to bond date

of issuance12

Thank you!Thank you!

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AppendixAppendixA.A. Analysis AssumptionsAnalysis Assumptions

B.B. Income SourcesIncome Sources

C.C. CostCost vs. Savingsvs. Savings

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Analysis AssumptionsAnalysis Assumptions1. 2011 is a partial year with savings projected to begin in mid May

2. Power generation estimates are based upon the installation of a 2,089 kW PV array with a .5% annual degradation

3. PG&E cost are escalated at 3.75%/year

4. Lease payment is based upon a financed amount of $9,915,000

5. Financed amount includes all soft costs including loan issuance, consulting fees, DSA inspection and the cost of an inverter replacement at year 10

6. Lease payment is based upon a Qualified Energy Conservation Bond (QECB) at a net rate of 2.31% for a 16.5 year term

7. California Solar Initiative (CSI) is a performance based rebate estimated at $.15/kWh for 5 years, is based upon the current Step 8 of the tiered program

8. REC revenue is calculated at $0.015/kWh of produced kWh and escalated at 5%/year

9. Insurance cost is escalated at 1%/year

10. Net Present Value calculated using a 4.0% discount rateA

Income SourcesIncome Sources

B

kWh CSI REC TotalYear $/kWh Generated Income Incentive Revenue Sources

2011 0.194$ 1,526,764 296,192$ - 22,901$ 319,093$ 2012 0.201$ 2,804,548 564,485 420,682 42,068 1,027,235 2013 0.209$ 2,790,525 582,725 418,579 44,172 1,045,475 2014 0.217$ 2,776,573 601,555 416,486 46,380 1,064,421 2015 0.225$ 2,762,690 620,992 414,403 48,699 1,084,095 2016 0.233$ 2,748,876 641,058 412,331 51,134 1,104,524 2017 0.242$ 2,735,132 661,772 - 53,691 715,463 2018 0.251$ 2,721,456 683,156 - 56,375 739,531 2019 0.260$ 2,707,849 705,230 - 59,194 764,424 2020 0.270$ 2,694,310 728,018 - 62,154 790,172 2021 0.280$ 2,680,838 751,542 - 65,262 816,804 2022 0.291$ 2,667,434 775,826 - 68,525 844,351 2023 0.302$ 2,654,097 800,895 - 71,951 872,846 2024 0.313$ 2,640,826 826,774 - 75,548 902,322 2025 0.325$ 2,627,622 853,489 - 79,326 932,815 2026 0.337$ 2,614,484 881,068 - 83,292 964,360 2027 0.350$ 2,601,412 909,537 - 87,457 996,994

Total Life of Debt Services 44,755,436 11,884,314$ 2,082,482$ 1,018,130$ 14,984,925$

Cost vs. SavingsCost vs. SavingsLease Costs Total Net

Year Payment O & M Insurance Cost Savings

2011 214,461$ 3,395$ 5,658$ 223,514$ 80,312$ 2012 821,163 6,267 10,446 837,876 160,2622013 837,806 6,392 10,550 854,749 160,6902014 858,747 6,520 10,656 875,923 157,4902015 878,984 6,651 10,763 896,397 155,6882016 898,411 6,784 10,870 916,065 155,4152017 559,081 6,919 10,979 576,979 104,3722018 579,834 7,058 11,089 597,980 106,3372019 604,884 7,199 11,200 623,282 104,7902020 629,232 7,343 11,312 647,886 104,7592021 652,768 7,490 11,425 671,682 106,3822022 675,601 7,639 11,539 694,779 109,5802023 702,623 7,792 11,654 722,069 109,4932024 733,725 7,948 11,771 753,444 106,2622025 758,963 8,107 11,889 778,959 109,8622026 788,227 8,269 12,007 808,504 110,4412027 746,896 8,435 12,127 767,458 182,653

Total Life of Debt Services 11,941,406$ 120,207$ 185,934$ 12,247,547$ 2,124,787$

C* Net of Federal interest subsidy

*