SVCE board authorizes CEO to initiate new prepay transaction, names Morgan Stanley as preferred supplier

The Silicon Valley Clean Energy Authority board on June 11 unanimously authorized the chief executive to negotiate and sign agreements to initiate a new prepay financing transaction and to engage Morgan Stanley as the prepaid energy supplier.

The action gives staff authority to engage municipal advisers, bond and tax counsel, disclosure counsel and other advisors needed to structure the transaction and prepare required documents; final execution of the prepay was not approved at the meeting and will be returned to the board with parameters, staff said.

A prepay is a financing mechanism that lets a party that does not have access to tax-exempt debt (for example, a bank or other funding recipient) receive a tax-exempt funding rate by using a separate issuer. SVCE's staff said the arrangement lets SVCE capture part of the difference between taxable and tax-exempt rates and pass that as a per-megawatt-hour discount on fixed-price contracts, reducing SVCE's effective cost of power without putting debt on SVCE's balance sheet.

Amrit (staff member) presented the proposal and described the mechanics:…