3.05.07

CPEP purchase to save customers money

Central Plains Energy Project (CPEP) recently completed the acquisition of a reliable, firm, 20-year natural gas supply through the issuance of $529 million of tax-exempt bonds.

CPEP is a joint action natural gas supply acquisition agency formed by Metropolitan Utilities District of Omaha, Nebraska (M.U.D.), Cedar Falls Utilities of Cedar Falls, Iowa (CFU) and Hastings Utilities from Hastings, Nebraska.

Over the term of the contract, the gas supply will serve a portion of M.U.D.’s and CFU’s customer needs at a substantial discount to market prices. M.U.D. and CFU estimate savings will be more than $62 million over the next 20 years, or approximately $58.3 million for M.U.D and $3.7 million for CFU.

CPEP completed the transaction with J. Aron & Company, a subsidiary of the Goldman, Sachs Group that provides energy services in the U.S. and Canada. CPEP issued $529.1 million in revenue bonds to finance the long-term supply acquisition. M.U.D. and CFU entered into 20-year supply agreements with CPEP to purchase the entire volume of gas.

“This is a great day for M.U.D. and our customer-owners,” said Jim Knight, vice-president, Gas Operations. “When we formed CPEP, we envisioned the day when a transaction of this type would be completed. But even in our most optimistic projections, we did not envision the high level of savings we achieved for our customers,” he said. “M.U.D. will pursue a second CPEP transaction with deliveries targeted to begin   next winter,” said Knight.

“This program brings lower natural gas prices for CFU and our customers for this winter and for the future,” said Joe Bruns, supervisor of Gas Operations for CFU. “I’m pleased to be a part of the team that brought these benefits to our municipal utility and gas customers of Cedar Falls.”

Bruns and Knight are directors of CPEP, which is managed by a board consisting of a director from each member system. CPEP is a governmental agency formed under the provisions of the Nebraska Interlocal Cooperation Act and the Nebraska non-profit corporations law. CPEP operates for the benefit of the participating municipalities.

The team of professionals, hired by the CPEP Board to work on Project No. 1, has extensive experience with natural gas prepayment transactions in other parts of the U.S. The CPEP transaction achieved economic savings superior to those achieved by other joint action agencies for supply transactions completed to date.

Since Federal Regulations were clarified in 2003, an estimated dozen natural gas prepayment transactions have been completed by joint action agencies throughout the U.S.

CPEP developed its project based on a business model in which participants:

• Make all decisions concerning the structure, size and other fundamental parameters of the project;
  
• Purchase all of the gas supply acquired by CPEP through the issuance of bonds for the entire term of the financing, and
  
• Provide the gas supply for use by customers in their individual service areas.

The benefits achieved through the program are realized by the individual participants, who in turn pass the benefit to their customers.

CPEP is headquartered in Lincoln, Nebraska. For more information, contact Evan Ward at 402.474.4759.

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