Author: Copperwing Design

Energy Southeast priced a third prepay bond transaction on April 16, 2024. This prepay involved the issuance of $988M in prepay bonds and set a Morgan Stanley and ESE record by providing project participants with 13.2 percent savings on electricity over the initial period.

This is the second highest savings on record for prepay transactions. This issuance follows Energy Southeast’s successful closure of two other prepaid power transactions all within the last year. In the first two transactions, Energy Southeast issued a total of $1.1B in prepay bonds to fund the purchase of electricity over a 30-year period.

These transactions along with this new issuance will save project participants over $100M over the first eight (8) years of the transactions. This latest transaction was authorized by the Energy Southeast Board of Directors in December 2023. This transaction is the latest of three transactions that utilized a long-term partnership between Morgan Stanley, Alabama Power, and the Alabama Municipal Electric Authority.

Energy Southeast is excited to close these transactions and continue support publicly- owned gas and electric systems by providing low-cost, competitively priced wholesale natural gas and electricity.

In a follow-up to its first transaction, Energy Southeast has once again closed another successful prepaid bond issuance. The organization priced its second prepay bond on October 18, 2023, and closed the transaction on October 27, 2023. This bond issue, with a total par value of $608 million, represents a significant step forward in Energy Southeast’s ongoing commitment to economic and energy stability in the region.

The proceeds from this issue will be utilized to prepay the costs of acquiring electric energy for a 30-year term. This energy will subsequently be sold to a single project participant, the Alabama Municipal Electric Authority, under a Power Supply Contract. The Prepaid Energy Sales Agreement with Morgan Stanley is a cornerstone of the transaction and will ensure a steady and reliable supply of energy.

By opting to prepay for the energy, the project participant is projected to realize savings of $26 million between now and 2031; the initial term of this second bond issue. This is in addition to the $17 million saved during the initial period of the first bond issue, bringing the total savings to an impressive $43 million.

Energy Southeast is well-positioned to continue exploring opportunities that yield economic benefits for project participants, utilizing tax-exempt electricity prepayments as a strategic financial tool.  As Energy Southeast celebrates this latest achievement, we also look forward to the future, ready to embrace new opportunities and continue their legacy of innovation and economic stewardship in the energy sector.

In a significant development for Alabama’s energy sector, Energy Southeast (ESE), a Cooperative District, priced its 1^st prepay bond issuance on June 8, 2023, and successfully closed the transaction on June 20, 2023. The bond issue of $501.24 million was achieved through the concerted efforts of various stakeholders, including the Alabama Municipal Electric Authority, Morgan Stanley, Municipal Capital Markets, Frazer Lanier, and various other advisors.

 

The proceeds from this bond issue will be used to prepay the costs of acquiring electric energy for 30 years under a Prepaid Energy Sales Agreement with Morgan Stanley. This energy will then be sold to the project participants under a Power Supply Contract. By prepaying for the energy, the participants will save $17 million over the initial period of the bond issue, which translates to an average annual saving of about $2.4 million.

 

This strategic move aligns with ESE’s mission to advance publicly owned gas and electric systems by providing low-cost, competitively priced wholesale electricity. It also underscores the commitment of ESE to invest in the future of the United States’ energy sector. ESE hopes to continue to find opportunities to provide economic benefit to participants, through the use of tax-exempt electricity prepayments in the coming months.