Prepayment
Prepay to Save
Energy Southeast has helped public power utilities achieve an average of 9.5% in energy savings through electric prepay projects. These savings are made possible through tax-exempt prepayment bonds. The bonds are used to secure long-term supplies of electricity, that are then sold to governmental owned utilities at a discount.
As a public power organization with proven experience executing prepayment transactions, Energy Southeast brings a perspective no other bond issuer can offer. We’ve used prepayment financing for our own long-term energy needs and leverage that real-world experience to help other utilities successfully complete their own transactions.
Month Timeline
Prepaid Bonds Issued
of Savings
The Energy Prepayment Process
Every prepayment project is customized, but most follow a similar three-phase process. From initial conversations to closing, transactions typically take between five to twelve months, depending on how quickly the team moves and the market conditions. Your utility will be guided every step of the way, and a simple conversation with our team at Energy Southeast is all it takes to get started.
Start a ConversationGetting started is simple. We’ll schedule a phone call and discuss your utility’s needs to determine whether prepayment could be a good fit. The only investment at this stage is staff time.
- Meet with Energy Southeast for a discovery call
- Discuss long-term goals and energy needs
- Learn how prepayment financing works and the savings it can yield
- Review current power supply arrangements and contracts
- Consult with advisors or legal counsel as needed
If a prepayment project is a potential fit, Energy Southeast will connect your utility with a team of experienced partners to begin structuring the deal. Your main responsibility will be to participate in regular meetings and to keep your utility board informed.
- Team evaluates energy supply options, pricing, and transaction structure
- Projected energy demand is estimated to optimize discount
- Financial analysis and due diligence is conducted
- Transaction agreements are developed and negotiated
- Education sessions and workshops are held with utility leadership and governing boards
- Transaction documents are drafted and reviewed
When the structure is finalized, the transaction moves to execution which must be timed with favorable bond market conditions. Once bonds are priced and sold, prepaid electricity will be delivered to your utility and real savings will hit your bottom line.
- Transaction documents and approvals are finalized
- The deal team times the bond sale to optimal market conditions
- Bonds are priced and sold in the municipal market
- Bond proceeds are used to fund the prepayment with your supplier
- Long-term energy deliveries begin under the new agreement
- Utility savings start to flow
Prepayment FAQs
Energy prepayment is a financing structure that allows public power utilities to purchase long-term supplies of electricity in advance through prepayment bonds rather than buying power incrementally through traditional power purchase agreements.
Prepayment bonds are a type of tax-exempt municipal bond that can be used by public power utilities to secure long-term supplies of electricity or natural gas at a discounted rate.
Energy Southeast has helped utilities achieve an average of 9.5% in energy savings through prepayment. These lower energy costs can help end customers save on their power bills and create more stable rates and expenses over time. Prepayment savings can also increase utilities’ financial flexibility and support long-term infrastructure improvements.
Tax-exempt, prepayment bonds carry lower borrowing costs than taxable debt. The difference between the cost of financing and the cost of purchased power is passed through as savings to the utility and its customers over the life of the deal.
Because the structure is tied to power the utility would already purchase, it does not introduce new operating costs or require a rate increase, and it does not negatively impact a utility’s credit metrics or borrowing capacity. At the same time, it creates predictable, long-term revenue for investors backed by investment grade credit quality, making it a favorable structure for all parties involved.
Energy prepayment structures have been used successfully by public power organizations for decades, originally in the natural gas sector before expanding into electricity.
To make prepayment arrangements possible, several key groups must work together in close coordination:
- The Customer (Public Power Utility): The entity that receives and delivers the electricity to their community.
- The Bond Issuer (Energy Southeast): The agency that issues the bonds and helps coordinate the transaction structure.
- The Prepaid Supplier: The entity that provides the prepaid electricity over the 30-year term.
- The Investment Bank: The entity that structures the financing, manages the flow of funds, and underwrites/sells the bonds to investors.
- The Investors: The financial entities that purchase the bonds, providing the necessary capital upfront to execute the prepayment.
Utilities of all sizes may be able to participate in electric prepay projects. Energy Southeast has experience aggregating multiple utilities into a single transaction, creating larger pooled opportunities that can improve efficiency and make prepayment accessible to utilities that may not be able to pursue a transaction on their own.
Prepayment transactions are carefully structured. Like any investment, there can be risks involved, but most of the financial risk is carried by the investors who purchase the bonds. These deals are designed so that monthly net payments cover scheduled debt service, even if energy prices change or fluctuate.
Electric prepayment agreements are typically structured with a 30-year term. This timeframe allows utilities to lock in discounted pricing and realize savings over an extended period.
Simply schedule a call with Energy Southeast. During our first meeting, we’ll discuss your needs and goals and determine if there could be a potential path to prepayment for your utility.
As a public power organization, Energy Southeast understands the unique operational, financial, and regulatory realities that utilities face. Our team has direct experience with electric prepay projects, having used this financial structure to meet our own long-term energy needs, and proven expertise helping other public power utilities successfully complete their own transactions.
We serve as both a bond issuer and active partner, coordinating key participants while also supporting the education and decision-making process with utility boards. As an industry peer, we bring practical insight and trust into a structure that can be complex to navigate.