Ordinance Single Reading - Lubbock Power & Light: Consider an ordinance approving the extension of the Commitment Expiration Date of the Note Purchase Agreement for City of Lubbock, Texas, Electric Light and Power System Revenue Revolving Notes, a reduction to the Available Commitment under such Agreement, providing a substitute index for floating rate notes, and other necessary and appropriate amendments; approving and authorizing certain authorized officers to act on behalf of the City; and providing for other matters incident and related thereto.
Item Summary
As part of the integration of the remaining load into the Electric Reliability Council of Texas (ERCOT) system, Lubbock Power & Light (LP&L) anticipates a sizeable capital improvement project for distribution projects that will improve its reliability and move customers from the legacy Southwest Power Pool (SPP) system to the ERCOT system.
The ordinance authorizes the extension of the Commitment Expiration Date of the Note Purchase Agreement relating to the City's Electric Light and Power System Revenue Revolving Notes (Notes). By extending the Commitment Expiration Date of the Note Purchase Agreement, the City will preserve the ability to issue Notes, from time to time, in an aggregate principal amount not to exceed $75,000,000. The Notes will be issued on a subordinate basis to LP&L's outstanding debt, and will be issued only upon approval of an amended Note Purchase Agreement with Bank of America.
The ordinance authorizing the issuance of the Notes is a "parameters ordinance" delegating authority to the Mayor, City Manager, the Chief Financial Officer of the City, the Director of Electric Utilities, or the Chief Financial Officer of LP&L (each an "Authorized Officer"), to approve the principal amount, the interest rate, the number of series, the price, and the other terms of the Notes, and to otherwise take such actions as are necessary and appropriate to effect the sale of such Notes. The proceeds of Notes will be used for the acquisition, purchase, construction, improvement, renovation, enlargement, and/or equipment of property, buildings, structures, facilities, equipment and/or related infrastructure for LP&L, including capital assets and facilities incident and related to the operation, maintenance and administration thereof.
The Program is expected to be utilized through December 31, 2024, to provide interim financing for LP&L's capital program, including the transition costs of the remaining load from SPP to ERCOT and including capitalized interest during and after the period of construction of the facilities.
A summary of the Program's key terms (following amendment) is as follows:
Program Size: $60,000,000 with the ability to expand up to $75,000,000
Type of Facility: Direct Purchase Revolving Note Program
Purpose: Fund distribution upgrades and other distribution needs in the City
Expected Closing Date: August 31, 2021
Program Expiration Date: December 31, 2024
Maximum Maturity Date for Individual Notes: 364 days from Purchase Date
Tax Status: Tax-Exempt (flexibility to draw on taxable basis as well)
Lien: Subordinate to existing senior lien bonds
Drawn Rate Pricing: Securities Industry and Financial Markets Association (SIFMA) + 38 basis points (bps)
Commitment Fee: Flat fee based on program utilization
Rate Covenant: 1.0x
A listing of parties to the transaction is as follows:
Issuer: City of Lubbock, Texas - Lubbock Power & Light (rated A1/A+/A+)
Initial Note Purchaser: Bank of America, N.A. (rated Aa2/A+/AA)
Bond Counsel: Orrick, Herrington & Sutcliffe LLP, represented by Jerry Kyle and Ben Morse
Financial Advisor: RBC Capital Markets, represented by Matt Boles
Paying Agent/Registrar: Bank of New York
At the conclusion of the program, LP&L intends to issue long-term financing to take-out all outstanding principal and interest amounts.
Fiscal Impact
The note proceeds will be used to fund capital projects and capitalized interest related to the financing. Based on the current draw schedule, it is estimated that costs related to the program will total roughly $1,211,000, broken down as follows:
