Wednesday, October 6, 2010

The Silence of the MoPEP Lambs

HERMANN ALDERMAN Brian Chorley (left) looks on as Vernon Kincheloe explains progress on the Prairie State Energy Campus construction project MoPEP cities are helping fund. The project’s costs have risen from $2.9 billion to $4.2 billion. MoPEP members voted Friday to issue $100 million in construction bonds to finance the group’s portion of the cost overruns on for the coal-fired power plant.HERMANN ALDERMAN Brian Chorley (left) looks on as Vernon Kincheloe explains progress on the Prairie State Energy Campus construction project MoPEP cities are helping fund. The project’s costs have risen from $2.9 billion to $4.2 billion. MoPEP members voted Friday to issue $100 million in construction bonds to finance the group’s portion of the cost overruns on for the coal-fired power plant.
LAKE OZARK, Mo., — Without asking a single question, MoPEP member cities voted unanimously by voice vote on Friday to issue an additional $100 million in construction revenue bonds to cover cost overruns on the Prairie State Energy Campus in southern Illinois.


John Tracy, city administrator for Owensville, did not cast a vote. Previously during votes to issue debt on the Prairie State, or the Iatan II project near Kansas City, Tracy has voted against such proposals. He said afterward that recent negotiations have shown MoPEP and MJMEUC officials seem willing to work with Owensville in the city’s efforts to exit the pool.

“I didn’t want to vote yes,” said Tracy about Resolution 07-2010 for the Prairie State project approved during the Missouri Public Utility Alliance’s annual conference held at Tan-Tar-A. “As a gesture of Owensville’s good faith, I didn’t want to vote no. As a gesture of good faith, I didn’t want to say anything.”

Bonds approved Friday go toward the estimated cost overruns listed by the daily newspaper of public finance, The Bond Buyer, at $1.3 billion. The original project was projected to cost $2.9 billion. Revised estimates on construction costs show the project at $4.2 billion. Duncan Kincheloe, general manager of the Missouri Public Utility Alliance, noted in his report to  Missouri Public Energy Pool cities that a negotiated  cap on construction costs had been reached.

The bonds approved Oct. 1 brings the total issuance of MoPEP and MJMEUC participation in the Prairie State project up to the $850 million figured originally authorized  back in 2007. Kincheloe’s report noted “This resolution would authorize final financing for the updated costs, and includes an increase of $7 million dollars over and above the $850 million authorization approved in 2007.”

Owensville’s portion of the long-term debt on the $100 million issue, calculated at the 1.23 percent rate of electrical power dedicated to Owensville’s future needs, is $1.23 million. On the entire $850,000 issuance by MoPEP for the project, Owensville’s portion is $10,541,100, according to Tracy’s calculations.
Owensville is seeking a replacement in MoPEP and such a replacement would take over the city’s assignment of power and financial commitment to MoPEP projects.

Tracy said recent discussions with MoPEP and MJMEUC (Missouri Joint Municipal Electric Utility Commission) members indicate a willingness to work with the city to accommodate an exit.

MoPEP cities have voted to “invite” any of the Sho-Me Electric Cooperative cities to join the pool through a request for proposal (RFP) due Oct. 1.  The pool, Kincheloe noted in his report, “is further pointing to a potential special opportunity to benefit from Owensville’s interest in assigning its MoPEP status.”

At a Sept. 21 committee meeting in Columbia of MoPEP cities, a motion was approved including a provision in the RFP to “credit any approved Owensville assignee approximately $60,000 in recognition of Owensville’s approximate” (6MW) peak electric use. Basically, the group granted Owensville a credit for paying into a reserve fund for the pool which generated $12.5 million from last fall to early this summer.
MPUA STAFFER Mike Loethen explains a resolution Friday authorizing the Missouri Joint Municipal Electric Utility Commission to issue $100 million  in revenue bonds for the Prairie State Energy Campus project. Based on new projections, Loethen said they may only need to actually between $78 million to $80 million in bonds to complete MJMEUC’s portion of the project. Cost overruns have driven the projected $2.9 billion project up to an estimated and recently capped completion total of $4.2 billion, according to The Bond Buyer newspaper which tracks financing projects. The bonds mature no later than 2042 and “shall bear interests at various rates not to exceed 10 percent” annually, according to the resolution approved by voice vote. MPUA STAFFER Mike Loethen explains a resolution Friday authorizing the Missouri Joint Municipal Electric Utility Commission to issue $100 million in revenue bonds for the Prairie State Energy Campus project. Based on new projections, Loethen said they may only need to actually between $78 million to $80 million in bonds to complete MJMEUC’s portion of the project. Cost overruns have driven the projected $2.9 billion project up to an estimated and recently capped completion total of $4.2 billion, according to The Bond Buyer newspaper which tracks financing projects. The bonds mature no later than 2042 and “shall bear interests at various rates not to exceed 10 percent” annually, according to the resolution approved by voice vote.
Minutes from the meeting also indicate a statement was made by Jim Roach, of Jackson, Mo., that “Owensville should have priority for any member transfer.” His motion was to include the credit provision into the RFP response to any Sho-Me cities expressing interest in joining MoPEP.


Tracy noted the city “did get a little commercial into the RFP” regarding their contribution to fund balances as a credit to a potential incoming member taking the city’s assignment. “It can’t hurt.”

City aldermen on Monday expressed frustration at what they perceive as another delaying tactic by Kincheloe. Tracy, however, noted the other cities appear to understand Owensville’s need to exit the pool and seem willing to help make it happen. “If they want to get along, we’ll go along until they prove different,” Tracy told The Republican this week.

Resolutions were also approved on vice vote issuing $20 million in construction bonds for the group’s portion of costs to help complete the Iatan II power plant near Kansas City. The measure funds a previous vote which allowed MJMEUC official to obtain a $20 million line of credit to cover construction costs. Another authorized the issuance of $20 million in revenue bonds for a MJMEUC combustion turbine project at Fredericktown, Mo.
Tracy did not cast a vote for, or against, either resolution.