Western Minnesota Municipal Power Agency issues more than $82 million in Power Supply Revenue Bonds

The Boards of Directors of the Western Minnesota Municipal Power Agency (WMMPA) and Missouri River Energy Services (MRES) on June 26 approved the issuance by WMMPA of $82,425,000 in tax-exempt Power Supply Revenue Bonds.

The proceeds of the bond issue will be used to complete construction of the Red Rock Hydroelectric Project at the Red Rock Dam on the Des Moines River near Pella, Iowa. The funds also will pay for miscellaneous transmission improvements, and the cost of issuance.

WMMPA is a municipal corporation and political subdivision of the State of Minnesota and has financed the construction and acquisition for all of the electric generating and transmission facilities used to serve the municipal members of MRES. The 24 members of WMMPA also are members of MRES.

MRES is a not-for-profit joint-action agency that provides wholesale electricity and energy services to 61 member municipalities in the states of Iowa, Minnesota, North Dakota, and South Dakota. All MRES members own and operate local electric distribution systems.

WMMPA and MRES have a power supply agreement under which WMMPA sells to MRES all of the output of its generating and transmission facilities. MRES provides all administrative services for WMMPA.

Pricing of the bonds was completed June 21 with Citigroup acting as senior underwriter. The bond closing is set for July 11. The all-in true interest cost of the debt offering was 3.88 percent with an average maturity of just under 22 years. The final maturity of the bonds is January 2049. Based on the average maturity of the bonds, this is the lowest borrowing cost in the history of WMMPA.

Depending on the maturity, between three and seven times more orders were placed for the bonds than there were bonds being offered. In all, 30 different investors placed a total of $408.7 million in orders. This strong demand allowed the underwriters to reduce interest rates from the initial offering price.

“The strong demand for the bonds and the low interest rates achieved is a reflection of investors’ high regard for WMMPA, MRES, and the MRES members,” said MRES Finance Director and CFO Merlin Sawyer.

Both Fitch Ratings and Moody’s Investors Service affirmed their long-standing ratings for WMMPA. Fitch rates the bonds AA- with a stable outlook, while Moody’s rates the bonds Aa3, also with a stable outlook. WMMPA is one of a just a handful of joint action agencies in the country, and the only one in the Midwest, with ratings in the double-A category.

“We are very pleased with the results of the sale and the strong investor demand for the bonds,” said MRES CEO Tom Heller. “The low interest rates and the strong credit ratings of WMMPA were the key factors in achieving these savings. The debt service savings will help keep MRES members’ power supply costs among the lowest in the region.”