Structured Project Finance and Energy Advisory Practice

Team Accomplishments

Leaders in Municipal Prepaid Natural Gas Supply – Prior to joining MCM, our team pioneered the development of prepaid natural gas supply transactions and structures beginning in the late 1980’s upon deregulation of the natural gas pipeline industry and completed the first such transaction in 1994.  Since that time we have participated in approximately $10 billion in 21 prepay transactions as sole senior or co-senior manager (in all but one) or about 29% of all prepay par value originated. We were actively involved in submitting commentary to the IRS in the development of the 2003 IRS regulations governing power and gas prepayments.

Natural Gas Reserve Acquisition Advisory and Financing – Our team successfully advised The Southeast Alabama Gas District and The Municipal Gas Authority of Georgia relative to the competitive sale of Tampa Electric Company’s interests in 700 wells and 200 billion cubic feet of coal bed methane gas reserves located in Alabama’s Black Warrior Basin. We identified the opportunity, reviewed the reservoir engineering reports associated with the reserves, developed the pricing models, advised on the bid process, and ultimately financed the acquisition for each entity.

Gas Reserve Valuation and Sale – In 2013 our team advised Lower Alabama Gas District in the valuation and sale of its “Participation Shares” in Production Sharing Agreements with Public Gas Partners.  Since its formation in 2004, PGP has made acquisitions and capital investments in excess of $500 million in primarily natural gas properties consisting of over 3,300 wells in 16 states producing in excess of 30,000 Mcf per day. We modeled and valued LAGD’s Participation Shares based on the numerous reservoir engineering reports associated with the current assets as adjusted for various costs and recovery assumptions, and compared our results to similar valuations prepared by PGP and the proposed purchaser. Additionally, we conducted a cost benefits analysis relative to LAGD retaining its Participation Shares.  We delivered a detailed 66 page report with respect to our valuation of the Participation Shares, variances from valuations prepared by others, and the cost benefits analysis for use by LAGD’s management and its governing body in their evaluation of the sale and negotiations with the purchaser.  We assisted in the negotiation of the sale with the prospective purchaser of LAGD’s Participation Shares in conjunction with LAGD’s management and its counsel, including making recommendations with respect to the acceptance or rejection of transaction terms. In summary, our valuation of the Participation Shares identified several material errors and other questionable assumptions in the valuations of others, and contributed directly to a significant savings of LAGD in its successful negotiations with the purchaser.

Partial Structured Bond Acceleration and Unwind – In 2013 our team advised Tennessee Energy Acquisition Corporation in (a) the acceleration and unwind of $414,870,000 of its $1,994,475,000 Series 2006 A Revenue Bonds owned by the prepaid supplier, reduction of the original 486 Bcf supply by 92 Bcf, and corresponding changes to the project documents including a reduction in the termination payment schedule, and (b) the acceleration and unwind of $234,960,000 of its $1,060,220,000 Series 2006 C Revenue Bonds owned by the prepaid supplier, reduction of the original 262 Bcf supply by over 15 Bcf, conversion of 37.2 Bcf of prepaid quantities to pay-as-you-go quantities priced at a discount to index, and corresponding changes to the project documents including a reduction in the termination payment schedule.  In both transactions we worked with TEAC’s accountant who generated verification reports as to the adequacy of the termination payment schedules for each series on bonds.  We represented TEAC in discussions with Moody’s, S&P and Fitch in communicating the proposed document and cash flow changes and to secure confirmations of credit ratings.  Additionally, we advised TEAC in the negotiation of upfront payments made by the prepaid supplier in consideration of forsaken future savings associated with the reduced gas supplies, and the calculation of the portion thereof to be received by each of the projects participants that opted to receive an upfront payment in lieu of future deliveries and savings.  We negotiated with one of TEAC’s investment agreement providers to establish a mark-to-market value to be paid to TEAC for the related downsizing of its debt service fund deposits. Finally, after reviewing the project documents and the proposed amendments thereto, we provided reports to TEAC’s management and board of directors stating that we were of the opinion that the conditions for amendment of the project documents without bond holder consents had been satisfied.

Transaction Terminations - Our team has been retained separately by each of The Public Energy Authority of Kentucky, Southeast Alabama Gas District and Lower Alabama Gas District to provide services with respect to the early termination of gas purchase agreements between the clients and their prepaid gas supplier, Société Générale Energie (USA) Corp.  The early termination resulted in the mandatory redemption of variable rate demand bonds in the original issue amounts of $382,970,000, $456,095,000 and $906,725,000, respectively. We were engaged to (i) advise and consult with the clients and their legal advisors with respect to early terminations of their gas purchase agreement and the related contracts and agreements, (ii) provide quantitative analysis of the termination payment to be paid by the gas supplier upon the early termination of the gas purchase agreement, and (iii) assist the clients in business negotiations with the gas supplier regarding the early termination of the gas purchase agreement and termination payment.

Bond Holder Consent – Our team has been retained as financial advisor to a municipal utility joint action agency to act as financial advisor in connection with the solicitation of bondholder consents relating to amendments on approximately $725,000,000 of gas prepayment revenue bonds.  While at our prior employer we were retained by the Tennessee Energy Acquisition Corporation to act as the solicitation agent inconnection with the solicitation of bond holder consents relating to amendments to TEAC’s $1,994,475,000 Series 2006A and $132,545,000 Series 2006B revenue bonds. This was likely the largest bond holder consent solicitation ever undertaken by a municipal issuer.  The consents were successfully solicited with respect to (i) certain amendments to the gas purchase agreement between the gas supplier and TEAC, (ii) certain amendments to the indenture in connection with a proposed receivables purchase agreement among TEAC, the gas supplier and the trustee, and (iii) certain related matters, all as described in the consent solicitation statement and a supplemental consent solicitation statement.  We were retained to (i) advise TEAC with respect to the terms and timing of the consent solicitation, (ii) assist TEAC in preparing any documents to be delivered by TEAC to the bond holders or used in connection with the consent solicitation, (iii) review, comment and provide advice to TEAC with respect to the proposed amendments, including (a) the restatement of the termination payments under the gas purchase agreement, (b) the amendments to the gas purchase agreement and (c) the amendments to the indenture, (iv) review, comment and provide advice to TEAC with respect to the proposed receivables purchase agreement, (v) review, comment and provide advice to TEAC with respect to the consent solicitation statement and the other documents relating to the consent solicitation, (vi) coordination of the review of the effect of the proposed amendments on the ratings of the bonds by Moody's and Standard & Poor's and (vii) provide an evaluation and recommendation to TEAC's board of directors with respect to the forgoing matters.

Annual Audit and Financial Report - Our team reviewed the 11 outstanding derivatives transactions of Tennessee Energy Acquisition Corporation as of March 31, 2013 and at TEAC’s request, provided a Market Valuation Analysis report.  In order to conduct the analysis described in the report, MCM reviewed information provided by TEAC including commodity swap confirmations on Fixed Payer Natural Gas Swaps between TEAC and various swap counterparties, confirmations of the Fixed Price Agreements between TEAC and its member utilities, and commodity swap confirmations on Fixed Receiver Natural Gas Swaps between TEAC and various swap counterparties and the corresponding Prepaid Natural Gas Contracts.  Our report was relied on by TEAC’s auditors in compiling TEAC’s audited financial report.

IRS Bond Audits – In addition to prior experience in this area, our team is actively involved as the financial advisor to clients relative to ongoing IRS bond audits, and had prior involvement in such audits while serving in the underwriting capacity.  In recent years the IRS audit division has become far more active in the number and scope of its municipal bond audits.  MCM is knowledgeable of the details involved with the numerous stages and tactics employed by the IRS, and together with the client’s attorneys can advise on how best to respond to the IRS in the audit process.

VARIETY OF POWER AND GENERATING EXPERIENCE

• Our team has served as the sole senior bankers to the Municipal Energy Agency of Mississippi in its Series 2006 $103,545,000 issuance of revenue bonds for a 6% interest in the 665 MW coal fired Plum Point Generating Station.


• Our team structured the first publicly offered Clean Renewable Energy Bond for a pool of the Cooperative Finance Corporation’s National Rural Utility Cooperatives in the amount of $30,250,000.


• Additionally, together with Chevron Energy Solutions we acted as part of the successful development team in the $151,781,000 structured financing, engineering, procurement, construction and operation of a central utility plant and utilidor for the U.S. National Interagency Bio-defense Campus at Ft. Detrick, Maryland.


• Our team acted as part of the successful development team awarded the financing, EPC contract, fuel supply and transport, and operating contract for a $41,250,000, 33MW, gas fired co-generation facility on the campus of the University of Colorado.


• Our team structured the financing of $92,436,000 million of Energy Savings Performance Contracts for energy retrofits at Ft. Bragg, Fairchild AFB, Kirtland AFB and the Johnson Space Center by Honeywell on behalf of the Department of Defense. 


• Finally, our team has experience in modeling complex renewable energy projects involving tax equity investors utilizing production tax-credits / investment tax-credits, accelerated depreciation, and power prepayments.

Gas Advisory and Qualified Independent Representative for Proposed Gas Fired Generation Project – Our team has been engaged by a western power agency to serve as Gas Advisor to review and comment on the feasibility study for a base load electric generation project, including the assumptions and projections regarding the cost of natural gas for the project. We will prepare and deliver a written analysis and report with respect to natural gas market conditions and considerations and the pricing, terms and conditions of gas supply contracts for the use of management in its evaluation of the project.  We will make recommendations with respect to the acceptance, rejection or negotiation of transaction terms and will be reviewing and commenting on transaction documents.

Assuming the project proceeds, our team will be responsible for development of gas supply acquisition and risk management policies and procedures governing gas supply acquisitions and commodity price hedging transactions. We will oversee development of the gas supply acquisition program including recommendations regarding portfolio supplies and individual transactions. We will assist with identification of and preliminary discussions with prospective gas suppliers, including negotiation of terms and provisions of gas supply contracts.  Finally we will be serving as the client’s “qualified independent representative” (as set forth by the regulations of the Commodity Futures Trading Commission) in connection with the evaluation and negotiation of any commodity price hedges that may be approved by the client.

Federal Government Structured Project Financings – Our team has a long history of developing innovative securitizations of various federal cash flows totaling approximately $1 billion. Their experience spans federal enhanced use leases, energy savings performance contracts, and real property leases including the following:

• Department of Defense and three other cabinet level Departments - first ever securitization of federal Energy Service Contract (ESC) Payments for development of a Central Utility Plant and Utilidor pursuant to an Enhanced Use Lease with the U.S. Army on the campus of the Interagency Biodefense Campus at Ft. Detrick, MD


• Department of Agriculture – first ever tobacco subsidy transition payment program whereby ongoing federal payments to thousands of growers for the elimination of tobacco subsidies were purchased and monetized


• Department of Energy, National Nuclear Security Administration, Y-12 National Security Complex - securitization of federal lease payments to finance development of 550,000 square foot Public Interface Facility and an Engineering and Production Interface Facility as a major part of the revitalization of the complex


• Department of Energy, Oak Ridge National Laboratory - securitization of federal lease payments to finance development in conjunction with the Industrial Development Board of the City of Oak Ridge, TN of a Computational Sciences Building (housing the world’s fastest non-defense computer), Engineering Technology Facility, Research Office Building, and Multi Research Program Facility which combined house over 1,000 researchers, scientists, engineers and staff as part of the $370 million revitalization of the laboratory


• Department of Agriculture, Natural Resources Research Center - securitization of federal lease payments to finance development of a facility on the campus of the Colorado State University Centre for Advanced Technology


• Federal Energy Regulatory Commission – securitization of lease payments for the development of a facility in Indianapolis to house the Midwest Independent System Operator, a non-profit organization formed with the approval of FERC to coordinate, control and monitor the use of the electric transmission system


• Federal Aviation Administration - securitization of federal lease payments for development in conjunction with the City of College Park, GA Business and Industrial Development Board of the FAA’s Southeastern Flight Headquarters located near Hartsfield International Airport


• Veteran’s Administration – securitization of federal lease payments for development in conjunction with the Medical University of South Carolina of a portion of the cost of the Strom Thurmond Biomedical Research Facility


• Department of Homeland Security, FBI, CIA and DoD – confidential private placement for the securitization of federal lease payments to finance development of the interagency National Counterterrorism Center


• Various Department of Defense locations and NASA – securitization of numerous Energy Savings Performance Contracts owned by the Energy Services Contractor, Honeywell