Co-Generation Project Financing and Structure
In order to finance, construct and operate the $85 million project, EWEB and the PUD formed an intergovernmental agency in late 1993 under the provisions of Chapter 190 of the Oregon Revised Statutes (ORS). This agency, which was authorized by the EWEB and Clatskanie Boards and named the Western Generation Agency (The Agency), sells the project output to Bonneville and contracts with James River for operation and maintenance of the project.
The Agency financed the construction of the project with (i) $70 million in project revenue bonds, which will be paid solely from project revenues and (ii) approximately $15 million of equity contributed by EWEB in the form of electric system revenue bonds. The EWEB contribution paid for 50% of the cost to construct the steam turbine facilities. The project debt issued by the Agency is intended to cover the cost to construct the fluidized bed boiler and 50% of the steam turbine facilities.
In order to finance the project with project revenue bonds, EWEB agreed to furnish the project equity or “down payment” in the form of electric system revenue bonds. EWEB also agreed to subordinate payment of the EWEB debt service to payment of the operation and maintenance costs to Fort James and payment of the debt service for the project revenue bonds. This financing structure allowed the project to be financed at a lower interest rate. In return for contributing the equity and agreeing to subordination, EWEB receives an additional payment from the project on an annual basis.
The intergovernmental agreement executed by EWEB and Clatskanie defines the purpose and scope of responsibility for the Western Generation Agency. Under the terms of the agreement, the Agency owns the cogeneration project and all project revenue bonds issued by the Agency and all other obligations incurred by the Agency will be paid from the revenues derived from the sell of the project output to Bonneville.
Under the provision of the applicable ORS statutes, the project debt was issued by the Agency under the Uniform Revenue Bond Act. In addition, because this agency was the first of its type to be formed in the State of Oregon for purpose of owning and constructing an electrical generation facility, EWEB and Clatskanie took the necessary legal steps to have the Agency validated in the Columbia County Circuit Court.