This article is reprinted from CFC Solutions News Bulletin (23 January 2017).
The 19 member distribution cooperatives of Kansas Electric Power Cooperative (KEPCo), a generation and transmission cooperative (G&T) based in Topeka, Kansas, will receive more green power—thanks in part to $2.1 million in New Clean Renewable Energy Bonds (New CREBs) financed through CFC. The funding will cover construction of a 1-MW solar array, consisting of 4,560 photovoltaic panels, located on 22.5 acres in Butler County and interconnected through the system of KEPCo member Butler Rural Electric Cooperative Association.
“The Prairie Sky Solar Farm will help decrease peak demand, providing power cost savings to our rural electric cooperatives,” says KEPCo CFO Coleen Wells. “We’re proud that more than 50 percent of our energy mix comes from resources—nuclear, hydro, wind and solar—that don’t emit any greenhouse gases.”
Linda Graham, CFC special asset portfolio manager, points out that the KEPCo deal follows IRS action in 2015 to reallocate nearly $281 million in New CREBs for eligible renewable energy projects owned by electric cooperatives. The amount stems from $800 million in New CREBs previously earmarked for cooperatives by Congress, but not totally used.
“New CREBs come with a direct payment option allowing cooperatives to issue a bond [access a loan] at a fixed interest rate to CFC and then receive a payment from the U.S. Treasury over the financing term to offset a portion of interest expenses,” she explains. “The direct payment gives electric cooperatives benefits in lieu of those available to taxable entities, such as federal investment tax credits that support solar or production tax credits for wind power. And with New CREBs financing, there is no need for cooperatives to set up or utilize taxable subsidiaries to secure benefits as with other renewables financing options.”
The effective cost of CFC’s financing is based on the loan rate associated with New CREBs less the federal subsidy payment received by the electric cooperative. Typically, CFC New CREBs financing runs for 25 years—matching the life of a solar facility, for example—and has an effective net rate of approximately 1 percent. The financing may be combined with federal and state grants to further lower costs. Members can contact CFC for current loan rates and the U.S. Treasury rebate rate published by the IRS. “New CREBs feature a simple application process,” Graham notes.
Currently, about $140 million in New CREBs remains available for eligible renewable energy systems owned by electric cooperatives. Over the years CFC has financed 51 renewable generation projects through more than $190 million of CREBs and New CREBs loans. CFC has also assisted on the New CREBs program by advising cooperatives on the application process and coordinating technical requirements with experienced bond counsel.
For more information, please contact Graham at 800-424-2954 or [email protected].