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Community Choice Energy (CCE) Financing Overview <br />November 8, 2016 <br /> <br /> <br /> 3 <br />found it important to focus on building early program reserves in order to secure better credit <br />terms and receive a credit rating which is required for bond financing. <br /> <br />It should be noted that CCE’s can be very large with significant capital requirements, especially <br />as the program matures. It is important to make sure the bank is large enough to finance your <br />program over the long term. Banks need to live within their loan-deposit caps, so it is essential <br />to ensure enough credit capacity for the program’s long-term needs. <br /> <br />Underwriting Considerations <br />When a bank or other lender considers lending to a new CCE program, it will consider a number <br />of factors including the management team: Does the Chairman, CEO, and other management <br />team demonstrate knowledge of the power markets, power procurement, utility functions and <br />energy programs? Does the team have a combination of relevant, seasoned experience and a <br />spirit of innovation and entrepreneurship? Does it have political savvy and a robust regulatory <br />function and marketing program? <br />The bank will also consider the program’s revenue projections and financial modeling, which <br />provides a detailed forecast of program expenses and revenues over a period of years. The <br />knowledge and credibility of the author of the financial pro forma(s) and operating budget is <br />very important. Finally, the bank will also consider the level of community support, number of <br />local government members/ potential customers, and the efficacy of the JPA Board, <br />governance structure and risk management controls in its underwriting process. <br /> <br />What Does this Mean for the Cities? <br />As noted earlier, Alameda County has committed to providing the upfront monies needed to <br />support most of the pre-revenue expenses to get EBCE to launch. The debt that is <br />contemplated above is that which is needed to support EBCE’s initial power supply purchases <br />and longer-term Agency operations. <br />Credit and financing is one of the first issues that the new EBCE Board will be addressing in the <br />new year. As noted, there are a few ways to fulfill early credit needs, one of which MAY include <br />some level of credit support (via a letter of credit) from member jurisdictions that are willing to <br />participate. This would be a request, not a requirement, of EBCE Agency members. <br />