Public Power & Energy Finance
Hawkins Delafield & Wood LLP is one of the leading bond counsel firms nationally in the areas of public power and energy finance. Since 1990, we have participated as bond counsel, underwriters’ counsel or special tax counsel in over 568 financings aggregating more than $80 billion in principal amount of bonds in these practice areas alone. Over this period, the Firm was ranked number one as bond counsel in the nation in the public power practice area for long-term fixed rate transactions.
Our public power and energy-related clients come from all over the country, including California, New York, North Carolina, Oklahoma, Oregon, Washington and elsewhere, as well as overseas. These clients include integrated and special purpose electric utilities with small, medium and large-scale operations and projects.
Our experience is equally varied, including:
· Traditional revenue bond financings
· Complex project finance structures involving multiple parties
· Generation acquisition and operating agreements
· Power purchase and marketing arrangements
· Cogeneration facilities
· " Local Furnishing" financings
· Environmental project financings
· Qualified energy conservation bonds
· Procurement design-build-generate contracts and similar activities
· Monetizations of stranded costs and other charges
· Privatization of assets financed with tax-exempt bonds
· Related tax work including private letter ruling
Two of the more prominent examples of our public power experience were:
1. Acting as Bond Counsel to the California Department of Water Resources in connection with its $11 billion power financing in 2002; and 2. In 1998, acting as Bond Counsel to the Long Island Power Authority in connection with its $7 billion acquisition of the Long Island Lighting Company.
Both of these transactions are described in greater detail below.
We have done big, complex financings, as well as small "plain vanilla" ones. The following highlights will provide some details of the breadth and depth of our experience in this area.
Large and Complex Transactions - DWR and LIPA
California Department of Water Resources Hawkins was retained in early 2001 to assist the State in identifying alternative means of addressing the looming energy crisis facing the State. We drafted the legislation that allowed the State to purchase power for sale to consumers and authorized DWR to issue debt to amortize the portion of the cost of power that could not be currently collected from the ratepayers. Such legislation successfully anticipated each of the major legal and credit issues raised by the potential bankruptcy of the State’s utilities. The unprecedented legislation provided the legal framework that permitted the State to assure the continued availability of power to consumers as well as finance the extraordinary cost of such power notwithstanding the bankruptcy of the State's largest utility. The fixed rate portion of the program, in a principal amount of approximately $7 billion, which at the time was the largest long-term municipal bond issue in history. A total of $11.25 billion in bonds were issued under the program and permitted the State’s general fund to be completely reimbursed for amounts advanced under the program.
Long Island Power Authority Hawkins served as advisor and Bond Counsel for the Long Island Power Authority ("LIPA") takeover of the Long Island Lighting Company ("LILCO") in 1998, which culminated in what was then the largest municipal bond issue in history, nearly $5.0 billion, with a total of over $6.5 billion issued over a 6-month period. Leading to this acquisition, the Firm was instrumental in negotiating the several interrelated agreements between LIPA and LILCO-related entities for the acquisition by LIPA of LILCO’s electric system, and the subsequent operation of the system by LILCO affiliates. As Bond Counsel we were instrumental in resolving the complex structural, litigation and disclosure issues inherent in such a massive undertaking. We successfully obtained the private letter rulings from the Internal Revenue Service necessary to enable all but $25 million of this debt to be issued on a tax-exempt basis. Our involvement in all of these processes illustrates the benefits of being able to assemble and successfully operate a large-team approach to complex issues.
Experienced Tax Department
Hawkins has one of the largest and most experienced tax departments in the country devoted primarily to public finance. Of particular note in the electric utility and energy finance area, our tax department has the size and wide breadth of expertise to deal effectively with the changing landscape of private activity bond status in light of deregulation and competition, and to counsel our utility and energy clients through the maze of complex federal tax rules. Our ongoing activities in this area enable us to provide expert and informed advice to our utility and energy clients concerning the tax issues which arise during and after financing.
Our tax department regularly monitors and participates in the amendment of the federal tax statutes and regulations. We confer, when appropriate, with staff of the Treasury Department and the Internal Revenue Service with respect to the development of regulations under the Internal Revenue Code and frequently prepare extensive written comments to proposed regulations when published. The Firm's tax department prepared extensive comments on draft arbitrage regulations, many of which were accepted in the final regulations currently in effect. The Firm has obtained numerous tax rulings for its clients. We have obtained several significant rulings from the Internal Revenue Service concerning federal tax questions bearing upon the financing of electric generating and transmission facilities.
The Firm has extensive experience throughout the country and in virtually every type of competitive environment regarding energy production and distribution. Examples of recent engagements would include the following:
Case History: Lower Colorado River Authority. Hawkins Delafield & Wood LLP served as underwriter's counsel on over $1.5 billion Refunding and Improvement Revenue Bonds and Transmission Contract Refunding and Improvement Revenue Bonds issued by the Lower Colorado River Authority, including the multi-series refunding of all of LCRA’s debt in connection with the structural unbundling of LCRA’s generation and transmission assets by means of transfer of LCRA’s transmission assets to an affiliated nonprofit corporation created by and acting on behalf of LCRA and the issuance of bonds by LCRA on behalf of such nonprofit corporation to finance its activities.
Case History: Oklahoma Municipal Power Authority. Hawkins Delafield & Wood LLP served as negotiation counsel in connection with the Authority’s acquisition from an independent power producer of an interest in wind generation facilities, and served in the same capacity in connection with the Authority's acquisition of an interest in a gas-fired generation facility.
Case History: New York State Energy Research and Development Authority. As Bond Counsel to NYSERDA, we have participated in more than $7 billion in revenue financings for the benefit of electric and gas utilities throughout the State of New York. Such transactions have included virtually every type of credit structure utilized in public finance, including letters of credit, bond insurance and liquidity facilities, as well as more traditional unsecured and first mortgage-backed structures and have incorporated numerous innovative variable rate features, as well as fixed rate debt. As examples, some of the first credit supported tax-exempt commercial paper programs, multi-modal variable rate and auction-rate securities were issued by NYSERDA based upon documentation developed and legal advice provided by the Firm.
Experience with Public-Private Partnerships
Hawkins Delafield & Wood LLP has participated in solutions to the challenges of electric utility deregulation and competition that have combined the interests of public and private entities.
Case History: Hawkins acted as Bond Counsel to the Finance Authority of Maine in several innovative State moral obligation-backed financings benefitting electric ratepayers in the State. The proceeds of the financings, which were Rule 144A taxable offerings, were used to enable investor-owned utilities to buy out contracts with non-utility generators which had required the utilities to pay above-market prices for electricity. We also have been active in other areas of cooperation among public and private entities in their common interests.
Case History: Hawkins served as finance counsel to the Western Generation Agency in Oregon in connection with the financing of the Wauna Mills project, a cogeneration project at a privately-owned pulp and paper manufacturing facility. This involved participation in the negotiation of a Power Purchase Agreement for the sale of the output from the project, an Agreement for Engineering, Procurement and Construction Services, Guaranty Agreements, a Fuel Supply and Steam Sales Agreement, and an Operation and Maintenance Agreement. In addition, we acted as finance counsel in connection with the issuance by the Agency of $70,000,000 of limited obligation bonds.
Participation in Both Public Takeovers and Privatizations
The rapidly changing electric utility industry involves deregulation, increased competition, reassessments by utilities of their competitive position and investigations of restructuring. We work with our clients to assess the impact of these developments and reach solutions tailored to their requirements.
Case History: Hawkins acted as Bond Counsel to Long Island Power Authority in connection with its acquisition of Long Island Lighting Company and its electric transmission and distribution system. The LIPA takeover of LILCO in 1998 culminated in what was then the largest municipal bond issue in history, nearly $5.0 billion, with a total of over $6.5 billion issued over a six-month period. Leading up to this, we were instrumental in negotiating the several interrelated agreements between LIPA and LILCO-related entities for the acquisition by LIPA of LILCO's electric system, and the subsequent operation of the system by LILCO subsidiaries. On the bond issues themselves, as Bond Counsel we were instrumental in resolving the complex structural, litigation and disclosure issues inherent in such a massive undertaking. We successfully obtained the private letter rulings from the Internal Revenue Service necessary to enable all but $25 million of this debt to be issued on a tax-exempt basis.
Hawkins also participates in privatization of public facilities.
Case History: The Firm was instrumental in the privatization of a Honolulu (Hawaii) resource recovery project that converted waste to energy, with the electric generation portion of the facilities also being financed on a tax-exempt basis as facilities for the local furnishing of electricity.