In a type of deal that is becoming increasingly popular amongmarketers selling to public entities, Aquila Energy has signed tosupply 91 Bcf over 12 years to municipal members of the NebraskaPublic Gas Agency for an advance payment of $162 million.
The contract was signed with the American Public Energy Agency(APEA), which was created by the Nebraska munis, and which raisedthe money through municipal revenue bonds. “For us this is anextraordinary opportunity to take advantage of low interest ratesand favorable prices for gas,” said Roger Mock, APEA president.Members of the Nebraska Public Gas Agency actually include munis infour other states as well: Colorado, Iowa, Kansas, and Wisconsin.Mock said APEA plans to obtain energy for public entitiesnationwide and already has signed up supply for other locations.Its activities are not confined to municipal systems, but includeother public agencies as well, such as school districts.
Mock said all the elements are favorable right now with both gasprices and interest rates low, they can make deals for gas atdiscounted prices, and fund the purchase with low interest ratebonds. He said APEA contracts for the gas at a rate below marketprices for the duration of the contract and then buys a swapdiscounted for present value. “You get a price benefit and then youget more benefits when you issue bonds.” Since it was created in1995 APEA has negotiated four deals valued at about $250 million.
This is the second of this type of deal for Aquila recently,according to spokesman Al Butkus. Aquila signed last December tostart deliveries of 20 MMcf/d for ten years to the Municipal GasAuthority of Georgia for an advance payment of $117 million.
Last week Unocal Global Trade announced its own 10-year dealwith the Public Energy Authority of Kentucky Trust to supply 72 Bcfof gas. The contract calls for a nonrefundable advance payment of$120 million on Jan. 1, 1999 and a fixed monthly reservation feeover the life of the contract. (See Daily GPI, Oct. 28, 1998)
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