Value Delivered:

In evaluating a proposal from Chevron Energy Corporation to install $30 million solar energy equipment on various sites in the District, the Milpitas Unified School District (“MUSD”) turned to KNN Public Finance for an independent third-party review. KNN has provided financial advisory services to MUSD since 1996. "Our school board members have the utmost confidence in KNN and Dave Olson," said Superintendent Karl N. Black, Ed.D.
   
Strategic Implementation:

KNN assisted MUSD in evaluating the power purchase agreement proposed by Chevron in partnership with Bank of America. Through the arrangement, Chevron agrees to install solar units on MUSD sites and the District agrees to purchase the energy produced by those units at pre-set annual prices through the term of the agreement. KNN researched the history of District energy usage and costs, and contacted both experts in the solar field and school districts who had entered similar agreements. KNN then used its skills in financial modeling to forecast potential savings and to quantify potential financial risks.

Armed with such research and analysis, KNN's Dave Olson assisted the District in negotiating a 3.4 megawatt agreement, the largest of its kind for a school district in terms of percentage of solar power provided. The 30-year agreement, together with various energy incentives, allows MUSD to pay "brown energy" costs (usually half the price of solar) for the "green energy" generated from the program. In addition to negotiating energy costs below those included in previous transactions, Olson helped to negotiate other deal points which provided significant financial benefits. Among those were the flexibility for the District to purchase the solar units after the benefits of the tax credits have expired, an equipment maintenance agreement, and the District's retention of 75 percent of the renewable energy credits made available by the federal government.

"There was a lot of energy and excitement surrounding this deal," said Superintendent Black. "Dave was a calming influence whose negotiations with Chevron and Bank of America were instrumental to obtaining an advantageous deal for our district."
   
Results:

Chevron is currently in the process of installing solar panels on 14 school sites in the District. While it is too early to determine the energy cost savings that will be generated from the program, MUSD is being recognized as one of the nation's leaders for offsetting 70-75 percent of its traditional energy usage with solar energy. Additionally, Chevron is setting up a learning laboratory within the District to educate students about the science of solar power. All cost savings generated from this power purchase agreement will revert back to MUSD's general fund and will be available to support personnel salaries, purchase new books, or pay for other operational expenses.

"This solar power program is our district's first major step into sustainability. It's very exciting and we look to it be a win-win-win-win - for the environment, the economy, the students and staff, and the taxpayers," said Superintendent Black.

KNN Public Finance Vice President Dave Olson was assisted by analyst Andrew Keys on this transaction.