The Wave – December 2013

President’s Letter

District Energy and District Cooling St. Paul are often recognized for their technical accomplishments, bringing advanced energy solutions to Saint Paul through the use of renewable energy, waste heat, solar, and storage systems.  Behind this operation, lies a carefully constructed business and financial structure, built upon the initial public-private partnership that allowed us to establish two unique 501(c)3 non-profit utilities to serve in the best interest of our customers, community, and the environment.

Operating the heating and cooling utilities as non-profits has benefited our customers and provided us with advantages when financing our infrastructure needs over the past 30 years.  The low-interest financing instruments used for our heating and cooling systems have allowed us to keep rates stable while continuing to expand the infrastructure of the system to keep up with growth and changing customer needs.  In October, District Energy and District Cooling took major steps to further ensure a stable future for District Energy and District Cooling customers.  In this edition of the Wave, we highlight the major refunding and new construction financing that followed our S&P Rating of A-, earned in August.  These achievements were made possible by the renewed commitment to service, made by our customers in the past few years.  Together with an extended franchise agreement with the City of Saint Paul, District Energy and District Cooling are extremely well-positioned to continue our history of stable rates and make additional investments into the expansion and efficiency of our system and our customer buildings.

Fiscal Year 2014 marks the third year in a row that District Energy and District Cooling have not raised demand rates.  Given the many accomplishments of the last year, I am confident that we will be continuing to provide best-in-class service, at competitive rates, to help our customers in Saint Paul thrive.  It is an important time in the history District Energy and I am excited about the future.

District Energy and District Cooling Refinance through New Revenue Bonds

District Energy and District Cooling St. Paul reached another important milestone on October 21st, completing the debt refunding and new construction financing for the companies.  The companies fund capital projects through long-term financings that help contribute to the long-term rate stability.

District Energy’s new bond totals $66,800,000 and District Cooling bond totals $60,975,000 with scheduled payments through October 2033.  The bond transaction was the company’s first to be issued with a stand-alone investment grade rating, carrying an “A-“ rating from Standard & Poor’s.  This rating is a major achievement and gives the company greater access to the capital markets.

This important refinancing was completed with the help of the Housing and Redevelopment Authority of the City of Saint Paul, Office of Financial Services of the City of Saint Paul and Saint Paul Port Authority.  As part of the transaction the District Energy and District Cooling franchise agreements with the City of Saint Paul were extended to 2033.  This extension adds to the overall stability of our system’s future.

District Energy and District Cooling are moving swiftly to deliver the benefits of this refinancing to customers, through efficiency projects and other initiatives that will improve the system and continue our commitment to cost-competitive rates.

Why is our financing and rate structure so important? 

To start, rates are cost-based, which means we only charge our customers what it takes to provide them with services and keep the system maintained and improved for the future.  A portion of the demand rate is dedicated to paying off the infrastructure that connects our customers to the system and keeps the system running efficiently and reliably.  By connecting to our heating and cooling services, our customers avoid the costs of on-site equipment and provides them with access to our fuel flexibility, reduced on-site maintenance, and services that can adapt to the changing needs of buildings and users.  The energy rate is a pass-through cost to our customers.  Between our mix of gas, oil, solar, coal, and the waste heat from the biomass-fired combined heat and power plant, we optimize the system to provide the lowest cost energy option with the most favorable environmental profile.  Our customers pay exactly the cost of this energy, as it is used in their building, without any additional profits built into the rate.

Celebrating Bill Mahlum

The District Energy family gathered in December to celebrate over three decades of contributions and achievements from William (Bill) Mahlum.  Mahlum is widely respected as one of the original architects of the Saint Paul system.  He joins Bill Buth, George Latimer, Hans Nyman, John Taylor, Dick Broker, and Alice Murphy on a prestigious list of names attributed with the original transformation of the system in the late 1970s.  Mahlum began his tenure as legal counsel, consultant, and advisor to District Energy and its affiliates during the exciting and important incorporation of the 501(c)3 non-profit.

Mahlum has served as legal counsel, consultant, and advisor to District Energy and its affiliates for 34 years.  He was part of the team that identified utilization of lower floater tax-exempt and taxable debt structures to obtain optimum financing for the capital-intensive district energy organizations.  Mahlum was instrumental in the conception, strategy, financing, and development of customer contracts for the district heating and cooling systems in downtown Saint Paul. He served the same role in establishing the St. Paul Cogeneration and Environmental Wood Supply, both essential partners to the biomass and waste heat contributions to the District Energy system.  His role in leadership has also included working with environmental organizations, labor affiliates, permitting organizations and individuals, and working with city, county, legislative, executive branch, and other public officials. Mahlum has also contributed his wide range of experience to many local causes, providing his counsel and his support to many non-profit entities dedicated to improving the environment and the community.

As Mahlum prepares for spending more time with his family, friends, and personal pursuits, District Energy and its affiliates extends its utmost gratitude for his service to our company. Through his many roles, his innovation, and his tenacity, Bill Mahlum has left an indelible mark on the energy field, the City of Saint Paul, and the opportunities for community-based energy systems throughout the United States.  In the words of the great Ralph Waldo Emerson, “Lives of great men all remind us, we can make our lives sublime, and, departing, leave behind us, footprints on the sands of time.”

District Energy’s Evolving Board of Directors

District Energy has been very fortunate to have a tremendous caliber of individuals serving on its Board of Directors.  In September’s edition of the Wave, we introduced you to Dr. Rassoul Dastmozd who was elected to represent our medium-sized customers.  As 2013 comes to a close, we are welcoming another board member into service, David Ybarra, President of the Minnesota Pipe Trades Association.  David will fulfill the term of city-appointed Director, Harry Melander, Executive Secretary of the Saint Paul Building and Construction Trades Council.   Harry has joined the Ever-Green Energy Board of Governors and will remain connected to the District Energy work through that position.  The Board of Directors is made up of publicly-appointed and customer-elected representatives that oversee District Energy activities. All District Energy board members are on the board for our affiliate, District Cooling St. Paul.

Annual Operating Engineer Seminar

On October 15, District Energy’s customer service team hosted its annual operating engineer seminar at the Amsterdam Hall.  This event is part of an ongoing effort to help our customers utilize energy more efficiently and learn best practices for building system operation.  This year’s topic was the importance of controls to maintain building efficiency.  The speaker panel included District Energy’s own Jeff Volovsek and Jonathan Martens, as well as Edward Cook (Edward H. Cook and Associates, P.A.) and Jason Lake (Johnson Controls).  The four experts walked through specific approaches to improve building automation and controls as well as fielding questions from customers in attendance.  Customers with additional questions on these or other customer service topics should contact Jeff or Jonathan directly for assistance.

New Job Opportunities!

District Energy’s affiliate, Ever-Green Energy, is seeking qualified applicants for open positions; IT Business Analyst, Loader Wood Grinder Operator, Senior Communication Specialist, and EHS Manager.