362 



Mr. Johnson. That's right. It makes a higher level of market ac- 

 ceptability because Bonneville is backing those bonds. 



Mr. DeFazio. Now, in your case, I assume you're just issuing 

 your own debt or coming up with your own capital, however one 

 wants to 



Mr. Wright. It's a combination of private investment capital, 

 hard equity dollars and conventional bank or institutional sources 

 of financing. There's a lot of it there. 



Mr. DeFazio. With no guarantees by BPA. 



Mr. Wright. No guarantees — ^well, we 



Mr. DeFazio. I mean other thsin they might purchase the output. 

 They might be a good contract for that. But you're going to have 

 the baclmig of the bonds in case there were technical or whatever 

 problems and you would do it without the 



Mr. Wright. We've taken the risk with our own capital. 



Mr. Johnson. And there is a significant price on that risk, of 

 course. The price of money is — ^there's a big gap difference there. 



Mr. Wright, Yes. 



Mr. DeFazio. I don't know. I'm confused by this. I thought he 

 was the wind and he's wind. Who are you talking about? 



Mr. Alderson. If I might 



Mr. DeFazio. You're the other one. I'm sorry. I'm getting my 

 wind people mixed up. 



Mr. Alderson. Aside fi-om wind, KENETECH has done in excess 

 of a billion dollars of projects, all of which have been financed using 

 similar kinds of structures. The JO A that was referred to here in 

 other areas of the country is referred to as a JPA or a joint powers 

 authority. 



There is a tendency to mix two entirely different financial con- 

 cepts. One is the financial concept associated with municipal debt 

 and the non or the tax-exempt status associated with that and, 

 therefore, the more efficiently issued debt in the marketplace. The 

 second one is project risk, whether or not the project works. 



In the first instance, it is an obvious advantage for the region to 

 have that tax-exempt debt associated with it. In the second in- 

 stance, in terms of project risk, the risk doesn't go away. All you've 

 done is masked its pricing and spread it across either — you're ei- 

 ther asking the marketplace to value it or you're asking the cus- 

 tomers — in this case, the eventual customers of BPA to bear that 

 risk. 



That was the point earlier that in almost all municipal fossil fuel 

 projects which we are involved with, you simply get performance 

 guarantees with the project. So what you do is you limit the guar- 

 antee to be that efficiency which is gained through the municipal 

 financing as opposed to accepting the project risk in that same in- 

 stance. 



Mr, DeFazio, Mr, Esteves, in the case of SESCO, you are not 

 only putting up the capital, but you are saying you will put up the 

 capital and BPA or whatever customer will only have to pay for 

 measurable results. 



Mr. Esteves. Yes, sir. 



Mr. DeFazio. So, essentially, you're taking out some of the risk 

 factor that we're hearing about over here. Is there a premium to 

 us in terms of the cost for the savings? 



