Citi Markets Deal Backed by Energy Efficient Bonds

Citi is underwriting a $67.4 million structured finance deal backed by energy efficiency revenue bonds called series 2011, according to an official statement published on the deal.

The issuer, Sustainable Energy Utility Inc, is a Delaware non-profit that will issue bonds and use the proceeds to pay the costs of designing and implementing energy conservation measures at the facilities of Delaware state agencies, which include state and local governments and institutions of higher learning. Some of the proceed will reimburse project costs paid on behalf of Delaware State University.

The Delaware deal sets up a "front-ended" process where the entity is set up to raise money and then under a regulatory construct, contractors are hired to go make energy efficient investments. Under Delaware's Energy Performance Contracting Act 29, agencies are authorized to enter into "guaranteed performance contracts" for the design and installation of energy conservation measures. The act provides that such a contract may be structured as an installment payment contract and may be financed via a third party. 

"The Delaware deal is the only deal where anyone has come close to securitizing the receivables," said one market source familiar with the deal.

The bonds are being issued to finance the initial energy conservation measures for several entities participating in Delaware's sustainable energy utility program. Each agency is obligated to make payments to the issuer for the energy conservation measures.

Citi  had no comment on the deal.