Utility finance executives visit Block Island
When the Block Island Utility District acquired the assets of the Block Island Power Company in March, it found a willing partner with the National Rural Utilities Financing Corporation, and this week executives from the bank came for a visit.
The bank, which is a not-for-profit cooperative, serves electrical cooperatives and public utilities across most of the country, with almost 1,000 members who in turn serve 42 million customers and have 2.6 million miles of electric lines. This year they are celebrating 50 years of existence, providing not only capital to utilities, but financial modeling tools and training in everything from board management to line maintenance. BIPCo President Jeffery Wright told The Times that the additional training and assistance “is priceless.”
When BIPCo joined the organization, it extended the bank’s reach to 48 states. The corporation provided funding for the $5.8 million needed to purchase the assets of BIPCo. The initial funding was in the form of a short-term loan. It has since been refinanced into long term loans. By having all of its lending with the Financing Corporation, BIPCo is eligible for lower interest rates than it would be with multiple lenders.
Most of the the bank’s visitors came all the way from headquarters in Dulles, Virginia. Spending two to three days on the island, they not only toured BIPCo’s facilities but were treated to an early morning trip to the Block Island Wind Farm on Wednesday morning. They were joined by Wright, some of the BIPCo staff, Utility District Commissioners Barbara MacMullan, Elliot Taubman, and Everett Shorey, Town Councilor Martha Ball, and Deepwater Wind’s Bryan Wilson, who narrated the tour. For most of the visitors, it was their first trip to Block Island.
After the wind farm tour, The Block Island Times sat down with Chief Executive Officer Sheldon Petersen for a brief interview. He said the mission of CFC was to “help cooperatives be successful.” Help was needed as investor-owned utilities weren’t willing to go into rural areas of the country, and funding for rural utilities went beyond what the federal government could, or was willing to provide.
The Financing Corporation was started in 1969 with 512 founding members who each paid $1,000 for their memberships. Operations began in 1970, and since then the company has grown to about 1,000 members and $27 billion in assets.
When asked how the bank could provide such favorable rates to lenders, Peterson said that it was a result of the company’s high bond rating, and “the economics of scale,” bolstered by the lower risks associated with geographical diversity.
He said the average cooperative in the Financing Corporaton network serves about 14,000 customers, while the largest serves about 250,000.
Of course, the visit was not all for pleasure. After the wind farm tour, they held a business meeting with Wright and MacMullan to go over potential future funding needs. Wright said one of the potential needs was to obtain a back-up transformer for the substation.