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Caption: Board of Trustees Minutes - 1994 This is a reduced-resolution page image for fast online browsing.
![](https://uihistories.library.illinois.edu/REPOSITORYCACHE/143/7394cYM6289NUMt19b5vaRT65prp85HPYsL0Fl5J7m0ok2xc752Wwb8AsbBB02wy9SRqOInZy6T01VV2Whn4IQv87ex60zUUn72PZWACC8C_6088-235.jpg)
EXTRACTED TEXT FROM PAGE:
224 BOARD OF TRUSTEES [March 9 By consensus, the board agreed that one roll call vote would be taken and considered the vote on each agenda item nos. 7 through 24 inclusive. The recommendations were individually discussed but acted upon at one time. (The record of board action appears at the end of each item.) Purchase of Natural Gas and Issuance of Certificates of Participation (7) The University owns and operates power plants at UIC and UIUC that generate essentially all of the heat, some of the cooling, and more than one-third of the electricity used on those campuses. While the plants have multi-fuel capabilities — natural gas and No. 6 fuel oil at UIC; natural gas, coal, and No. 2 fuel oil at UIUC — natural gas is the primary fuel. It is critical that the University have a firm, long-term base supply of natural gas to provide essential utilities service to the campuses, and to do so efficiently. The ten-year installment purchase contracts recommended herein with MidCon Corp., and its subsidiaries, MidCon Gas Services Corp. (MGSC) and Natural Gas Pipeline Company of America (NGPL), would accomplish the dual business objectives of attaining a long-term, firm supply of a base load of natural gas at favorable prices. Those contracts would result in an up-front payment of approximately $26.0 million to MGSC to secure a firm supply of 5,000 MMBTUs per day of natural gas for a ten-year period beginning May 1, 1995, and ending April 30, 2005. This payment reflects the present value of a projection of spot prices times volume. To the extent that actual spot prices differ from these projections during the ten years of the purchase contract the University or MGSC would make annual payments or rebates to adjust or "true-up" for these differences. In order to obtain the funds to prepay MGSC, the board would designate the First National Bank of Chicago (the First) to act as vendor/trustee on this transaction and to authorize the First to issue Certificates of Participation (COPs) in the name of the board. These COPs would be sold competitively to provide the estimated sources of funds identified in the attachment. The board would also authorize an installment purchase agreement between the board and the First as vendor under which the First would assign the natural gas to the University and the University would make installment payments to the First as trustee to pay principal and interest due to the holders of the COPs. Annual installment payments to the First should approximate $4.0 million. The AMBAC Indemnity Corporation (AMBAC) would provide bond insurance on the COP issue at a cost not to exceed $800,000. A financial analysis of the benefits of achieving a AAA insured rating via bond insurance indicates that this is cost effective because of the concomitant reduction in interest rates to be paid on the COPs. In addition, approximately $3.0 million in COPs would be issued to fund a debt service reserve. This reserve is essentially "self-funding," i.e., the interest earned on the investment of the reserve should be sufficient to pay the interest on the COPs sold to fund the reserve. The costs of both the bond insurance and the debt service reserve are reflected as uses of funds in the attachment. In order to implement this transaction, the vice president for business and finance recommends that the board: 1. Confirm the previous employment of (a) Chapman and Cutler as bond counsel, and (b) John Nuveen Co., Inc., as financial advisor. 2. Approve appointment of The First National Bank of Chicago as vendor and trustee. 3. Approve the execution, delivery, and assignment of the following contracts which result in the payment of no more than $28.1 million to MGSC: (a) Prepaid Gas
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