Kentucky Municipal Energy Agency

Background

In October 2026, Baird served as municipal advisor to the Kentucky Municipal Energy Agency (KYMEA) on its second public bond offering, the $45,990,000 Power System Revenue Bonds (Energy Center I Project), Series 2026. Baird also served as municipal advisor on KYMEA’s inaugural $121,980,000 Series 2025 financing for Energy Center I, a new approximately 75 MW natural gas-fired reciprocating internal combustion engine (RICE) facility in Madisonville, Kentucky. The facility is designed to provide flexible, reliable generation for KYMEA’s municipal utility members, supporting both continuous and peaking needs.

The Series 2026 Bonds were issued to finance a portion of the remaining costs to acquire, construct and equip Energy Center I, as well as capitalized interest, a deposit to the debt service reserve fund and costs of issuance.

Opportunity

Since the initial financing, construction of Energy Center I had advanced significantly. Major equipment had been delivered and installed, and work was progressing toward the project’s anticipated June 2027 in-service date. Approximately 98% of project construction costs were fixed by contract or otherwise committed, and the project remained on schedule and slightly under budget. The Series 2026 financing was expected to provide the remaining funds needed to complete the project.

Implementation

Baird worked with KYMEA and the financing team on the $45.99 million negotiated offering. The Series 2026 Bonds received ratings of A3 from Moody’s and A with a stable outlook from Fitch. The 2025 financing funded approximately 73% of the total project cost, with the 2026 Bonds providing the balance of the financing for remaining construction, startup and commissioning, debt service reserves, capitalized interest and issuance costs.

The bond sale took place on October 20, 2026, amid a challenging municipal bond market and alongside several significantly larger issues. The financing resulted in a final true interest cost of 5.298%, with annual debt service levels well below budgeted amounts for the utility.

Results & Impact

With the Series 2026 financing, KYMEA expects to have the funding necessary to complete Energy Center I, which has a proposed in-service date of June 2027. Once operational, Energy Center I’s four RICE units will be able to start and stop multiple times per day, providing KYMEA with added flexibility to respond to changing power needs and complement other resources within its power supply portfolio.