The Benefits of Tax-Exempt Prepay Bonds

Why Purchase Energy from Minnesota?

Along with its 12,000 serene lakes, pristine forests, and rolling prairies, Minnesota also has an active and loyal municipal bond investor base. Minnesota’s state income tax rate of 5.35% to 9.85% allows the state to fund much-needed investments. This relatively high rate also leads many state residents to seek Minnesota tax-exempt bonds as an effective after-tax investment vehicle. Annual bond issuances are relatively low (Minnesota issuers averaged $7 billion of issuance annually over the past five years), and there are at least 15 Minnesota state-specific municipal bond funds, with total assets approaching $5 billion.

The direct retail investors and Minnesota bond funds provide MCE with a solid target market for its energy prepayment transactions. While market conditions can vary over time, this Minnesota-specific investor base supports our expectation of efficient market execution and favorable interest rates when bringing a transaction to market. Lower interest rates on a prepayment transaction can be expected to produce greater savings for transaction participants.