Featured Bond – Week of May 20, 2019: City of Austin, Texas $464 Million in Electric Utility System Revenue Bonds
The City of Austin, Texas is issuing $464 million in Electric Utility System Revenue Bonds through negotiated sale. The pricing date is Wednesday, May 22, 2019. The bonds are being used to improve and extend the current Electric Utility System, Austin Energy, through the acquisition of Nacogdoches Power, LLC, and pay the transaction fees and bond costs of the issuance.
The bonds are rated Aa3, AA, and AA, by Moody’s, S&P, and Fitch, respectively. Outlooks from all three rating agencies Moody’s, S&P, and Fitch are stable.
About The Bonds & Austin Energy
The City of Austin has seen a 25% increase in population over the last ten years and is still projected to grow. Austin Energy is a municipally-owned electric company that serves the City of Austin and surrounding areas. 50% of the service area is in the City of Austin and the other 50% is outside the City. Because of this growth in the area population, the service area of Austin Energy is also growing.
These bonds are being used to fund the acquisition of Nacogdoches Power, LLC. In late 2018 Southern Power Company, the previous owner, conducted a competitive sale of Nacogdoches Power, LLC. Austin Energy agreed to purchase the LLC for $460 million.
In 2008, Austin Energy had signed a 20-year PPA contract for 100MW of output from Nacogdoches Power, LLC. Part of the LLC includes the Nacogdoches Biomass Facility which is the biomass-fired power plant that currently provides renewable power to Austin Energy under this 20-year PPA contract. Thus, the benefits to Austin Energy from this acquisition include an avoidance of $275 million in additional costs over the remaining term of the PPA, capturing operating efficiencies and cost reductions as the owners of Nacogdoches Power, LLC, lowering the fixed debt service payment, and more.
Austin Energy serves a vibrant economy and has a balanced and diverse economic base. Austin Energy is diversified in geography and fuel types too. It’s also well on its way of achieving its goal of having 65% renewable energy by 2027.
The bonds are taxable. The amortization will run for 13 years, 2019 – 2031.
Security for the Bonds
The 2019 Bonds will be issued as Separate Lien Parity Electric Utility Obligations. The net revenues of the combined Utility Systems of the City of Austin, Austin Energy, have been pledged, jointly and severally, on a first lien basis to the payment and security of the bonds.
These details and more on purposes, security, risks and other matters pertaining to these Austin Electric Utility Obligation bonds can the found in the official statement, provided by MuniOS. After registering, if needed, visitors can link directly to the official statement as well as an investor’s roadshow by searching for the City of Austin.
Statistical Snapshot: Austin Energy Fund Selected Financial and Economic Indicators
Provided above is a quick snapshot of financial characteristics of the Austin Energy Fund along with the medians for other retail electric sector issuers of all sizes, courtesy of Merritt Research Services, LLC. Merritt has many of the sector medians publicly available and regularly updated on their Benchmark Central page. (Merritt believes the data to be reliable but does not make any representations as to its accuracy or completeness).
These facts and numbers are for informational purposes, and should not be considered an official disclosure for potential investors. Investors should consult the official statement. None of the information provided should be construed as a recommendation by MuniNet Guide, MuniNet LLC, Merritt Research Services LLC, or any of their employees. Information and analysis is for informational purposes only.
Potential investors should rely only on the official documents and figures provided in the official statement (prospectus). Although the numbers presented in this summary are primarily derived from public documents, including issuer audits, issuer reports and other public sources such as federal reporting agencies , they are not intended to replace official information presented in connection with the bond sale. Medians may differ from official sales documents due to methodology or survey base variances.