Salt River Project’s Board and Council approved the refunding sale of more than $761 million of highly rated, 2016 Series A public power revenue bonds, which will save SRP customers more than $151 million over the next 21 years — more than $112 million on a present value basis — and lower SRP’s overall borrowing costs.
The refunding sale is expected to be one of this week’s largest municipal market transactions as well as one of SRP’s largest, according to Associate General Manager Aidan McSheffrey, SRP’s CFO.
He said the sale is a pure refunding transaction, with no new money for capital projects or construction. SRP has no specific plans for a bond sale to follow the current transaction, McSheffrey said.
McSheffrey said SRP’s bonds received a very good response from the municipal bond market last week from both retail and institutional buyers, much like SRP’s last transaction in May 2015 in which more than $924 million in 2015 Series A public power revenue bonds were sold — producing more than $300 million of new money for capital projects and construction.
Steve Hulet, SRP’s treasurer and senior director of financial services, said 76 buyers participated in the sale and that the pricing drew interest from several sectors. He expects the refunding sale, which will be used to refund a portion of bonds issued in 2005 and 2008, will close Dec. 1.
“We were very pleased to have seen such strong market support,” said Hulet, “especially since this was a large transaction in a relatively unstable market for issuers following the unexpected results of the presidential election.”
Morgan Stanley served as senior manager for the transaction, which included co-managers Goldman Sachs & Co., Bank of America Merrill Lynch, Citigroup and J.P. Morgan. PFM acted as financial adviser and Chiesa Shahinian & Giantomasi as bond counsel.
Morgan Stanley priced the Series 2016A electric system revenue bonds for institutions on Wednesday. With final maturity in 2038, the tax-exempt bonds carry ratings of Aa1 from Moody’s Investors Service and AA from S&P Global Ratings.
SRP is the nation’s third-largest public power utility and the largest provider of electricity to the greater Phoenix metropolitan area, serving more than 1 million customers. SRP also is the metropolitan area’s largest supplier of water, delivering about 800,000 acre-feet annually to agricultural, urban and municipal water users.