Salt River Project’s Board and Council has approved the sale of more than $924 million of highly rated, Series A public power revenue bonds, which will save SRP customers more than $130 million over the next 20 years — more than $90 million on a present value basis — and lower SRP’s overall borrowing costs.
Associate General Manager Aidan McSheffrey, SRP’s chief financial executive, said the sale will be one of the week’s largest municipal market transactions as well as one of SRP’s largest. The transaction will produce more than $300 million of new money for capital projects and construction, with the rest of the bonds refunding outstanding debt for savings. SRP has no specific plans for a bond sale to follow the current transaction, he said.
“Our six-year financial plan includes capital expenditures to meet future electric system growth and replacement of aging infrastructure, and this transaction helps achieve that as well as keeping our electric prices among the lowest in the Southwest,” said McSheffrey, who added that SRP’s bonds received a very good response from the municipal bond market this week from both retail and institutional buyers.
Corporate Treasurer Steve Hulet, SRP’s senior director of financial services, said last week’s pricing drew interest from several sectors, with 42 buyers participating in the bidding.
“The timing was such that we were going to market when there was volatility with Treasuries, so we weren’t sure how that was going to affect the response to our transaction,” said Hulet. “However, Goldman Sachs and the banking team did a great job of assessing the market and setting a price scale that proved to be a good balance for both the market and SRP.”
Goldman Sachs & Co. served as senior manager for the transaction, which included co-managers BofA Merrill Lynch, Citigroup, J.P. Morgan and Morgan Stanley. Goldman Sachs priced the Series 2015A electric system revenue bonds for institutions on Wednesday. With final maturity in 2045, the tax-exempt bonds carry ratings of Aa1 from Moody’s Investors Service and AA from Standard & Poor’s.
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.
