The Black Belt Energy Gas District, a municipally-owned energy supplier based in southern Alabama, issued $638.7 million in bonds to finance the purchase of a long-term supply of natural gas that it will sell to the city of San Antonio, Texas.
The bonds mature between 2025 and 2055, yielding between 3.82% and 3.94%. They carry a mandatory tender in 2031 and pay interest at 5%. The securities received a rating of Aa3 from Moody’s Investors Service.
The district will use the issuance proceeds to prepay for a 30-year supply of natural gas provided by Aron Energy Prepay 40 LLC, a subsidiary of Goldman Sachs. It will sell that gas to San Antonio.
It is unclear how the purchase squares with the city’s stated sustainability objectives. “San Antonio is focusing on a transition from fossil fuel energy sources to a less carbon-intensive portfolio,” the city government’s website says. But natural gas is a fossil fuel, and in recent years, the share of natural gas in San Antonio’s energy mix has risen.
The bonds are special, limited obligations of Black Belt, payable by revenue from energy sales.
Goldman Sachs & Co LLC and Stifel, Nicolaus & Company, Inc served as underwriters on the issuance, purchasing the bonds for $675.5 million. The price reflected a premium of $39.7 million and a discount of $2.9 million. Municipal Capital Markets Group, Inc acted as financial advisor.