San Antonio, Texas, sold $1.1 billion in bonds to finance capital improvements to its electric and gas systems.
The city issued the bonds in three series. The Series 2024A bonds, consisting of $452.2 million, mature between 2035 and 2049, yielding between 3.38% and 4.16%. The Series 2024B bonds, consisting of $453.4 million, mature between 2025 and 2054, yielding between 3.27% and 4.29%. The Series 2024C bonds, consisting of $193.3 million, mature between 2035 and 2054, yielding between 3.38% and 4.29%.
The securities received a rating of AA- from Fitch Ratings, Aa2 from Moody’s Investors Service, and AA- from S&P Global Ratings. San Antonio’s electric and gas systems are operated by the City Public Service Board, also known as CPS Energy.
Moody’s analysts wrote that “CPS Energy’s ratings reflect various utility strengths, including a broad and growing service area economy; diverse generation resource mix; credit-supportive self-regulation on electric and gas rates and sound environmental policies; competitive residential retail rates; and consistent achievement of debt service coverage ratios and liquidity appropriate for the rating level.”
CPS Energy will use the bond proceeds to finance its capital plan, which calls for $6.2 billion in spending over the next five years. Many of the projects in the plan are aimed at modernizing the city’s aging infrastructure.
In 2021, a severe winter storm demonstrated the fragility of that infrastructure. Costs from that storm are still being litigated, but they could approach up to $909 million in liability for CPS Energy, according to the official statement accompanying the sale of the bonds. (CPS Energy expects the final cost to be lower).
The bonds are special obligations of the city, secured by net revenues from its electric and gas systems. Those systems recorded $1.5 billion in net revenue last fiscal year, according to the bond documents.
Jefferies LLC served as lead underwriter on the issuance, purchasing the bonds with a discount of more than $4 million. PFM Financial Advisors LLC and Estrada Hinojosa & Company, Inc acted as municipal advisors.