Major West Coast Utility Goes to Global Market with Climate Bonds Certified USD402m Green Municipal Offering First "Put Option" for a Muni Green Bond
What's it all about?
Repeat green bond issuer San Francisco Public Utilities Commission (SFPUC) is seeking both domestic and international interest for its new tranches of Climate Bonds Certified green municipal bonds, of approximately USD402m.
Proceeds will be used to fund selected projects as part of the SFPUC Sewer System Improvement Project (SSIP), including stormwater, flood resilience, sewage treatment, wastewater, and associated control system infrastructure upgrades and is intended to address ageing infrastructure, seismic reliability, combined sewer discharges, rising sea levels and localized flooding.
Both Series A and Series C bonds have been Certified by Climate Bonds Initiative under the Water Infrastructure Criteria.
Series A Underwriters are JP Morgan (Senior Manager) and Goldman Sachs & Co. and Siebert Cisneros Shank & Co. as Co-Managers. Series C Underwriters are Citi (Senior Manager), Morgan Stanley and Piper Jaffray & Co. as Co-Managers.
Certification under the Climate Bonds Water Criteria demonstrates to investors that the issuer has:
- Carried out climate vulnerability assessments considering past, present and future climate risks and environmental losses and;
- Created resulting adaptation and/or mitigation plans.
SFPUC is one of the largest municipal green issuers in US, having previously issued more than USD1.04bn of Climate Bonds Certified green bonds since 2016 and is an early adopter of the Programmatic Certification process for multiple green issuance.
This latest series A and C bonds will bring their cumulative green issuance to approximately USD1.44bn. SFPUC were recognised in the 2017 Green Bond Pioneer Awards for its leadership in green water bonds.
A "put option" and international investors
Environmental Finance reports that the bonds are the first to be marketed to offshore investors by the SFPUC, with interest from the UK, European Union, Switzerland, Indonesia, Japan, Singapore and Taiwan to go for the green 'put option.'
Debt Manager at SFPUC Richard Morales is also quoted by Environmental Finance in more detail on the raising of the new green debt:
“It’s our first venture into long-term variable-rate financing, which we wanted to introduce given the size of the utility’s Wastewater Enterprise capital programme [to maintain the City's wastewater infrastructure]."
“We're trying to have as many financing tools so that we can then bring down the cost of delivering the capital programme, at rates as low as possible for our rate-payers. We will be coming to market regularly and with quite some size over the next few years to fund the Wastewater Enterprise capital programme.”
Justine Leigh-Bell, Climate Bonds Director Market Development, sees the potential:
“SFPUC have been a US leader in the green sphere with their international best practice approach on municipal green bonds. Municipal issuers will increasingly attract attention from global investors and markets with new green muni bond offerings, particularly from the water, urban transport and energy infrastructure space."
The Last Word
Cities are looking to replace ageing infrastructure and develop low carbon, more liveable urban communities. There is also a growing realisation that new long-life infrastructure must be both hardened and resilient to deal with the coming climate impacts.
The latest Climate Bonds Briefing identifies areas where some US municipalities could increasingly label bonds as green, improve discoverability for investors and help consolidate the US municipal sector position in the growing green bond market.
In some municipalities the conversation is yet to get started.
Writing in a guest post, "Green Bond Pledge -A Climate Finance Strategy for Cities and Subnationals", former California Deputy State Treasurer Mike Paparian outlines how the Green Bond Pledge can be a pathway for cities to begin to align bond issuance and investment with their climate actions.
Every city and municipality have its own challenges around budgets, balance sheets, and infrastructure.
But they all face a common climate challenge.
Increasingly matching climate policy ambitions, goals and targets with green finance directions is a practical response.
'Till next time,
Want to know more?
Webinar: 26th July 2018
12:00 PM EDT/09:00 AM PDT/17:00 PM BST
This webinar, co-hosted by CDP and Climate Bonds Initiative, will introduce the Green Bond Pledge. Speakers will outline the Green Bond Pledge’s role to foster debate around finance for low carbon, climate resilient urban infrastructure as a part of cities’ plans to help the US to meet its Paris Accord emissions goals.
We will also share information on the upcoming GCAS and Green Bond Pledge announcements in support of maintaining climate momentum across states and cities.
The Green Bond Pledge will also be highlighted as a major commitment local governments can make to the Global Climate Action Summit Sept. 13-14 in San Francisco. For information on the Climate Action Summit, see www.globalclimateactionsummit.org