DALLAS — The San Antonio City Council has unanimously agreed to purchase water from the developer of a $3 billion privately financed pipeline, and approved more than $500 million of revenue refunding bonds from the city's electric utility.
The 142-mile pipeline, one of the largest projects in San Antonio's history, is expected to transport up to 16.3 billion gallons per year from Burleson and Milam counties east of Austin to the San Antonio Water System.
The privately owned Vista Ridge Consortium, headed by the international infrastructure finance company Abengoa, will bear the financial risks of building the pipeline and the political risks of dealing with groundwater districts in Central Texas, SAWS chief executive Robert Puente said.
"SAWS is meeting its commitment to provide sustainable, affordable water services for San Antonio," Puente said. "City Council has demonstrated its confidence in SAWS and this contract."
This is the first time the city-owned utility has agreed to such an ambitious project from a private developer. Earlier this year, the city considered a similar pipeline proposal from a supplier operating in South Texas, but negotiations did not work out.
Despite opposition from environmental groups and a former city council member, the council voted 9-0 in favor of the deal.
Vista Ridge has up to 30 months to arrange financing followed by 42 months to build the pipeline. SAWS payments to Vista Ridge will not begin until the project is delivering water.
Vista Ridge has assembled 3,400 leases for water rights with local landowners in Burleson and Milam counties.
Under the terms of the contract, San Antonio will not pay for any water that is not made available for delivery, shifting major regulatory risks to the private developer instead of San Antonio ratepayers.
The deal gained urgency as San Antonio coped with serious drought and a heavy dependence on the Edwards Aquifer beneath the region.
"With this agreement we are moving from a city perceived to lack water supplies to a city that will ensure economic prosperity for our children and grandchildren," said SAWS chairman Beto Guerra in a prepared statement. "And we will be able to do this while fulfilling our commitment to protect the Edwards Aquifer, even in times of drought."
The council was also unanimous in approving issuance of more than $500 million of junior-lien refunding bonds for the city's CPS Energy electric utility. The bonds will come in two series, including variable-rate debt tied to the SIFMA index, in 2015.
The junior-lien bonds carry ratings of Aa2 from Moody's Investors Service. Standard & Poor's and Fitch Ratings are split with ratings of AA-minus and AA-plus, respectively.
CPS issued $297 million of refunding bonds in September for savings.
SAWS carries ratings of AA-plus from Standard & Poor's and Aa1 from Moody's Investors Service on its senior-lien revenue bonds. San Antonio's general obligation bonds are rated triple-A.
San Antonio's general obligation bonds are rated triple-A.
