PHOENIX - Arizona's Salt River Project is gearing up for a $720 million refunding deal next week.
The negotiated pricing is slated to take place Nov. 16, with the formal award two days later and closing scheduled for Nov. 30.
The revenue bonds are rated Aa1 by Moody's Investors Service and AA by S&P Global Ratings.
Morgan Stanley is senior underwriter for the deal, and PFM is financial advisor with Chiesa Whahinian & Giantomasi as bond counsel.
SRP is one the nation's largest utilities, providing electricity and water to more than 2 million people in Central Arizona.
It had operating revenues of $3 billion in fiscal year 2016, and net revenues of $145 million.
As of April it had outstanding indebtedness of just over $4 billion, including roughly $3.8 billion of revenue bonds and some $225 million of commercial paper.
It is governed by a publicly elected board of directors, and is a political subdivision of the state.
"The district continues to manage its outstanding debt portfolio in a conservative and careful manner," the SRP's corporate treasurer, Steven Hulet, said in an investor presentation, which noted that the district expects its annual debt service to climb from about $100 million to over $250 million in the coming years, but then hold steadily around that mark out through 2040.
Hulet cited SRP's strong regional presence and high levels of customer satisfaction, as well as its strong statutory authority to raise rates if necessary.
Under Arizona law, the utility district may set its own rates.
While the Secretary of the Interior has the legal authority to revise those prices, that has never before happened.
SRP's board has approved rate increases with a focus on maintaining financial metrics and credit strength during hard financial times, SRP chief financial officer Aidan McSheffrey said. The most recent increase was a 3.9% bump in April 2015.
The upcoming transaction will be used to refund a portion of bonds issued in 2005 and 2008. The issuance is expected to generate level savings, said Morgan Stanley's Grant Fraunfelder.
SRP is also embarking on a multi-year capital improvement plan estimated to cost about $5.3 billion from 2017-2023. About 74% of that project is to be paid for by internally generated funds, according to investor materials. Hulet said that would allow SRP to maintain its debt ratio at existing levels.
The largest investments in the six-year plan are just over $1.7 billion each for power generation and distribution infrastructure, with smaller but significant investments in operational support and transmission.
Hulet said the expenditures are being done with an eye toward meeting the growth of the Phoenix metropolitan area that SRP serves, as well replacing aging infrastructure such as wooden poles and underground cables.
