The city of Santa Fe, New Mexico, is leaving no room for doubt that $16.5 million of debt for an environmentally friendly wastewater treatment plant earns the “green bonds” designation.
The revenue bonds ran a certification gauntlet that some so-called “green bonds” avoid en route to market Wednesday.
“This is the first certified green bond to be issued in New Mexico and the first anaerobic wastewater treatment plant to go through the Climate Bond Initiative certification process,” Mayor Alan Webber told The Bond Buyer.
Climate Bonds Initiative, an international organization that verifies the environmental benefits of bonds, said that Santa Fe’s stand-alone anaerobic digester project is the first of its type to earn certification.
To guide the deal through the certification process, Santa Fe hired the firm First Environment to assure that the credentials were in place.
“This is the smallest certified climate bond issue that I’ve been involved in, and I think it shows what can be done,” said Phillip Ludvigsen, senior associate for First Environment. “This is in the desert where they make sure they don’t waste water. With this project, they don’t waste anything.”
The anaerobic digester is designed to capture gas from sewage that will be used for fuel and to produce treated water and solid waste as a fertilizer. The project will require no outside energy, officials said.
“It saves an enormous amount of carbon dioxide,” Webber said. “This plant’s energy savings is equivalent to taking 743 passenger cars off the road. It could provide the energy that 610 homes use for one year.”
The anaerobic digester is not a new concept. The U.S. has over 2,100 sites producing biogas, including 247 anaerobic digesters on farms, 1,241 wastewater treatment plants using an anaerobic digester, 38 standalone anaerobic digesters, and 645 landfill gas projects, according to the American Biogas Council. Some digesters are used to recycle food waste. Methane gas emissions has long been a problem at U.S. landfills.
Webber said that the city brought its finance team into the planning for the green bonds early in the process. George Williford, managing director at Hilltop Securities, has worked with Santa Fe's chief financial officer, Mary McCoy.
RBC Capital Markets and Piper Jaffray are senior managers on the negotiated deal.
“Some cities or entities have just done what’s called self-designation (as green bonds),” Williford said. “The mayor wanted it to be clear and explicit, and that’s why we went through the trouble to get it certified by the most recognized authority.”
McCoy said the city wanted to been on the greenest end of the “fifty shades of green” finance market.
Build America Mutual, which is providing the surety bond for the reserve fund, has also blessed the deal with its “Green Star” designation.
“The hope is that that will bring some potential buyers that have green platforms that might not have been interested otherwise,” Williford said. “We hope that will broaden the market and indicate that this is the policy going forward.”
The bonds, rated AA-plus by S&P Global Ratings and Fitch Ratings, are an outgrowth of Santa Fe’s sustainability plan adopted last November. The plan’s goal to achieve carbon neutrality by the year 2040.
