1 Nikolai J. Sklaroff,
Capital Finance Director
September 20, 2023
Results of Recent Financings for
Water Enterprise
Water Revenue Bond Sales
(Series 2023ABCD)
2 2023 Series AB 2023 Series CD
Authorized
Par and
Purpose
Up to $450 million to fund regional,
local, and Hetchy water capital projects
(new money and refund commercial
paper)
Up to $1,662 million to refinance certain
outstanding WSIP and Local Water bonds
through a tender process to achieve debt
savings
Pricing July 11, 2023 July 19, 2023
Approval: June 27, 2023 Commission Meeting
Sale Negotiated (Wells Fargo Securities and Jefferies as lead underwriters respectively) Ratings Moody’s Investors Services affirmed Aa2 water revenue bond rating, Stable outlook S&P Global Ratings affirmed AA- water revenue bond rating; Stable outlook 2023AB Bond Sale Conditions
(AAA Rated Bonds Over Past 30 Years)
3 • Broader financial markets reflected confidence in the U.S. economy. • High grade tax-exempt municipal bond yields were generally low compared to highs experienced over the past year
Source: Montague De Rose & Associates; Municipal Market Data Index data. 2023AB Bond Sale Results
4 • High grade tax-exempt municipal bond yields were generally low compared to highs experienced over the past year
• Strong demand generated lower rates
o Lowered interest rates in 2028 to 2038 by 0.02% to 0.07% after retail order period.
o Strong institutional follow through on 2028 to 2043 tightened an additional 0.02% to 0.07% at final pricing.
o Total subscription for the combined Series A and B bonds was about 4.0x the available bonds with $1.665 billion of total orders for $416.7 million of bonds.
Source: Montague De Rose & Associates
2023AB Final Pricing Results
5 Series A
(Regional and Local
Water)
Series B
(Hetch Hetchy Water)
Final Maturity November 1, 2052 November 1, 2052
True Interest Cost (TIC) 4.10% 4.10%
Purpose $398M to fund regional and
local water capital projects
(new money and refund
commercial paper)
$73M to fund Hetch Hetchy
water capital projects (new
money and refund commercial
paper)
2023 Series AB Water
Revenue Bonds
Par Amount $414,035,000
Premium $57,218,995
Total Proceeds $471,253,995
True Interest Cost 4.10%
Sale Date July 11, 2023
Independent Pricing Consultant
(2023 Series AB Report)
6 As per policy on SFPUC negotiated bond sales,
in addition to our Municipal Advisors, we engaged
an Independent Pricing Consultant (PFM
Financial Advisors LLC) to evaluate the results of
the sale.
o “We have analyzed the sale results in
reference to market information showing
national indices during the time of the sale
and other similar bond sales pricing at
approximately the same time as the Bonds,
as well as monitored order flow during the
pricing and post-sale data through the date
of this memo.”
o “Based on the data noted in this report, the
orders received by the Underwriters during
the marketing and the final pricing levels,
we have concluded that the 2023AB
Bonds were reasonable and fairly priced
in light of the market conditions on July
11, 2023.”
Series 2023CD Tender Offering
7 UST : Rate Movement Since 1/1/2022 MMD AAA: Rate Movement Since 1/1/2022 Market Movements Since 2022 Water Financing
Inverse relationship between interest rates and bond
prices
●
%
$
When interest rates rise,
bond prices fall
●
%
$
When interest rates fall,
bond prices rise
2022
kick-off
2022
abandoned
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
10-YR UST 30-YR UST
0.00%
1.00%
2.00%
3.00%
4.00%
5.00% 10-YR MMD 30-YR MMD
Tender Process
8 Bond Proceeds
Payment for
Tendered
Bonds
New T/E Refunding Bonds
Participating
Bondholders of
Tendered Bonds
SFPUC New Bondholders
Tendered Bonds
TENDER OFFER
Investors may be interested in selling their existing SFPUC bonds Investors may need liquidity or simply want to exit bond positions Rising rates, negatively affect price of outstanding bonds SFPUC can offer investors the opportunity to tender back bonds for a price that is better than what they can be sold for in the open market Win-Win opportunity for investors and SFPUC
Initiating Tender Sequence
• June 13th Issued Notice of Potential Issuance
• June 28th Issued “Invitation to Tender Bonds” and POS 9 Tender Invitation
• Invitation also had these tax-exempt bonds:
10 Sequence of Tender Notices
(https://emma.msrb.org)
11 Results: Taxable Bonds
12 Results: Taxable Bonds
13 $603.6M
$371M
Not offered from Investors
Offered from Investors
$974.7M
Overview
• Produced 10.4%
present value
savings of $38.6M
• Created additional
optionality in debt
portfolio by
replacing taxable
bonds with 10-year
par call tax-
exempt bonds that
have the potential
to generate
additional refunding
savings in about
10-years
All accepted
$371M
Accepted by SFPUC
Taxable Bonds
Candidates
Tender Offers
Accepted by SFPUC
Results: Tax-Exempt Bonds
14 Results: Tax-Exempt Bonds
15 $478M 320
$320M
Not offered from Investors
Offered from Investors
$798.2M
Overview
• Produced 9%
Present Value
savings of $21.8M
• Accepted offers
that generated a
minimum of 5%
PV savings per
maturity (the Debt
Policy minimum
refunding
transaction PV
savings threshold
is lower at 3%)
$240.8M
accepted $240.8M
$79.2M
Accepted by SFPUC
Not Accepted by SFPUC
Tax-Exempt Bonds
Candidates Tender Offers
Accepted by SFPUC
Results: New Bonds 2023CD
16 $371M
Accepted by SFPUC
$240.8M
$79.2M
Accepted by SFPUC
Not Accepted by SFPUC
$486.9M
$28M
$514.9M*
2023C (Green Bonds) 2023D
Taxable Tender Offers Accepted
Tax-Exempt Tender Offers Accepted
$611.8M
tendered
2023CD – Tax-Exempt
*includes $7.2M in advance refunded bonds to
achieve debt savings in every year
2023CD Final Pricing Results
17 Series C
(Regional and Local
Water)
Series D
(Hetch Hetchy Water)
Final Maturity November 1, 2043 November 1, 2035
True Interest Cost (TIC) 3.25% 2.49%
Purpose $562M to refinance certain
outstanding WSIP bonds
through a tender process to
achieve debt service
savings
$32M to refinance certain
outstanding Local Water bonds
through a tender process to
achieve debt service savings
2023 Series CD Water
Revenue Bonds
Par Amount $514,855,000
Premium $79,303,059
Total Proceeds $594,158,059
True Interest Cost 3.23%
Sale Date July 19, 2023
Key Results
(Series 2023CD Water Revenue Bonds)
18 Source: Montague, DeRose & Associates, Municipal Advisors to the SFPUC Financial
Plan
Savings
Independent Pricing Consultant
(2023 Series CD Report)
19 As per policy on SFPUC negotiated bond sales,
in addition to our Municipal Advisors, we
engaged an independent Pricing Consultant
(PFM Financial Advisors LLC) to evaluate the
results of the sale.
• “We have analyzed the sale results in
reference to market information showing
national indices during the time of the sale and
other similar bond sales pricing at
approximately the same time as the Bonds, as
well as monitored order flow during the pricing
and post-sale data through the date of this
memo.”
• “Based on the data noted in this report, the
orders received by the Underwriters during the
marketing and the final pricing levels, we have
concluded that the 2023CD Bonds were
reasonable and fairly priced in light of the
market conditions on July 19, 2023.”
Outstanding Water Debt
($million)
20 Before
2023ABCD
After
2023ABCD
Revenue Bonds $4,459 $4,769
Commercial Paper
• Authorized
• Drawn
500
373
500
0 • Net result: Secured $471,253,995 of additional spending but overall impact was only $310,000,000 of new bonds
New Money and Call Horizon
(AFTER Series 2023ABCD Water Bonds)
21Source: Montague DeRose & Associates
Projected Aggregate Net Debt Service
22 **Does not include future debt as projected in 2024 Financial plan (see table below). -
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
Water Net Debt Service
Outstanding Bond NDS 2023C&D Refunding NDS Planned SRF Loans 2023A&B New Money NDS Prior Outstanding Bond NDS
Record Green Bond Issuance
23 Water Wastewater Power Total
$2,367M $1,953M $106M $4,426M
SFPUC Green Bond Issuance by Enterprise
SFPUC Green Bond Issuance by Calendar Year*
*This chart represents only bonds issued. In addition, there are various other financing tools the SFPUC utilizes including loans and credit facilities that we obtain and maintain. *2023 power bond is a projection and it is preliminary and subject to change. $0
$500
$1,000
$1,500
$2,000
$2,500
2001 2002 2003 2006 2009 2010 2011 2012 2013 2015 2016 2017 2018 2019 2020 2021 2022 2023 $ millions
Water (Green) Water (Non-Green) Wastewater (Green) Wastewater (Non-Green) Power (Green) Power (Non-Green) 24 Questions