An Arizona electrical utility sold $650 million in bonds to finance capital improvements.
The bonds mature between 2043 and 2053, yielding between 4.18% and 4.48%. They received a rating of Aa1 from Moody’s Investors Service and AA+ from S&P Global Ratings.
The rating “recognizes the inherent strengths of SRP, given its self-regulated rate setting authority, historically robust financial metrics, and strong management of a growing economic service territory that includes Phoenix, AZ and a large portion of the surrounding metropolitan area,” Moody’s analysts wrote, referring to the Salt River Project Agricultural Improvement and Power District (SRP), which issued the bonds.
Extreme weather has weighed on the Phoenix electric system in recent months, putting pressure on SRP to produce more energy. But producing more energy requires the burning of fossil fuels, contributing to severe weather by worsening climate change.
Over the summer, Phoenix recorded 31 consecutive days over 110°F, nearly doubling the previous record. During July, which was the hottest month ever recorded according to the Copernicus Atmosphere Monitoring Service, SRP set a record peak load of 8,163 megawatts.
The vast majority of SRP’s energy still comes from oil and gas, though it plans to increase its supply of renewable energy, particularly in hydroelectric power. Fossil fuels contribute 5,000 MW of SRP’s energy supply annually, while owned renewables contribute just 235 MW, according to the official statement accompanying the sale of the bonds. SRP plans to increase the renewable share of its energy mix by purchasing renewable energy, with plans for it to reach almost 2,500 MW in the next five years; however, SRP does not plan to reduce its owned share of oil and gas resources.
The bond proceeds will finance improvements included in the district’s capital improvement plan, which calls for $8.1 billion in spending between 2024 and 2029. The district expects to fund about one-third of the plan with debt.
SRP is a public utility providing electrical, water supply, and irrigation services to residents of the Phoenix metropolitan area. The bonds are payable by electrical system revenue.
Morgan Stanley & Co LLC served as lead underwriter on the issuance, purchasing the bonds for $685 million. The price reflected a premium of more than $35 million.