The electric utility of the city of Sacramento, California, issued $162 million in bonds to refund a previous issuance.
The bonds, issued by the Sacramento Municipal Utility District (SMUD), were sold in two series. The 2023 Series D bonds, consisting of $100 million, mature on August 15, 2049. They have a coupon rate of 5% and yield 2.8%. The 2023 Series L bonds, consisting of $62 million, mature between 2024 and 2033. They have yields ranging from 2.55% to 3.01% and a coupon rate of 5%. The bonds received a rating of AA from Fitch Ratings and AA- from S&P Global Ratings.
The issuance comes as the utility implements its plan to become carbon neutral by 2030. While that plan could raise costs, Fitch “anticipates that costs will be recovered in a timely manner to preserve the utility’s financial profile, or the target date delayed if costs are significantly higher than anticipated.”
The utility estimates that two-thirds of power supply is already carbon free. The remaining supply is provided by five natural gas power plants, which SMUD plans to retire or repurpose within the next seven years. While SMUD generally prices its electricity at affordable rates, an unexpected nine-month outage at its largest natural gas power plant last year temporarily resulted in higher costs for the utility and energy prices for Sacramento residents.
The bonds are backed by the revenue from the utility. In 2022, SMUD collected more than $2 billion in operating revenue.
Barclays Capital Inc served as lead underwriter on the issuance.