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Texas Sells $1 Bln in Water Bonds

By Munichain News Desk

A Texas authority tasked with water security issued $1.01 billion in bonds to ensure that the state is prepared for drought.

The tax-exempt bonds, issued by the Texas Water Development Board (TWDB), mature between 2024 and 2058, yielding between 3.46% and 4.82%. As part of the same issuance, the board sold an additional $5 million in taxable bonds. The securities received a rating of AAA from Fitch Ratings and AAA from S&P Global Ratings.

The bonds are backed by the State Water Implementation Revenue Fund for Texas (SWIRFT), a pool of money that finances the State Water Plan, which aims to prevent future droughts.

“We assessed SWIRFT’s enterprise risk profile as very strong, given that the program was established through the passage of a constitutional amendment, was capitalized via a direct equity contribution, and is managed by a governmental agency,” S&P analyst John Kennedy said in a press release.

Climate scientists point out that drought has become more common as a result of human-caused climate change. Extreme drought is 1.7 times more likely now than it was between 1850 and 1900, according to a report by the Intergovernmental Panel on Climate Change. Within the next century, the likelihood of megadroughts, or those which last more than ten years, is likely to increase five-fold, a NASA study found.

The issuance comes after a widespread drought struck Texas in 2022. The TWDB’s most recent State Water Plan, released the same year, calls for $80 billion in spending over the next 50 years to avoid a water shortage. 

The TWDB was founded in the wake of a seven-year drought in the 1950s that caused more than $20 billion in inflation-adjusted damage. It remains the worst drought in state history. Since then, the TWDB has regularly released water plans aimed at fortifying Texas’ water infrastructure against future droughts of a similar scale. 

Wells Fargo Bank, NA, served as lead underwriter on the issuance, purchasing the bonds for more than $1.04 billion. The price reflected a premium of $37.5 million.

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