Fayetteville PWC Completes $94 Million Bond Issuance, Secures Historic Low Interest Rate
November 9, 2021
by Paul Ciampoli
APPA News Director
November 9, 2021
The Fayetteville Public Works Commission (PWC) in North Carolina has issued $94.79 million of revenue bonds at an interest rate of 2.278%, the lowest rate ever achieved by PWC outside of state lending.
Citigroup Global Markets Inc. was the successful purchaser of the bond series and the PWC funding closed on November 4, 2021, PWC reported on Nov. 5.
PWC issued its Series 2021 Bonds to fund improvements to its electric, water and wastewater utilities, including $22 million to fund continued work to retrofit utilities in the City of Fayetteville’s Phase V annexation area.
“The low cost of borrowing helps PWC maintain highly-reliable utility services and demonstrates the strength of Fayetteville’s utility system and its management,” said PWC CEO and General Manager Elaina Ball in a statement. “When we can fund continued system improvements through low-cost borrowing, it ensures we can continue to provide reliable utility services while also managing our customers’ costs.“
The bonds represent PWC’s continued investment in its electric, water and wastewater systems to support growth, reliability, water quality and compliance, Ball noted. “The investment continues to address PWC’s multi-year plan of rehabilitation and replacement of aging infrastructure to ensure safe and reliable services for our 118,000 customers,” she said.
Overall, $90 million of the bond funding is dedicated to PWC’s water and wastewater system.
PWC will use $48 million to replace, upgrade and rehabilitate system mains, manholes and lift stations throughout its more than 2,500 miles of water and sanitary sewer system.
Over $10 million will fund back up generation at PWC’s water and wastewater treatment facilities for storm readiness. Backup generators have been critical when hurricanes caused extended power outages and flooding. PWC’s Rockfish Water Reclamation facility will receive $8.2 million to fund plant improvements and expansion plans in support of community growth, it noted.
The PWC Electric system will use over $7 million of the bond funds to replace one of PWC’s 30 electric substations and fund the expansion of PWC’s battery storage system at its community solar farm by 1.5 megawatts.
“PWC received favorable bond ratings by all three rating agencies which underpins our credit-worthiness and keeps our cost of capital low,” said Ball.
“Utilities required a substantial amount of capital to keep up with growth, replace aging infrastructure and maintain the reliability of their systems. Having such a low cost of borrowing is a key benefit of being a publicly owned utility and helps manage bill affordability for our community,” she noted.
Moody’s, Standard & Poor’s (S&P) and Fitch Rating agencies all affirmed PWC’s AA stable financial ratings during the bond issuance process.
Moody’s assigned PWC an Aa2 rating in a statement that noted PWC’s financial position will remain sound given its long-standing history of conservative budgetary practices and asset management.
Fitch Ratings assigned and affirmed PWC’s “AA” rating based on PWC’s very strong financial performance characterized by very low leverage, strong operating cash flow and healthy liquidity.
S&P assigned PWC its “AA” long-term rating stating key factors supporting the ratings include PWC’s deep and diverse service area, credit supportive policies and robust financial metrics.
S&P said PWC has “a very strong operational and management assessment, highlighted by an experienced a sophisticated management team engaged in credit-supportive planning and in adopting a robust set of financial policies and reserves. “
PWC noted that the bond issuance process required significant resources working collaboratively over a well-designed and managed schedule spanning four months.