The New York Power Authority is bringing its first 100% green bond deal to finance priority transmission projects that will fund rebuilding and modernizing the state’s electrical grid, bringing cleaner energy sources downstate.
The $600 million green transmission project revenue bonds pricing Tuesday is the authority's first 100% green deal and it is also the first ever with bonds backed solely by revenue earned by specific transmission projects, instead of the authority’s underlying credit. The bonds are certified green by Sustainalytics.
“The capital generated from this upcoming green transmission revenue bonds sale is a significant step in laying the foundation of a green energy economy in New York State,” NYPA Interim President and CEO Justin Driscoll said.
NYPA is working to achieve Gov. Kathy Hochul’s vision for the state, addressing the administration’s goal to ensure that 70% of the state’s electricity comes from renewable energy by 2030, and 100% by 2040, Driscoll said.
The New York Power Authority deal is insured by Assured Guaranty Municipal Corp. and the deal is rated A1 from Moody's Investors Service, AA from S&P Global Ratings and AA-minus from Fitch Ratings (A2/NR/AA-/ underlying). Goldman Sachs is lead underwriter on the deal and Prager & Co., LLC is financial advisor. The bonds mature from 11/2023-2041 with terms in 2046, 2051 and 2061. The issuer was offering bonds to retail investors on Monday and officials said the deal was receiving strong interest with $300 million of retail orders with some maturities two times oversubscribed by late-afternoon.
"This is the first of many reinvestments needed to rebuild and modernize the transmission grid," said Adam Barsky, the authority's chief financial officer. Some of the transmission lines were built in the 1940s and are at the end of their lifespans, he said. The bonds will finance two projects, the Central East Energy Connect Transmission Project and the Smart Path Reliability Transmission Project.
Central East will increase transmission from central New York to eastern New York, replacing wooden structures with steel structures. The Smart Path will rebuild 78 miles of single circuit, mostly wood poles from central New York to northern New York.
"These upgrades will help move that power from the St. Lawrence River and Central New York more cost-effectively through the grid to high-demand areas downstate in New York City and Long Island while creating economic development and jobs upstate," Barsky said.
The New York Power Authority produces over 80% of its energy as clean, renewable, and low-cost electricity. The authority generates and distributes roughly 25% of New York’s power consumption and controls 30% of the state’s transmission infrastructure.
Barsky said long-term transmission upgrade and modernization projects favorable to the environment are now ongoing throughout New York.
The strength of the ratepayer base and the debt service coverage ratio at 1.6 times add to the credit's strength, Barsky said.
CreditSights said they expect many in-state investors will be "excited for the opportunity to add a new issuer to their portfolios."
“We expect strong demand for this New York tax-exempt paper, particularly for those keen on investing in the state’s green power goals,” CreditSights said.
"Since these bonds are secured by two specific projects, prospective investors will have an added surveillance burden, although the involvement of Assured Guaranty means that investors will indirectly benefit from their surveillance," CreditSights said in a report. "In our view, prospective investors should expect incremental yield to compensate for the ongoing diligence that will be required."
This is not the authority's first foray into green bonds. In April 2020, it came to market with a $1.23 billion offering including a tranche of its first-ever green bonds. That deal won The Bond Buyer's 2020
NYPA is the nation's largest public power organization with 16 generating facilities and more than 1,400 circuit-miles of transmission lines. In 2019, NYPA became the first North American electric utility to receive certification from the International Organization for Standardization, given to organizations meeting the most rigorous asset management standards.
Jessica Lerner contributed to this report.
