Snohomish County PUD this week issued approximately $141 million of tax-exempt bonds, a move that will fund a number of system improvements over the next three years. The PUD benefitted from favorable market conditions to lock in a low borrowing rate for the bonds.
The new bonds, which have a final maturity of 2040, were sold at an average borrowing rate of 3.48%, as the PUD made good use of the current, very low long-term interest rate environment. Many economic experts believe interest rates will rise later this year.
In conjunction with the bond sale, three major bond rating agencies affirmed the PUD’s bond ratings. Standard & Poor’s and Fitch Ratings rated the District AA-, while Moody’s provided a comparable Aa3 rating. These were consistent with previous strong ratings for the PUD. Strong bond ratings allow the utility to sell bonds at lower rates, providing savings for its ratepayers.
The bond sales will fund a range of system improvements on the PUD’s distribution system, including overhead and underground power lines and substations. The funds also will support ongoing grid modernization work to maintain high levels of reliability for the utility’s customers.
This is the first part of a 2015 financing plan that includes the redemption of approximately $90 million of bonds originally sold in 2005 at interest rates much higher than those currently available. As a result, the PUD expects its already modest debt levels to be only slightly higher by the end of 2015.
In their reports, the bond rating agencies cited several key factors, including:
- The strong health of Snohomish County’s economy,
- Strong PUD financial practices,
- A low debt ratio,
- Benefits of a long term supply agreement with the Bonneville Power Administration, and
- Resource planning that allows the PUD to comply with environmental regulations and accommodate load growth.
“Selling bonds when interest rates are low allows the PUD to keep expenses in check for the utility and its customers,” PUD Assistant General Manager for Finance Glenn McPherson said. “The PUD Board of Commissioners has provided solid policy direction that has earned outstanding ratings from the bond market, confirming that we are managing our finances in a prudent manner and keeping our cost of capital low.”