Nov. 30 pricing date eyed for $3.4B Texas natural gas securitization

A $3.4 billion bond issue to securitize costs incurred by Texas natural gas providers during 2021’s Winter Storm Uri appears to be on track for pricing at the end of this month.

Members of the state’s Bond Review Board, who have until the end of Friday to call for a full review of the transaction, had no questions about the Texas Natural Gas Securitization Finance Corp. deal when it was presented at their meeting on Thursday.

The board’s Executive Director Robert Latsha said the deal was put on the agenda “out of an abundance of caution to allow board members to ask any additional questions.” At the meeting, he told the members the anticipated sale date for the taxable bonds is Nov. 30.

The preliminary official statement will be posted and a pricing date will be announced after the deal clears the Bond Review Board, according to Lee Deviney, executive director of the Texas Public Finance Authority.

In February 2021, Texas and other states were pounded with snow, ice, and high winds amid record-low temperatures, causing widespread blackouts, resulting in enormous energy bills as prices for electricity and natural gas skyrocketed due to high demand.

The customer rate relief bonds will be repaid with charges imposed on customers of eight natural gas utility local distribution companies, which were hit with huge costs for the commodity needed to heat homes and businesses as well as generate electricity.

Following a request for proposals process, Jefferies was selected in May as lead underwriter, with Morgan Stanley and HilltopSecurities tapped as co-senior managers.

UBS was dropped as a co-manager last month after the Texas Comptroller’s Office placed it on a list with nine other financial companies determined to be boycotting energy businesses. 

The Texas Legislature passed a series of bills in response to the storm. For natural gas providers, House Bill 1520 authorized securitization financing to provide customers with rate relief by extending the period over which they will pay the extraordinarily high gas costs.

The Southwest region has churned out several securitizations related to the storm. The Oklahoma Development Finance Authority issued bonds totaling $697 million for the Public Service Company of Oklahoma, $1.35 billion for Oklahoma Natural Gas Company, $761.6 million for Oklahoma Gas and Electric Company, and $81.56 million for Summit Utilities Oklahoma.

The Kansas Corporation Commission has approved securitizations allowing cost recovery of $92.7 million for Atmos Energy and $328 million for Kansas Gas Service.