HOUSTON PUBLIC WORKS AGENDA 2018 CITY OF HOUSTON
HOUSTON PUBLIC WORKS AGENDA 2018 CITY OF HOUSTON INVESTOR CONFERENCE SAMIR SOLANKI ACTING DEPUTY DIRECTOR APRIL 23, 2018
COMBINED UTILITY SYSTEM Disclaimer 2 This Investor Presentation is provided for your general information and convenience only, is current only as of its date and does not constitute an offer to sell or a solicitation of an offer to buy securities. The information contained herein does not constitute a sufficient basis for making a decision with respect to the purchase or sale of any security. All information regarding or relating to bonds issued or to be issued by the City of Houston (the “City”), either as general obligation debt or through its enterprise funds, the Combined Utility System, the Houston Airport System or the Convention and Entertainment Department, is qualified in its entirety by the relevant Official Statement and any related supplements and continuing disclosure. Investors should review the relevant Official Statement and any related supplements and continuing disclosure before making a decision with respect to the purchase or sale of any bonds issued or to be issued by the City or any of the City’s enterprise funds. In addition, before purchasing any bonds issued or to be issued by the City or any of the City’s enterprise funds, please consult your legal and financial advisors for information about and analysis of the bonds’ risks and their suitability as an investment in your particular circumstances. With respect to each section of this Investor Presentation, such section contains information from sources believed by the City to be reliable but which information is not guaranteed as to accuracy. Each enterprise fund makes no representation regarding the reliability or accuracy of any information in the other enterprise funds’ sections of this Investor Presentation. The financial data and other information provided herein are given in summary form and not warranted as to completeness or accuracy and are subject to change without notice. Certain of the information set forth herein has been derived from external sources that have not been independently verified and no representation or warranty expressed or implied is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of, the information or opinions contained herein. None of the city officials or their respective representatives or agents, including any underwriters of bonds issued or to be issued by the City, shall have any liability whatsoever in negligence or otherwise for any loss however arising from any use of this Investor Presentation or its contents or otherwise arising in connection with this Investor Presentation or any other information or material discussed. By viewing this Investor Presentation, you agree not to duplicate, copy, download, screen capture, electronically store or record this Investor Presentation except for your own personal use, nor to produce, publish or distribute this Investor Presentation in any form whatsoever. There may have been events that occurred subsequent to the date of the Investor Presentation that would have a material adverse effect on the information presented herein. The City and/or its enterprise funds are under no obligation to update any of the information set forth herein. No dealer, broker, salesperson or any other person has been authorized to give any information or to make any representation in connection with the City or any bonds issued by the City, and if given or made, such other information or representation must not be relied upon as having been authorized by the City. This Investor Presentation includes forward-looking statements based on current beliefs and expectations about future events. Forward-looking statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future events. Forward-looking statements are not guarantees of future performance and are subject to inherent risks, uncertainties and assumptions, and changes in economic conditions globally or in the State of Texas and political and regulatory factors. Those events are uncertain; their outcome may differ from current expectations which may in turn significantly affect expected results. Actual results may differ materially from those projected or implied in these forward-looking statements. Any forward-looking statement contained in this Investor Presentation speaks as of the date of this Investor Presentation.
COMBINED UTILITY SYSTEMS One of the Largest Water & Sewer Systems in the U. S. 3 § Primary regional water provider for an area with estimated population of over 6 million, including City of Houston with population of 2. 3 million. § Service to the MSA is through wholesale contracts with municipalities, water districts and water authorities § Maintains ~480, 000 active water accounts and ~458, 000 wastewater accounts § As area grows and water needs grow, by 2060, Houston area population is expected to double § City built 3 reservoirs/lakes decades ago - has secured significant surface water rights and built conveyance system. § Enables City to be regional surface water supplier compliance with State mandated ground water reduction plans
COMBINED UTILITY SYSTEMS One of the Largest Water & Sewer Systems in the U. S. (Cont. ) 4 § § 7, 144 miles of water lines 6, 950 miles of wastewater lines Treated average of 458 MGD water Water Capacity of 800 MGD § Treatment Plants Capacity – 562 MGD § Ground Water Permitted – 237 MGD § Untreated water sales ~217 MGD § Highest day on record – 672 MGD treated in Sept. 2011 drought
COMBINED UTILITY SYSTEMS One of the Largest Water & Sewer Systems in the U. S. (Cont. ) 5 § Water Supplier for the Region § § 1, 550 square miles, 3 counties 3 Surface Water Purification Plants 7 major Re-pump Stations ~100 Groundwater Wells § 39 Wastewater Treatment Plants § 385 Lift Stations § 3 Wet Weather Storage Facilities § Average treated wastewater 256 MGD (564 MGD currently permitted)
COH Water Supply WATER SUPPLY Water Supply 1, 854 Million Gallons per Day 14% Lakes & Rivers Surface Water 6% Surface Water 13% Ground Water 67% Bayou Reuse Surface Water Rights 1, 609 MGD Allowable Groundwater ~87 MGD (Pursuant to rules of the Harris. Galveston Subsidence District) 6
SURFACE WATER SOURCES • San Jacinto River (SJR) via § Lake Conroe managed by SJRA § Lake Houston managed by CWA § Trinity River (TR) via § Lake Livingston managed by TRA 7
COMBINED UTILITY SYSTEM Capital Improvement Projects 8 § Since 2010, CIP average of $370 million annually § Recent Pay-As-You-Go funding: § § 17. 6% in FY 16, and 18. 9% in FY 17 The FY 19 -FY 23 CIP is being finalized FY 17 -FY 21 CIP Funding ($3. 6 B) Regular CIP - First Lien Others, 1. 47 Regular CIP - First Lien, 1. 89 Pay-go Funding 24% Debt 76% Subordinate First Lien, 0. 27
NEXT LARGE REGIONAL PROJECTS Major Regional Capital Projects 9 § Luce Bayou § Inter-basin transfer of ~400 MGD water from Trinity Basin to San Jacinto Basin via Luce Bayou for storage in Lake Houston § Water conveyance infrastructure project § Pump Station in the Trinity River § 3. 0 miles of pipeline § 23. 5 miles of canals § Project underway, fully permitted and under construction; Estimated completion Summer 2019 § Estimated Cost ~$380 M; Participants: NHCRWA, CHCRWA, WHCRWA & NFBWA
NEXT LARGE REGIONAL PROJECTS Major Regional Capital Projects (Cont. ) 10 § Northeast Water Purification Plant Expansion (NEWPP) Expansion Capacity from 80 MGD to 400 MGD by 2024 320 MGD Expansion Phase 1: 80 MGD year 2021, and Phase 2: 240 MGD year 2024 Project underway - Design/Build contract executed in December 2015 § Estimated cost: $1. 7 B § Participants: COH, NHCRWA, CHCRWA, WHCRWA & NFBWA § CUS participation about 16% § § § Transmission Line Expansion § Convey treated water from Eastern Harris County to Water Authorities in Western Harris County § Construction in segments under way § Estimated cost: $450 M, about 42% paid by CUS
CONSULTING ENGINEERS NEWPP EXPANSION Luce Bayou Transfer (CWA Project) New Plant & Existing Plant Upgrades New Lake Intake & Pump Station Transmission Pipelines 11
CUS Risks and Actions RISK MANAGEMENT Risks 12 § Negotiations with EPA – ongoing § $15 M budget in FY 18 for assessment, cleaning, inspections and education – spending significantly less as negotiations not finalized § Large aging system § Significant population growth Actions § § Reducing water loss – water loss audit completed Securing water resources for 2060 and beyond Reducing electrical usage by installing efficient pumps and LEDs Emphasis on Continuous Process Improvements – significant reductions in chemical costs over past several years
HARVEY RISKS &ACTIONS Hurricane Harvey – CUS Risks & Actions 13 Risks § Potential increase in costs related to Hurricane Harvey damages Actions § Damage assessment still ongoing § Site inspections conducted with FEMA § Potential Federal recovery of up to 90%
CUS Ratings & Credit Strength FINANCIAL UPDATE Financial Strength § § § • 14 Closed system Strong liquidity Maintains cash reserve policy of 300 days of operating cash. CUS currently has over 600 days of available operating cash Per Ordinance since 2004 – rates adjusted automatically each year System maintains strong long term ratings with stable outlook As of 4. 1. 18
Strong Credit Fundamentals & Consistent Performance FUNDAMENTALS Conservative budgeting & significant reserves 15 Proactively secure lower cost of debt service (refundings & TWDB SRF/SWIFT programs) Maintain strong long term debt ratings 1 7 2 6 Provides water service to the Houston region serving a growing population of ~4. 4 Million Automatic annual rate adjustment maintains strong financial position 3 5 4 CUS continues to strive for efficiencies in operating expenses Rates continue to be affordable compared to other large utilities
Revenues & Expenses Highlights Debt Service Coverage FINANCIAL HIGHLIGHTS CAFR FY 2017 CUS ($M) 16 Revenues $ 1, 056 Expenses O&M (438) Net Revenues $617 CAFR FY 2016 CUS ($M) Revenues Expenses O&M Net Revenues $1, 034 (437) $597 Annual Bond Debt Service Coverage: 1. 44 1. 47
Debt Service Coverage 1. 60 1. 55 1. 50 1. 48 1. 47 1. 45 FINANCIAL UPDATE Annual Rate Adjustments (%) 1. 40 1. 44 1. 35 1. 30 1. 25 2012 2013 2014 2015 2016 2017 4. 4 3. 3 $420. 0 $424. 7 $399. 9 2013 2014 2015 2016 2017 2018 $110. 0 $100. 0 $55. 1 $65. 0 2015 2016 $70. 0 2017 2018 $40. 0 $390. 0 $380. 0 $120. 0 $60. 0 $406. 3 $400. 0 2012 $80. 0 $417. 6 $410. 0 1. 4 1. 2 System Actual Pay-As-You-Go (In Million $; FY 18 Estimate ) $436. 8 $438. 3 $440. 0 3. 4 1. 9 System Actual O&M (in Million $) $450. 0 3. 6 2. 8 2011 $430. 0 17 5 4 3. 5 3 2. 5 2 1. 5 1 0. 5 0 $20. 0 2012 2013 2014 2015 2016 2017 $0. 0 2013 2014
CURRENT &UPCOMING TRANSACTIONS 18 CUS FY 2017 & FY 2018 Financing Transactions FY 2017 • TWDB SWIFT Loan • Closed December 2016 - $63 M • TWDB Clean Water Loan • Closed February 2017 $65. 7 M • CP Takeout/New Money and Refunding • Closed May 2017 $350 M FY 2018 • TWDB SWIFT Loan • Closed December 2017 $83 M • TWDB Clean Water Loan • Closed April 2018 - $65 M • TWDB SWIFT Loan • Closing June 2018 -- $106 M • CP Takeout/New Money & Refunding • CP Takeout in June 2018 ~$250 M • Refunding Amount tbd
SUSTAINABLE QUALITY OF LIFE 19 COMMITMENT TO THE FUTURE 10/7/016
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