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California IBank in $141.6m bond issue

The Infrastructure State Revolving Fund revenue bonds, which mature in October 2045, will go towards financing more infrastructure projects in the state.

The California Infrastructure and Economic Development Bank (IBank) has successfully raised $141.6 million of Infrastructure State Revolving Fund revenue bonds (2016A bonds) that will help public agencies invest in a range of infrastructure projects including transportation, social and water/wastewater.

The bond pricing resulted in an interest cost of 3.003 percent, IBank said in a recent statement, adding that S&P, Fitch and Moody’s have assigned the bonds triple-A ratings.

The 2016A bonds transaction is the third series of bonds issued under IBank’s 2014 Master Indenture. “This 2016 transaction continues the open indenture structure under which IBank will pledge repayments of loans made under the ISRF programme to secure all bonds issued under the 2014 Indenture,” the bank said.

Since its inception in 1994, the Sacramento-based bank has financed $34.5 billion in infrastructure and economic development projects.

“It is the oldest infrastructure bank in the country,” 32 Advisors’ principal and head of infrastructure Michael Likosky explained during a recent interview. “It was created by Governor Pete Wilson and it is different than other state infrastructure banks. The SIBs are more federal banks and transportation only, while the California bank is multi-sector and has moved seismically more money into priority projects.”

According to Likosky, until a few years ago, IBank was largely a bond and loan bank. In 2011, however, Governor Edmund Brown Jr. created a task force seeking ways to modernise the bank. “The idea was to make it a public-private partnership bank,” said Likosky, who chaired the task force.

The task force made five recommendations, such as expanding the bank’s scope to include financing for climate change-mitigating projects, including energy efficiency, renewables, storage technology, water and alternative fuels.

The recommendations were approved in 2012. They started to take shape in 2014 and have been gaining speed since last year, according to Likosky.

Last August, the bank’s five-member board approved the creation of the California Lending for Energy and Environmental Needs (CLEEN) Centre, which IBank’s executive director Teveia Barnes describes as a “full-scope green bank.”

“We provide subsidies to our borrowers which are municipalities and public universities, schools and hospitals to help meet Governor Jerry Brown’s goals of reducing greenhouse gas emissions below 80 percent of 1990 levels by 2050,” Barnes told Infrastructure Investor in an interview. “We are encouraging more clean energy and water projects by encouraging low-cost financings by providing a larger subsidy on the interest rate for CLEEN Centre projects.”

While the CLEEN Centre focuses on clean energy, water and environmental-related projects, it does sometimes overlap with IBank’s ISRF programme.

For example, one of the projects in IBank’s current pipeline of nearly $50 million is a portion of the Santa Cruz Safe and Reliable Drinking Water Project, for which IBank has approved a $25 million loan.

“It was a project that was more focused on water infrastructure and less focused on water conservation, although the two go hand-in-hand,” Barnes said, explaining why the Santa Cruz project was being funded through IBank’s ISRF programme as opposed to the CLEEN Centre.

“We have many water projects in our infrastructure programme. That programme has been around for over 22 years and that’s where all the water district projects have historically been,” she said.

“While the IBank is not new, it’s certainly an institution that’s being revitalised, fine-tuned and tuned up under the direction of Teveia Barnes,” IBank board member and founder of Table Rock Capital Peter Luchetti told Infrastructure Investor.

“To her credit, if you look at the deal flow in the last 24 months, with the help of the board, her staff and the Governor’s office, she has started to stimulate the right kind of activity,” Luchetti said, referring to Barnes, a Brown appointee, who joined the bank in July 2013.

According to Luchetti, one of the bank’s most important roles is providing financing for smaller-scale projects of up to $100 million.

“For the under ‘$100 million club’, I think the iBank model in California is the best example in the US that can sustainably support governmental and quasi-governmental enterprises in any state, if one were to replicate it,” Luchetti said. “California is probably the leader and provides the best example.”