AGENDA DEPARTMENT OF PUBLIC WORKS AND ENGINEERING
2017 CITY OF HOUSTON INVESTOR CONFERENCE
TANTRI EMO DEPUTY DIRECTOR
APRIL 25TH, 2017
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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.
Disclaimer
1
One of Largest Water & Sewer Systems in U.S.
Primary regional water provider for an area with estimated population of over 6 million, including City of Houston with population of 2.2 million
Maintains approximately 460,000 active accounts and related measuring system technology
As area grows, 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
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One of Largest Water & Sewer Systems in U.S. (Cont.)
7,480 miles of water lines
6,950 miles of wastewater lines
Treated average of 439 MGD water (as of June 2016)
Water Capacity of 860 MGD Treatment Plants Capacity – 630 MGD Ground Water Permitted – 230 MGD
Untreated water sales ~205 MGD
Highest day on record – 672 MGD treated in Sept. 2011 drought
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One of Largest Water & Sewer Systems in U.S. (Cont.)
3 Surface Water Purification Plants Northeast Water Purification Plant (NEWPP) Southeast Water Purification Plant (SEWPP) East Water Purification Plant (EWPP)
137 Groundwater Wells 166 Water Tanks/Towers 78 Ground Water Pump Stations
40 Wastewater Treatment Plants Over 385 Lift Stations 3 Wet Weather Storage Facilities Average treated wastewater ~256 MGD (563 MGD permitted)
– as of June 2016
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Lakes & Rivers
Surface Water
67% 13%
6%
14%
Water Suply 1,844 Million Gallons per Day
Surface Water
Ground Water
Bayou
Reuse
COH Water Supply C
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All Permitted Water Rights 1,844 MGD – as of June 2016
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Capital Improvement Projects Since 2010, CIP average of $370 million annually
Initialized pay-go funding:
13.5% in FY12, 17.6% in FY16, 18.9% in FY17 and 27% in FY20
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Regular CIP - First Liens,
1.89
Non First Liens, 0.27
Others, 1.47
Debt 76%
Pay-go Funding
24%
FY17-FY21 CIP Funding ($3.6B)
Regular CIP - First Liens
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Luce Bayou Interbasin 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 ~$400M
Participants: COH, NHCRWA, CHCRWA, WHCRWA & NFBWA
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Major Regional Capital Projects
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Northeast Water Purification Plant Expansion (NEWPP) Expansion Capacity from 80MGD to 400 MGD by 2024 320MGD 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: $1.3B 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 underway Estimated cost: $450M, about 42% paid by CUS
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Major Regional Capital Projects (Cont.)
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SUR
FAC
E W
ATER
SO
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• San Jacinto River (SJR) via
Lake Conroe managed by SJRA Lake Houston managed by CWA
Trinity River (TR) via Lake Livingston managed by TRA
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Risks Negotiations with EPA - ongoing
$15M budget in FY17 for assessment, cleaning, inspections and education – spending significantly less as negotiations not finalized
Large aging system Significant population growth
Actions Reducing water loss – completed water loss audit.
Implementation of recommendation is being planned 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
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CUS Ratings and Credit Strength
Closed system
Strong liquidity - cash reserve policy of 300 days of operating cash
CUS currently has over 600 days of available operating cash
Automatic annual rate increases - per Ordinance since 2004
Regional primary water provider – increasing growth in water sales
System maintains strong long term ratings with stable outlook
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First Lien Aa2 Stable AA Stable AA Stable
Previous Lien Aa1 Stable AA+ Stable AA+ Stable
Moody's FitchS&P
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Strong Credit Fundamentals and Consistent Performance
FUN
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TALS
Conservative budgeting &
significant reserves
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1
7 Automatic annual
rate adjustment maintains
strong financial position
3 CUS continues to strive for
efficiencies in operating expenses
4 Rates continue to be
affordable compared to
other large utilities 5
Provides water service to
the Houston region
serving a growing population
of ~4.4 Million
6 Maintain strong long term
debt ratings
Proactively secure lower cost of
debt service (refundings &
TWDB SRF/SWIFT programs)
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Revenues & Expenses Highlights Debt Service Coverage
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CAFR FY 2015 CUS $M
Revenues $943
Expenses O&M ( 424)
Net Revenues $519
Annual Bond Debt Service Coverage:
1.35
CAFR FY 2016 CUS $M
Revenues $ 1,034
Expenses O&M ( 437)
Net Revenues $ 597
Annual Bond Debt Service Coverage:
1.47
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FIN
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ATE
417,615,000
399,855,000
406,273,000
424,665,000
436,845,000
380,000,000
390,000,000
400,000,000
410,000,000
420,000,000
430,000,000
440,000,000
2012 2013 2014 2015 2016
System Actual O&M ($s)
55,100,000
110,000,000
65,000,000 65,000,000 70,000,000
-
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
2013 2014 2015 2016 2017
System Pay-as-you-go ($s)
1.9
3.3 3.6
1.2
4.4
1.4
3.4
0
1
2
3
4
5
2011 2012 2013 2014 2015 2016 2017
Annual Rate Adjustments (Percentage)
1.48 1.48
1.55
1.35
1.47
1.25
1.3
1.35
1.4
1.45
1.5
1.55
1.6
2012 2013 2014 2015 2016
Debt Service Coverage
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CUS FY2017 & FY2018 Financing Transactions C
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UP
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FY2017 TWDB SWIFT Loan
Closed December 2016 - $63M TWDB Clean Water Loan
Closed February 2017 - $65.7M CP Takeout/New Money and
Refunding Closing May 2017 - $350M
FY2018 TWDB SWIFT Loan
December 2017 - $83M TWDB Clean Water Loan
February 2018 - $64.7M CP Takeout/New Money and
Refunding CP Takeout in March 2018 -
~$230M Refunding Amount - TBD
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SUST
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OF
LIFE
10/7/016 COMMITMENT TO THE FUTURE
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