Citizens Energy Group and CWA Authority, Inc. Acquisition of City of Indianapolis, Ind. Water and Wa Citizens Energy Group and CWA Authority, Inc. Acquisition of City of Indianapolis, Ind. Water and Wa

Citizens Energy Group and CWA Authority, Inc. Acquisition of City of Indianapolis, Ind. Water and Wastewater Assets

Ice Miller’s bond lawyers regularly are engaged to work on some of the most complex and visible financing projects financed with governmental bonds. Of note was the $1.9 billion financing completed by Citizens Energy Group (“Citizens”) and CWA Authority, Inc. (“CWA”) that resulted in the acquisition by Citizens and CWA of the City of Indianapolis’ (the “City”) water and wastewater systems. The financing was the culmination of three-plus years of planning and structuring. At the time the transaction closed, it was the largest U.S. water and wastewater acquisition.  The acquisition was financed through the Indiana Finance Authority (“IFA”) in a cumulative $1.0 billion tax-exempt financing, as well as the assumption of $943 million of outstanding Indianapolis Local Improvement Bond Bank debt in connection the acquisition of the water system. 
 
In order to reach the closing date for the financing, Ice Miller undertook several instrumental steps that showcased not only our bond lawyers, but the full service ability of the Firm. Ice Miller assisted Citizens and the City in executing an interlocal cooperation agreement in order to create CWA as Citizens’ affiliate owner of the wastewater system and prepared and submitted a request for a private letter ruling concerning the separate governmental status of CWA. Ice Miller also counseled Citizens and CWA with respect to negotiations with the Environmental Protection Agency (“EPA”) regarding CWA’s ability to assume the requirements under the City’s existing Consent Decree for the mitigation of combined sewer overflows. Ice Miller also helped Citizens and CWA arrange with the City, EPA and the state of Indiana for the transfer of all operating permits from the City for both systems to ensure the provision of continued safe drinking water and wastewater treatment services for ratepayers. Further, Ice Miller’s utility lawyers led the approval of the acquisitions and rate increases previously approved by the City through the Indiana Utility Regulatory Commission (the “IURC”) regulatory process. The IURC also approved an Environmental Compliance Plan for the wastewater system, which facilitates recovery in between rate cases of debt service costs for Consent Decree projects, significantly reduces the risk of delay in obtaining rates increases for a substantial portion of the wastewater system improvements and adds protection to bondholders.
 
With respect to the water financing, Ice Miller had the foresight to implement and utilize provisions with respect to the waterworks bonds that permitted Citizens to become the replacement obligor, thereby obviating the need for a more costly refunding. The underwriters of the bonds estimated at the time of the transaction that such debt replacement, rather than refunding of the outstanding debt, resulted in a present value savings of approximately $195 million for Citizens and waterworks customers. As a result of the acquisition and expected synergies with Citizens other utility systems, the water bonds have since received an upgraded rating.
 
With respect to the wastewater bonds, Ice Miller created an entirely new credit and indenture structure with first and second lien bonds, which allowed CWA to separate its use of proceeds into separate liens, provide a separate credit profile for acquisition and working capital financing on the second lien and create additional capacity for the open first lien indenture.   
 
Our bond lawyers truly enjoy working as a team both within the firm and with our clients and working group members. Citizen’s and CWA’s acquisition of the City’s water and wastewater system allowed our bond lawyers and many lawyers from our other practice groups to collaborate on a one-of-a-kind project and help all parties involved achieve their goals. The transaction was a testament to the outcomes obtainable when genuine team work and selflessness is given priority. 
 
For further information about our services or a review of the rebate requirements with respect to outstanding bonds, please contact Philip Genetos, Tyler Kalachnik, Michael Allen or another member of the Ice Miller Municipal Finance Group.
 
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
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