Financing Climate Adaptation CRWU and Water Utility Climate Alliance (WUCA) Webinar Series Laura Dubin, ORISE Intern, EPA Keely Brooks, Southern Nevada Water Authority/WUCA Dave Wright, Southern Nevada Water Authority Jeffrey Hughes, UNC Environmental Finance Center Kirsten Anderer, EPA Drinking Water State Revolving Fund (DWSRF) Emily Nicasio, EPA Clean Water State Revolving Fund (CWSRF) May 28, 2014 For audio, dial 888– 271 – 8859 and provide code 47449769
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Financing Climate Adaptation - University of North ... · SNWA 2014-15 Budget: • Total expense budget $464 million • Total debt service budget $171 million (37%) –Issue $100
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Financing Climate Adaptation
CRWU and Water Utility Climate Alliance (WUCA) Webinar Series
Laura Dubin, ORISE Intern, EPA
Keely Brooks, Southern Nevada Water Authority/WUCA Dave Wright, Southern Nevada Water Authority
Jeffrey Hughes, UNC Environmental Finance Center Kirsten Anderer, EPA Drinking Water State Revolving Fund (DWSRF)
Emily Nicasio, EPA Clean Water State Revolving Fund (CWSRF)
May 28, 2014
For audio, dial 888– 271 – 8859 and provide code 47449769
Housekeeping
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• Mute/un-mute
• Question & Answer sessions
• Technical difficulties – dial *0
Climate Ready Water Utilities (CRWU)
CRWU Mission Statement
To provide the water sector (drinking water, wastewater,
and stormwater utilities) with the practical tools, training, and technical assistance needed to adapt to
climate change by promoting a clear understanding of climate science and adaptation options.
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CRWU and WUCA Webinar Series
Topic
Scenario Planning to Support Decision Making
Robust Planning to Support Decision Making
Threshold Analysis to Support Decision Making
Decision Making in Practice
Communicating Climate Change
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• Additional topics and dates under consideration
• Archived webinars available online at http://www.epa.gov/climatereadyutilities
Overview
• Water Utility Climate Alliance Introduction
• Utility case study
– Dave Wright, Southern Nevada Water Authority
• Utility financing options
– Jeffrey Hughes, University of North Carolina Environmental Finance Center (UNC EFC)
– Kirsten Anderer, EPA Drinking Water State Revolving Fund (DW SRF)
– Emily Nicasio, EPA Clean Water SRF (CWSRF)
• Wrap up and Q & A 5
Water Utility Climate Alliance
Decision Support Planning Methods: Incorporating Climate Change
Uncertainties into Water Planning
Options for Improving Climate Modeling to Assist Water Utility Planning for Climate
Change
White Papers (2009-2010) http://www.wucaonline.org/html/actions_publications.html
2014 Activities
2014 Activities
Piloting Utility Modeling Applications (PUMA)
Identify available climate tools (GCMs and downscaled data)
Use in “Chain of Models”
Given large ranges in outputs, how useful are these tools in planning?
Build regional relationships
Articulate adaptation community research needs
2014 Activities
Societal Dimensions Working Group
CESM Admin: Climate and Global Dynamics Division at the National Center for Atmospheric Research
Engage
Applied data user
Actionable outputs
Community Earth System Model (CESM)
2014 Activities
Translating Climate Change Assessments into Action Information to support decision-making under large uncertainty
Pushing the boundaries beyond climate assessments
Stories from the field - multi-outcome planning to address future climate uncertainty
Lesson learned from the utilities
2014 Activities
Regulatory Challenges due to Climate Change Defining the challenges at the science-policy interface
What climate impacts present regulatory challenges?
Are there barriers to climate adaptation because of certain regulations?
Inventory of utility challenges
How Do Water Utilities Finance Climate
Adaptation?
Southern Nevada Water Authority
Dave Wright Chief Financial Officer
May 28, 2014
Outline
• SNWA Basics
• SNWA Challenges
• Adaptation vs. Capital Improvements
• Funding Projects 101
• Borrowing Money
• Summary
PRESENTATION OUTLINE
• Seven member agencies
• 90% of supply from Colorado River
• Withdrawal from Lake Mead
• Two intakes, third under construction
• Two water treatment facilities
SNWA BASICS
Las Vegas
• Supply shortage
• Intake system impacts
• Reduced water quality
• Power requirements
SNWA CLIMATE CHANGE CHALLENGES
EXISTING CHALLENGES EXACERBATED
CLIMATE ADAPTATION OR CAPITAL IMPROVEMENT
ADAPTING TO LOWER LAKE MEAD SURFACE ELEVATIONS
INTAKE 3 UNDER CONSTRUCTION
CLIMATE ADAPTATION OR CAPITAL IMPROVEMENT
• To – date, mostly no-regret projects
• In future, projects will be designed to handle greater extremes (bigger-faster-stronger---Superman!)
• CC only one uncertain factor considered in capital planning
• Upscaling a project for climate change creates an added “marginal cost”
• Cash – maintenance projects (rates, pay as you go)
• State Revolving Fund (SRF) – large replacement projects (borrow one year at a time)
• Bonds - new construction, large projects, capital financing (borrow every 2 – 3 years)
FUNDING PROJECTS 101
New water resource
• Bond issuances will need to be larger, but debt obligation currently appx. 20-40% of utility budget
• Extend the repayment time for big projects? – Example: $10 million loan at 5% interest, what would be
the repayment amount for 20, 30, 40, 50 year loans? • 20 yrs. = $802,426 yr. 30 yrs. = $650,514 yr.
• 40 yrs. = $582,782 yr. 50 yrs. = $547,767 yr.
• 75 yrs. = $513,216 yr. 100 yrs. = $503,831 yr.
– Paying over 50 yrs. vs. 20 yrs. saves ~32%/yr.
• Possible alternative, but newer product for lenders
BORROWING MONEY
ADAPTATION WILL COST MORE $$, HOW TO PAY?
SNWA 2014-15 Budget: • Total expense budget $464 million • Total debt service budget $171 million (37%)
– Issue $100 million in bonds – 30 year repayment is $6.5 million a year
• Compare to a 10% increase due to project adaptation – Issue $110 million in bonds – 30 year repayment is $7.2 million a year
• Additional $0.7 million makes a 0.15% increase to customer rates
• Not monumental, but does increase over time – 6 bond issuances like this would cause an incremental
1% rate increase
BORROWING MONEY
EXAMPLE OF FINANCING ADAPTATION
• Add marginal costs to capital program • Result in increased borrowing (SRF or bonds) • Could result in longer repayment periods • Have rate impacts, but usually gradual and may not
be material • However, rate impacts are cumulative and must be
considered
SUMMARY – ADAPTATION MAY:
efc.sog.unc.edu
Crafting an Adaption Finance Strategy
Jeff Hughes Director, Environmental Finance Center University of North Carolina at Chapel Hill [email protected] www.efc.unc.edu