PRESENTER: Presenter
Jessica Williams, Chief Financial Officer, New Braunfels Utilities (NBU)
Body
SUBJECT: Title
Discuss and Consider Approval of an Ordinance Authorizing the Issuance of "City of New Braunfels, Texas, Utility System Revenue Program Notes, Taxable Series" in an Aggregate Principal Amount of Not to Exceed $25,005,000 to Provide Interim Financing to Pay Project Costs for Eligible Project for the City's Utility System, Approving and Authorizing the Execution of Agreements to be Entered into in Connection with the Program Notes and Resolving Other Matters Incident and Related Thereto.
Header
DEPARTMENT: NBU
Body
COUNCIL DISTRICTS IMPACTED: All districts
BACKGROUND INFORMATION:
As a participant in the Electric Reliability Council of Texas (“ERCOT”) wholesale electric market, NBU is required to maintain financial collateral to support market activities and satisfy ERCOT credit requirements to cover NBU’s Total Potential Exposure (TPE). This exposure includes financial obligations arising from settlements in the Day-Ahead Market (DAM) and Real-Time Market (RTM). ERCOT accepts three primary forms of collateral: cash, surety bond, and letter of credit (“LOC”).
NBU is pursuing this LOC to replace its current cash collateral, which will release approximately $9 million in cash back to the NBU’s operational funds. By utilizing an LOC, NBU will maintain its required market standing with ERCOT while increasing its cash liquidity for other infrastructure projects and operational needs.
NBU’s municipal advisor solicited proposals from several qualified financial institutions for the LOC, and Wells Fargo Bank, N.A., was selected based on their competitive terms and compliance with ERCOT’s strict issuer rating and concentration limits.
The proposed LOC will:
• Satisfy ERCOT collateral and credit support requirements.
• Reduce the amount of NBU cash required to remain on deposit with ERCOT.
• Improve liquidity and financial flexibility.
• Preserve cash reserves for operating needs, emergencies, and capital funding needs.
• Diversify NBU’s collateral management strategy.
The LOC does not represent new debt issued for capital spending purposes, but rather a contingent credit support instrument used to support participation in the ERCOT market
ISSUE:
The NBU Board of Trustees, at its May 26, 2026, Board Meeting, authorized NBU staff to proceed with the necessary steps to issue an LOC facility in an amount not to exceed $25,005,000, with anticipated access to funding by mid-June 2026.
STRATEGIC PLAN REFERENCE:
☐Economic Mobility ☐Enhanced Connectivity ☐Community Identity
☐Organizational Excellence ☒Community Well-Being ☐N/A
FISCAL IMPACT:
There is no direct impact to the City of New Braunfels from the agreement with Wells Fargo Bank, N.A., as described above.
Recommendation
RECOMMENDATION:
NBU staff recommends approval of the ordinance.