October 25, 2019 Feature

Financing the Future: Three Innovative Approaches to Infrastructure Finance

By Emmett N. Ellis IV, Michael F. Fitzpatrick Jr., and Steven C. Friend

The power and utility industries have undergone tremendous change in the last several decades. In the past 10 years alone, the amount of coal-fired generation in the United States has decreased dramatically, both in absolute terms as well as in terms of a percentage of total generation.1 Electric utilities throughout the country have been forced to find ways to finance the costs of recovery from catastrophic storms. Investors, at the same time, have become more focused on the use of proceeds from a utility’s sale of securities. This article will address how the utility capital markets have adapted to these circumstances. First, we discuss dedicated utility rate securitization and the various types of utility costs that can be recovered. Second, we review the ongoing boom of “green bond” financing in the utility sector. Finally, we discuss a novel tax-exempt bond structure currently used to finance facilities to control stormwater pollution, whereby the holders of the bonds are eligible to receive incentive payments depending on the success of the underlying project.

Dedicated Utility Rate Securitization

Dedicated utility rate securitization (“utility securitization”) is a specialized financing vehicle that has been used by investor-owned utilities for over twenty years to recover certain specified costs. As a result of the features outlined below, utility securitization can provide an alternative source of financing at a lower cost, which can be mutually beneficial to utility customers and investor-owned utilities. Although long associated with recovery of “stranded costs,” in recent years there has been a renewed focus on this type of structured financing to address other types of costs, including costs arising from catastrophic weather events and early retirement of uneconomical coal generation assets.

All utility securitizations are based upon an enabling state statute authorizing the state public utility commission to issue a financing order, which, among other things, creates an intangible property right to bill and collect an unavoidable charge from a public utility’s customers.2 The intangible property also includes the right to obtain periodic adjustments (the “true-up”) to the unavoidable charge to ensure that collections are sufficient to timely pay principal, interest, and other financing costs relating to bonds issued pursuant to the financing order. Under the enabling statute, a sponsor utility sells the intangible property created by the financing order to a wholly owned special purpose entity (the “SPE”). The SPE issues bonds that are secured by the intangible property and uses the proceeds to pay for its purchase of the intangible property from the sponsor utility. The sponsor utility then applies the proceeds of the sale to cover the costs approved in the financing order.3 In the enabling statute, the state also pledges for the term of the bonds that the state will not take any action that would impair the value of the intangible property or otherwise impair the unavoidable charges. The structure, including the state pledge and true-up, allows for the bonds issued in a utility securitization to receive a triple-A rating4 from the rating agencies. As a result, such bonds are issued at a lower cost than would otherwise be available to the sponsor utility.

Since the adoption of Regulation AB II in 2014,5 utility securitization bonds have been registered with the Securities and Exchange Commission and sold pursuant to a registration statement on Form SF-1. At the time of writing this article, approximately half of the states in the United States, the District of Columbia, and the Province of Ontario, Canada, have enabling statutes.6

What Categories of Costs Are Recoverable Through Dedicated Utility Rate Securitization?

Utility securitization was first used in the late 1990s as a financing tool to allow utilities to recover “stranded costs” incurred by the utility that would have been recoverable under a regulated monopoly market structure but were no longer recoverable through market prices in a competitive market. Following Hurricane Katrina in 2005 and subsequent storms in the Gulf of Mexico, states adopted enabling statutes to permit the use of utility securitization to recover costs associated with significant storms.7 Storm-cost securitization offered a lower-cost alternative to traditional methods of recovery. Several utilities have sponsored issuances of storm recovery bonds, including Florida Power & Light Company;8 Entergy New Orleans, Inc.;9 Entergy Arkansas Inc.;10 and CenterPoint Energy Houston Electric LLC.11 Another significant benefit of utility securitization for storm costs is that while the debt is amortized over several years, the utility is able to receive and use the funds upon the issuance of the bonds. In addition, in certain states where insurance for large-scale storms was no longer economical, storm cost securitization statutes were used to fund reserves for future storms.12 In addition to stranded costs and catastrophic storms, utility securitization has been used for costs associated with early retirement of uneconomical generating assets (further discussed below), deferred fuel costs, and environmental control equipment and for achieving rate stabilization or reduction.

In certain states, bonds backed by intangible property have been issued by state-owned entities. Louisiana, for example, has an enabling statute that permits the creation of intangible property for a state-owned entity that may issue bonds directly or through another state entity.13 Proceeds from these offerings have been used to fund storm reserves. Offerings for the benefit of two Entergy utilities have been completed in 2008, 2010, and 2014.14 In New York, a state-owned entity issued bonds backed by intangible property to refinance debt incurred for the construction of an abandoned nuclear facility.15 Hawaii also used a state-owned entity to issue bonds secured by intangible property to finance a fund designed to make loans to support solar development.16

Building from storm cost recovery legislation adopted in Louisiana, Arkansas, Florida, and Texas, recent legislation has been introduced to permit recovery of storm costs in North Carolina17 and South Carolina.18 These statutes, as currently drafted, would permit the use of utility securitization to recover costs not only from hurricanes and tropical storms, but also from other significant weather events, including winter storms.

Expanding on the notion of storm cost recovery, California adopted an enabling statute in 2018 that would allow investor-owned utilities the option of recovering costs associated with catastrophic wildfires using utility securitization.19 Balancing the needs of both investor-owned utilities in California and customers, Senate Bill 901 created two different standards for recovery for catastrophic wildfire events. When determining the “just and reasonableness” of any wildfire cost incurred in 2017, the law also required that the California Public Utilities Commission consider “the [utility’s] financial status and determine the maximum amount the [utility] can pay without harming ratepayers or materially impacting its ability to provide adequate and safe service.”20 For wildfires that occur after January 1, 2019, the enabling statute created several new wildfire management protocols for investor-owned utilities to follow, and any determination of just and reasonableness would be measured against a utility’s compliance with such new measures. In addition to Senate Bill 901, California has also considered using utility securitization to finance and fund a reserve for future wildfire costs.21

The use of utility securitization to recover costs associated with catastrophic events can be mutually beneficial to utilities and customers because the structure allows bonds to be issued at a lower cost than would be otherwise available using traditional recovery methods. By using this structure, public utility commissions give up some of their ratemaking authority, as the unavoidable charges, including any adjustments through the true-up, are established for the duration of the bonds. The sponsor utility, in turn, is assured cost recovery.

Early Retirement of Uneconomical Generating Assets

As the utility industry looks to transition from uneconomical generation assets, utility securitization has also been identified as a tool to allow investor-owned utilities to recover the remaining book value of assets that are being retired early. Although this concept is not new,22 intervenor groups recently have been vocal in suggesting utility securitization to encourage the early retirement of coal generation.23 In certain western states, enabling statutes have been adopted that go beyond traditional utility securitization structures.24 Like other enabling statutes, these new statutes allow a utility to recover the remaining book value of affected assets, but a portion of the savings that would otherwise be directed to lower utility customer rates are diverted to a fund or funds that will be used to compensate workers and communities affected by the closing of the relevant plant.25 In New Mexico, for example, as part of its application for a financing order, the utility must identify, as “energy transition costs,” (i) severance pay and job training expenses of affected employees losing their jobs and (ii) costs for plant decommissioning or mine reclamation costs.26 To date, no bonds have been issued pursuant to these new western state enabling statutes.

Limitations

While utility securitization is a good alternative source of financing for discrete asset recovery, it is not meant to replace investor-owned utilities’ recovery of cost of service through rate base. The “regulatory compact” between investor-owned utilities and their regulators recognizes that investor-owned utilities must be able to earn a return on their investments in order to attract continued investment. Therefore, overuse of utility securitization could undermine investment in investor-owned utilities. In addition, the rating agencies recognize that too large an unavoidable charge could result in political or regulatory challenges and risk the reliability of the true-ups as the primary source of credit enhancement. As a result, the agencies have limited a sponsor utility’s aggregate unavoidable charges to no more than 20 percent of a customer’s bill in order to qualify for a triple-A rating.27

Green Bonds

A growing trend in the debt capital markets in recent years is the issuance of “green bonds.” Green bonds are debt securities issued to raise funds for new and existing projects with environmentally sustainable benefits. Issuers across a range of industries seeking to finance an existing or new expenditure that conforms to certain green bond principles (discussed in more detail below) have structured their debt in this format.

The benefits for an issuer generally include (i) diversifying the issuer’s investor base and (ii) fostering “green” investor relations and corporate responsibility initiatives. As investors become increasingly focused on companies’ environmental impact and critical of companies that do not take sufficient measures to limit their carbon footprint, companies are incented to prioritize environmentally beneficial capital expenditures. Issuing a green bond is one tool to finance such expenditures.

In 2014, approximately $34 billion of green bonds were issued. By 2018, that amount grew to over $167 billion in total issuances. The year 2018 alone saw 1,543 individual green bond issues from 320 issuers (204 of such issuers were new to issuing green bonds), as well as the largest single green bond (a EUR 4.5 billion bond issued by the Kingdom of Belgium).28 In 2018, the U.S. was the country with the most issuances, followed closely by China.29 Despite their popularity, however, green bonds are still a small fraction of the more than $100 trillion global bond market.30

Since the green bond market’s inception in 2007, following the European Investment Bank’s issuance of climate awareness bonds, corporate issuers such as Apple, Engie, Starbucks, Fannie Mae, and numerous sovereign and municipal issuers have sought out the green bond market to finance various projects. Green bonds have become so significant in the past several years that the World Bank has described them as “a key private sector solution helping finance the world’s transition to a low-carbon future.”31 The largest U.S. market issuance to date was a $1.5 billion issue by Apple Inc. of senior notes with a seven-year maturity and fixed coupon in February 2016. The green tranche, part of Apple’s overall $12 billion senior notes offering (with maturities ranging from three years to thirty years) was prominently displayed in green font on the cover page of Apple’s prospectus supplement.32

The green bond principles, the first set of guidelines for verifying the credentials of green bonds, were introduced by the International Capital Markets Association (the “ICMA”) in 2014 and have since been regularly updated as increased activity in the green bond market has necessitated an updated framework and guidance. These principles serve as the primary guidelines for any green bond issuance and contain four primary components: (1) Use of Proceeds, (2) Process for Project Evaluation and Selection, (3) Management of Proceeds, and (4) Reporting.33 These four principles largely dictate the planning and ongoing obligations an issuer will undertake for a green bond issuance. The green bond principles also detail certain types of potential third-party review that an issuer could utilize, including (1) consultant review, (2) verification, (3) certification, and (4) rating. The World Bank and the IFC have developed their own criteria and definitions of eligible green projects to assist issuers as well.34

Because there is no standard definition of what constitutes a “green bond,” the Use of Proceeds section of a typical green bond offering document normally includes disclosure regarding the principal green aspects of the ultimate use of the proceeds (the first component of the ICMA green bond principles). The ICMA green bond principles identify several broad categories of eligibility for green projects, which include climate change mitigation, climate change adaptation, natural resource conservation, biodiversity conservation, and pollution prevention and control.35

Building on the first of the ICMA green bond principles, the second principle requires that the issuer provide to investors a summary that includes the environmental sustainability objectives of the project, the issuer’s process for determining whether the project fits within the broad green projects categories identified in the first green bond principle, and the related eligibility criteria of the project. The ICMA notes that issuers are “encouraged to position this information within the context of [their] overarching objectives, strategy, policy and/or processes relating to environmental sustainability.”36

The third of the ICMA green bond principles requires that the net proceeds of a green bond (or an amount equal to those net proceeds) should be tracked by the issuer in an appropriate manner and periodically adjusted to match allocations to eligible green projects identified by the issuer. The issuer should also disclose to investors the intended types of temporary placement for the balance of any unallocated net proceeds.37

Ongoing reporting, the fourth component of the ICMA green bond principles, is an important component to the integrity of the green bond, and several methods of compliance have developed. The issuer may provide updates on a dedicated website available to investors regarding the allocation of the proceeds and ongoing reporting on key environmental features. One model many issuers have adopted is to include on this website an attestation from management and a report from an independent accountant with respect to the use of proceeds.38 These methods are in place in part because investors cannot rely on a universal standard. The EU is currently in the process of creating a Green Bond Standard, which will build on the ICMA green bond principles. Compliance with this standard will be verified by an EU-accredited assessor.39

An increasing number of issuers have chosen to engage an independent evaluator to verify a green bond. These services can be provided by rating agencies such as Moody’s Investors Service, the Climate Bonds Initiative (the “CBI”), and specialized green audit firms such as Vigeo Eiris, Sustainalytics, Institutional Shareholder Services, and Cicero Shades of Green.40 Of the nearly $48 billion of green bond debt issued in the first quarter of 2019, 93 percent was certified by the CBI or was reviewed by other outside groups.41

Green bonds have also been increasingly prominent in the electric utility industry in recent years. In November 2015, Southern Power Company issued two series of notes for a total offering of $1 billion. The use of proceeds was the financing of, or investments in, solar and wind power generation facilities located in the United States.42 In June 2016, Southern Power Company issued €1.1 billion of bonds. The proceeds, as with their 2015 offering, were for investments in solar and wind generation.43 Other utility issuers such as Georgia Power Company; DTE Electric Company; Westar Energy Inc.; Avangrid, Inc.; Duke Energy Carolinas; and Duke Energy Progress, LLC, have all issued green bonds.44

The process of issuing a green bond is not significantly different than for a regular bond. Besides disclosure in the use of proceeds section of the offering document and the occasional green font on the front cover, no other deviations from a standard offering are typically employed. The largest hurdle an issuer may face is creating an ongoing compliance regime (as part of the fourth component of the ICMA green bond principles) and establishing the parameters by which it determines whether an investment is green (as set forth in the second component of the ICMA green bond principles regarding the process for project evaluation and selection). Ongoing compliance may result in additional recurring costs for auditing and attestation reporting and website updating.45

Environmental Impact Bonds

The Federal Water Pollution Control Act, as amended (the “Clean Water Act” or the “CWA”),46 and applicable regulations require municipalities and other public-sector entities to address the amount of pollution entering local waterways following moderate to heavy storms. More than 770 cities across the country have combined sewer systems, which means that stormwater is channeled through the same system that handles raw sewage.47 On a normal day, all wastewater from those systems would go to sewage treatment plants. But during significant storms, heavy rain exceeds the capacity of the system and untreated sewage is discharged directly into local waterways. There is a growing trend among communities across the country to address these issues using green infrastructure, such as vegetated trenches, green roofs, and raingardens.48 Green infrastructure reduces and treats stormwater at its source while attempting to deliver other environmental, social, and economic benefits.49 Despite the benefits, the unfamiliarity of green infrastructure techniques may be seen as more risky and more difficult to finance than traditional infrastructure.

An emerging concept in financing environmental projects such as green infrastructure on a large scale is environmental impact bonds. An environmental impact bond (“EIB”) is an innovative municipal bond that is designed to cover the downside risk of using green infrastructure to control stormwater runoff.50 EIBs are used to finance large projects and adjust returns based on outcomes. In other words, an EIB allows cities to share both the risks and rewards of solving environmental problems using innovative strategies with private investors, allowing cities and investors to focus on overall project outcomes.

In September 2016, the District of Columbia Water and Sewer Authority (“DC Water”) issued the country’s first EIB, which uses a pay-for-success approach by linking financial payouts with environmental performance.51 The $25 million tax-exempt EIB, which was sold privately to Goldman Sachs Urban Investment Group and the Calvert Foundation, funded a pilot green-infrastructure project within DC Water’s Clean Rivers Project.52 The $2.6 billion, 25-year-old project is the city’s effort to improve water quality in the Potomac River. In 2005, the city signed a consent decree with the Environmental Protection Agency after being noncompliant with certain provisions of the CWA.53 The terms of the consent decree launched the Clean Rivers Project.

Using water-modeling software, DC Water calculated that its green-infrastructure installation would reduce stormwater runoff by about 30 percent. The agency conducted 12 months of baseline stormwater runoff measurements. These will be compared with 12 months of runoff measurements after the green infrastructure is installed.

The DC Water issuance was a multimodal variable rate bond, initially issued in a term mode at a single rate fixed through a 2021 mandatory tender date.54 Investors during the initial five-year period will receive the stated 3.43% coupon rate. However, if runoff is reduced by more than 41.3% (only a 2.5% probability), then DC Water will make an “outcome payment” of $3.3 million to investors.55 If runoff is reduced by less than 18.6% (also only a 2.5% probability), then the investors will make a “shared risk payment” of $3.3 million to DC Water.56 Any performance-based payments will occur at the five-year mark, when the project has been installed and post-construction performance has been measured.

Following DC Water’s lead, in April 2018, the City of Atlanta and the City of Baltimore announced plans to finance green infrastructure and impact projects through the issuance of EIBs.57

In February 2019, the City of Atlanta Department of Watershed Management (the “DWM”), in partnership with advisory firm Quantified Ventures and investment platform Neighborly, issued the first EIB to be offered on the public markets.58 The EIB issuance was supported by a grant from The Rockefeller Foundation.59 The $14 million tax-exempt EIBs will help finance six innovative green infrastructure projects aimed to address critical flooding and water quality issues, reduce stormwater runoff, and enhance the quality of life in various neighborhoods located in the Proctor Creek watershed.60

The projects are designed to provide at least 6.52 million gallons of additional stormwater storage capacity in the Proctor Creek watershed, which would result in an annual reduction of approximately 56 million gallons in stormwater runoff through green infrastructure.

The DWM issuance consisted of (i) $2.675 million aggregate principal amount of its 5.000% Term Bonds and (ii) $11.345 million aggregate principal amount of its $3.500% Term Bonds, each due November 1, 2028. The bonds bear interest at the stated coupon rate semiannually through maturity, subject to mandatory redemption. If stormwater storage capacity is increased by at least 6.52 million gallons across the projects, then the DWM will make an “outcome payment” of $1 million pro rata to investors after six years.61

Currently, the Baltimore City Department of Public Works, working with the Chesapeake Bay Foundation and Quantified Ventures, with funding from the Kresge Foundation, announced plans to issue up to $6.2 million of tax-exempt EIBs in a private offering to help fund a $10.3 million green infrastructure project in the City of Baltimore.62 This project consists of 90 stormwater projects aimed to enhance quality of life while also reducing runoff in more than three dozen neighborhoods.63 The transaction is still in a planning phase.64

In addition, Louisiana’s Coastal Protection and Restoration Authority (the “CPRA”) is considering the issuance of an EIB to help finance its $50 billion, 50-year wetland project.65 The Environmental Defense Fund, a New York–based nonprofit,66 is seeking authorization from the CPRA’s board for a proposed $40 million pilot project to restore up to 835 acres of Port Fourchon marsh using the first EIB for wetland restoration.67

Endnotes

1. U.S. Energy Info. Admin., Monthly Energy Rev., March 2019.

2. Michael F. Fitzpatrick Jr. & Adam R. O’Brian, Dedicated Utility Rate Securitization § 14.01, Securitizations: Legal and Regulatory Issues (Patrick D. Dolan & C. VanLeer Davis III eds. 2019).

3. Id. § 14.05.

4. Since 1999, only one issue of dedicated utility rate securitization bonds in the United States did not receive a triple-A rating. In that instance, one of the rating agencies was concerned about the concentration of the utility’s customers solely within the City of New Orleans.

5. Asset-Backed Securities Disclosure and Registration, Securities Act Release No. 9638, Exchange Act Release No. 72982, 79 Fed. Reg. 757183 (Sept. 24, 2014).

6. Fitzpatrick & O’Brian, supra note 2, § 14.01.

7. Ark. Code. Ann. § 23-18-901 (2019); Fla. Stat. Ann. § 366.8260 (West 2019); La. Rev. Stat. Ann. § 45:1226 (2019); Tex. Rev. Civ. Stat. art. 36, § 401 (West 2019).

8. FPL Recovery Funding LLC, Prospectus Supplement (Form 424B5) (May 21, 2007).

9. Entergy New Orleans Storm Recovery Funding I, L.L.C., Prospectus Supplement (Form 424B5) (July 16, 2015).

10. Entergy Arkansas Restoration Funding, LLC, Prospectus Supplement (Form 424B5) (Aug. 13, 2010).

11. CenterPoint Energy Restoration Bond Co., LLC, Prospectus Supplement (Form 424B2) (Nov. 20, 2009).

12. La. Rev. Stat. Ann. §§ 45:1311–1328 (2019).

13. Id.

14. See, e.g., Louisiana Local Government Environmental Facilities and Community Development Authority (Louisiana Utilities Restoration Corp. Project/EGSL), Official Statement (July 29, 2014); Louisiana Local Government Environmental Facilities and Community Development Authority (Louisiana Utilities Restoration Corp. Project/ELL), Official Statement (July 29, 2014).

15. 2013 N.Y. Adv. Legis. Serv. 173; Utility Debt Securitization Authority, Final Official Statement (Oct. 25, 2017).

16. Haw. Rev. Stat. §§ 269-161–269-176 (2019); Dep’t of Bus., Econ. Dev., & Tourism, State of Hawaii, Final Official Statement (Nov. 4, 2014).

17. S.B. 559, 2019–2020 Sess. (N.C. 2019).

18. S. 110, 123d Sess. (S.C. 2019).

19. Cal. Pub. Util. Code § 850 (West 2019).

20. Id. § 451.2.

21. Governor Newsom’s Strike Force, Wildfires and Climate Change: California’s Energy Future (Apr. 12, 2019), https://www.gov.ca.gov/wp-content/uploads/2019/04/Wildfires-and-Climate​-Change-California%E2%80%99s-Energy-Future.pdf.

22. In 2014, Consumers Energy Company used securitization to recover the remaining book value of several coal-generating assets that were retired early, and in 2016, Duke Energy Florida, LLC, used securitization to recover the costs associated with the early retirement of a nuclear generating station. See Consumers 2014 Securitization Funding LLC, Prospectus Supplement (July 14, 2014); Duke Energy Florida Project Finance, Prospectus (June 15, 2016).

23. Uday Varadarajan, David Posner & Jeremy Fisher, Sierra Club, Harnessing Financial Tools to Transform the Electric Sector (2018).

24. See Colo. Rev. Stat. § 40-41 (2019); H.B. 467, 66th Leg. (Mont. 2019); S.B. 489, 54th Leg. (N.M. 2019).

25. Colo. Rev. Stat. § 40-41.

26. S.B. 489, 54th Leg., § 4B.(2).

27. U.S. Utility Tariff/Stranded Cost Bonds Rating Criteria, FitchRatings, at 8 (Nov. 30, 2017).

28. 2018 Green Bond Market Summary, Climate Bonds Initiative (Jan. 2019), https://www.climatebonds.net/resources/reports/2018-green-bond-market-highlights.

29. Id.

30. Lyubov Pronina, What Are Green Bonds and How “Green” Is Green?, Bloomberg Businessweek (Mar. 24, 2019), https://www.bloomberg.com/news/articles/2019-03-24/what-are-green-bonds-and-how-green-is-green-quicktake.

31. Green Bonds, Int’l Fin. Corp. World Bank Grp., https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external​_corporate_site/news+and+events/news/perspectives/perspectives-i1c2 (last visited May 23, 2019).

32. Apple Inc., Prospectus Supplement (Form 424B2) (Feb. 17, 2016).

33. Int’l Capital Mkt. Ass’n, Green Bond Principles: Voluntary Process Guidelines for Issuing Green Bonds (June 2018), https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/June-2018/Green-Bond-Principles---June-2018-140618-WEB.pdf.

34. Green Bond Principles & Climate Bonds Standard, Climate Bonds Initiative, https://www.climatebonds.net/market/best-practice-guidelines (last visited May 23, 2019).

35. Int’l Capital Mkt. Ass’n, supra note 33.

36. Id.

37. Id.

38. See, e.g., S. Power Co., Prospectus Supplement (Form 424B2) (Nov. 15, 2016).

39. Pronina, supra note 30.

40. Id.

41. Michael Copley, More Green Bonds Are Being Scrutinized as Investors Focus on Climate Risk, SNL Fin. (May 17, 2019).

42. S. Power Co., Current Report (Form 8-K) (Nov. 17, 2015).

43. S. Power Co., Current Report (Form 8-K) (June 20, 2016).

44. Ga. Power Co., Prospectus Supplement (Form 424B2) (Mar. 3, 2016); DTE Elec. Co., Prospectus Supplement (Form 424B2) (Feb. 12, 2019); Westar Energy Inc., Prospectus Supplement (Form 424B2) (June 15, 2016); Avangrid, Inc., Prospectus Supplement (Form 424B5) (Nov. 17, 2017); Avangrid, Inc., Prospectus Supplement (Form 424B5) (May 15, 2019); Duke Energy Carolinas, LLC, Prospectus Supplement (Form 424B5) (Nov. 6, 2018); Duke Energy Progress, LLC, Prospectus Supplement (Form 424B5) (Mar. 5, 2019).

45. Int’l Capital Mkt. Ass’n, supra note 33.

46. Federal Water Pollution Control Act Amendments of 1972 (Clean Water Act), 33 U.S.C. §§ 1251–1387 (1972).

47. Laurie Mazur, Why Environmental Impact Bonds Are Catching On, Governing: The States and Localities (May 25, 2018), https://www.governing.com/gov-institute/voices/col-environmental-impact-bonds-washington-dc-baltimore-atlanta.html.

48. What Is Green Infrastructure?, Env’t Prot. Agency, https://www.epa.gov/green-infrastructure/what-green-infrastructure (last updated July 3, 2018).

49. Benefits of Green Infrastructure, Env’t Prot. Agency, https://www.epa.gov/green-infrastructure/benefits-green-infrastructure (last updated Dec. 5, 2018).

50. Press Release, Goldman Sachs Urban Investment Group, FACT SHEET: DC Water Environmental Impact Bond, available at http://www.goldmansachs.com/media-relations/press-releases/current/dc-water-environmental-impact-bond-fact-sheet.pdf.

51 .Id.

52. Id.

53. 33 U.S.C. §§ 1251–1387.

54. See Goldman Sachs Press Release, supra note 50.

55. Id.

56. Id.

57. Jessica Pothering, Atlanta and Baltimore Going Green with “Environmental impact bonds”, Impact Alpha (Apr. 2, 2018), https://impactalpha.com/atlanta-and-baltimore-going-green-with-environmental-impact-bonds/.

58. Press Release, City of Atlanta Dep’t of Watershed Mgmt., City of Atlanta Department of Watershed Management Announces First Publicly-Issued Environmental Impact Bond (Feb. 21, 2019), https://www.atlantawatershed.org/first-publicly-issued-environmental-impact-bond/.

59. Id.

60. Id.

61. Phoebe Higgins, Atlanta’s Cutting-Edge Environmental Impact Bond, Env’t Policy Innovation Ctr. (Mar. 21, 2019), http://policyinnovation.org/atlantas-cutting-edge-environmental​-impact-bond/.

62. Donna Morelli & Timothy B. Wheeler, Environmental Bonds a New Way to Finance “Green” Stormwater Projects, Bay J. (Aug. 17, 2018), https://www.bayjournal.com/article/environmental_bonds_a_new_way_to_finance_green_storm​water_projects.

63. Id.

64. Jon Hay, Atlanta and Baltimore Prep Pay-for-Results Green Bonds, Glob. Capital (Nov. 28, 2018), https://www.global​capital.com/article/b1c0v0xxqmk1xm/atlanta-and-baltimore-prep-pay-for-results-green-bonds.

65. John Haughey, Groups Pushing Louisiana Agency to Make Use of $40 Million in Environmental Bonds for Wetland Project, The Ctr. Square (Oct. 9, 2018), https://www.watchdog​.org/louisiana/groups-pushing-louisiana-agency-to-make-use-of-million-in/article_86f2f944-cbba-11e8-883f-c7289ae1ff31​.html.

66. Environmental Impact Bonds: Financing for Wetlands Restoration, Envtl. Def. Fund (Aug. 2018), https://www.edf.org/ecosystems/environmental-impact-bonds-financing-wetlands-restoration.

67. See Haughey, supra note 65.

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By Emmett N. Ellis IV, Michael F. Fitzpatrick Jr., and Steven C. Friend

Bud Ellis (ellisb@huntonAK.com), Mike Fitzpatrick (mfitzpatrick@huntonAK.com), and Steve Friend (sfriend@huntonAK.com) are partners in the New York office of Hunton Andrews Kurth LLP.