AI Funding Boom Reaches Muni Market With Google-Tied Bond Sale
Google parent Alphabet Inc. is poised to enter the municipal-bond market’s prepaid energy space by participating in a $1 billion transaction out of California, a major development in the evolution of a booming segment.
Alphabet was identified as the funding recipient on a $1 billion transaction slated to be issued by the California Community Choice Financing Authority, according to preliminary bond documents posted late Tuesday. Goldman Sachs Group Inc., one of the leading underwriters of prepaid deals, is underwriting the California offering.
Prepaid deals provide a mechanism for so-called funding recipients to borrow at tax-exempt rates and invest the proceeds at taxable rates, according to a report from American Century Investments. Utilities can benefit because they lock in cheaper prices for gas and electricity as part of the deals.
Large banks typically serve as funding recipients, though the space has started to see insurance companies and other players access the market.
The bonds will finance the acquisition of a long-term supply of electricity at a discounted price for Pioneer Community Energy, an electricity provider based in Rocklin, California.
Investors in the sector count on getting higher interest rates on prepaid energy bonds compared to similarly-rated muni bonds.
Alphabet this week announced it’s raising $80 billion through a package of equity offerings, including an investment deal with Berkshire Hathaway Inc., to help fund its ambitious and growing artificial intelligence spending plans.
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