Crockett: Waterfront Views
Crockett Cogeneration, an Energy Investors Funds-backed operation, issued $295 million of 20-year senior secured notes last month to refinance higher-rate debt. The limited partnership owns the largest QF in the Pacific Gas & Electric system in the form of a 240 MW gas-fired cogeneration facility in Crockett, Calif., just east of San Francisco. Crockett decided to issue the notes now to take advantage of low interest rates, and long-term notes made sense because the company has 20 years left on its power purchase agreement, says Timothy Vincent, co-head of project finance for North America in New York at BNP Paribas, which was sole underwriter.

Proceeds will pay down a $200 million floating-rate bank loan. The notes were priced at 5.869%, a comparatively low rate reflecting the fact tight corporate spreads have left investors searching for higher yield in project finance. Paul Lange, managing director of debt capital markets for BNP, says, "Investors are willing to do their homework to reach a higher yield."

The deal was rated Baa3 by Moody's Investors Service and BBB- by Standard & Poor's. Anticipating interest in the notes, BNP targeted both traditional private placement investors and public bond buyers and the placement was nearly four times oversubscribed following a limited roadshow.

The original bank loan for Crockett was set up in 1994 and amended in 1996. Vincent declined to specify pricing for the loan. The plant, which has been operating since 1996, sells power to Pacific Gas & Electric and steam to the C&H Sugar Company refinery located adjacent to the plant.


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