Investec has launched a $250 million debt facility into syndication to refinance Primary Energy Recycling Corp., a portfolio of behind-the-fence generation assets located at steel mills in Indiana.

Initial price talk on the seven-year loan is 300 basis points over Libor, say project finance bankers.

The portfolio’s main owner, Fortistar, hired Investec for the refinancing a couple of months ago, as PFR reported in October (PFR, 10/30).

The loan to be refinanced is a $215 million deal arranged by Investec in 2014 to finance the $241.4 million take-private of Primary Energy by a consortium led by Fortistar (PFR, 12/18/14). The consortium includes John Hancock Life Insurance Co.Prudential Capital Group and Ares Capital Corp.

Headquartered in Oak Brook, Ill., Primary Energy owns four waste-heat-to-energy projects and a 50% stake in a pulverized coal-fired plant with a total combined generating capacity of 298 MW. The facilities can also produce 1.8 million pounds per hour of steam. They are:

  • the 48 MW Ironside Energy combined-heat-and-power project, which has been online since 2001,
  • the 88 MW North Lake waste heat-fired project, which has been online since 1996,
  • the 95 MW Cokenergy waste heat-fired project, which has been online since 1998, and
  • the 61 MW Portside cogeneration project, which has been online since 1997.

All of the projects are located at an ArcelorMittal steel mill in East Chicago with the exception of Portside, which is at a Portage plant owned by U.S. Steel. They sell their output to their hosts under separate contracts, the shortest of which has two years left to run and the longest 22 years.

“It’s a very off-the-beaten-path deal,” says a project finance banker who is considering a bid for a joint lead arranger role, and who describes the main offtaker, Arcelor, as “the strongest company in a fairly cyclical, risky industry.”

The Luxembourg-headquartered steelmaker has been upgraded from junk to the lowest investment grade rating (Baa3/BBB) by the three main rating agencies this year, starting in February with S&P Global Ratings.

“The whole U.S. steel industry industry would have to go under [for the offtaker to default] because this is Arcelor’s main competitive facility in the country,” adds the banker. “That is a risk over a decade or two but it sounds like a pretty remote risk.”

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