As the window to finance quasi-merchant gas-fired projects in PJM Interconnection ahead of the August capacity auction begins to close, the sponsors behind three projects recently made headway on their debt and equity raising plans.
Commitments were due June 21 for the $1.075 billion debt financing of Caithness Energy and Apex Power Group’s Guernsey combined-cycle gas-fired project in Ohio, which was already about twice subscribed the day before the deadline. The deal is due to close in July.
The loan is said to have attracted interest from between 20 and 24 lenders including some that have not previously lent to quasi-merchant gas-fired projects in PJM.
Relatively conservative capacity price assumptions help to explain the broad interest, says a person familiar with the deal.
The 1,850 MW project, which is located in Guernsey County, is one of the largest CCGTs in the PJM queue. The scale of the project has helped the sponsors to keep construction costs down.
Investec underwrote and is acting as sole bookrunner on the project debt, which includes a $950 million construction-plus-five-year term loan priced at 300 basis points over Libor, in line with price talk.
Bankers were telling PFR in May that they expected pricing on quasi-merchant gas-fired projects in PJM to come in slightly wider of that mark (PFR 5/16).
The deal also includes a $125 million revolving credit facility.
The loan has attracted considerable interest from South Korea.
Industrial and Commercial Bank of China, KEB Hana Bank, NH Investment & Securities and Nomura are coordinating lead arrangers on the deal, as previously reported (PFR, 6/7).
China Merchants Bank and KB Kookmin Bank are participating as joint lead arrangers.
Meanwhile, Morgan Stanley is advising on an equity raise for the project. Global Infrastructure Partners and John Hancock are rumored to be among the potential investors. Spokespeople and other officials at Morgan Stanley, GIP and John Hancock did not respond to requests for comment.
The project will be supported by a 10-year gas netback with Equinor, the Norwegian state energy company formerly known as Statoil, and the sponsors are said to have taken bids for a five-year revenue put.
Tom Cuffaro, director of finance at Caithness, and spokespeople for the developer, also did not respond to requests for comment.
Meanwhile, J-Power USA reached financial close on June 26 for its 1.2 GW Jackson Generation combined-cycle gas-fired project in Grundy County, Ill., securing a combination of bank and fixed-income debt totaling $790 million.
The deal is split between $690 million in bank loans, including letters of credit, and a $100 million project bond.
CIT Bank, Crédit Agricole, Mizuho, MUFG and SMBC provided the construction-plus-five-year mini-perm and letters of credit.
BNP Paribas was previously also involved (PFR, 1/8) but is understood to have withdrawn from the deal.
The bank debt was priced at 300 basis points over Libor, in line with Guernsey.
Prudential Capital provided the fixed-rate tranche, which has the same construction-plus-five-year tenor as the bank loan.
The project has a five-year revenue put provided by J. Aron, the commodities trading arm of Goldman Sachs.
The capital structure for the project implies a 50:50 debt-to-equity ratio, says a person familiar with the transaction. Equipment supplier Mitsubishi Hitachi Power Systems is said to be providing the project's turbines.
Officials at J-Power in Chicago declined to comment.
Next in line?
Competitive Power Ventures has also been aiming to close financing for its 1,250 MW Three Rivers Energy Center project in Grundy County, Ill., before the delayed capacity auction takes place.
The sponsor took bids from prospective lenders in March and by May had lined up eight banks as arrangers (PFR, 5/16).
The Three Rivers project is located just a 30 minute drive from the site of J-Power’s Jackson Generation.
Top up for Hill Top
On the equity front, Ares Management has sealed a commitment from a European infrastructure fund manager for its Hill Top Energy Center gas-fired project in Pennsylvania, which reached financial close earlier this year.
France's Ardian Infrastructure is acquiring a 42% stake in the 620 MW combined-cycle project under the terms of the deal, which was signed at the beginning of June.
The capital is coming from Ardian's Americas Infrastructure Fund IV, through which it raised $800 million in 2018.
Spokespeople for Ardian declined to comment on the deal.
The firm established a New York office co-led by managing directors Stefano Mion and Mark Voccola last year (PFR, 3/28/18) and is looking for investment opportunities in North America and select Latin American countries, including Mexico, Chile and Peru.
Ares is retaining a 42% stake in the project, with the remainder being held by minority shareholders.
Boutique investment bank PJ Solomon advised Ares on the equity raise.
Construction began earlier this year on the Hill Top plant, which reached financial close at the end of March with a $375 million 10.5-year private placement arranged by Morgan Stanley (PFR, 4/3).
It is located outside Pittsburgh in Greene County and is expected to be completed in 2021.