The first financing to close in 2019 for a new gas-fired project in PJM Interconnection was not the standard fare. The transaction financed the 485 MW Long Ridge Energy Generation project – also known as Hannibal Port Power – as well as an interest in a gas production field under development in Ohio.
Because of this and the project’s unusual commodity hedge structure, developer Fortress Transportation and Infrastructure had to put together a unique non-bank debt deal.
The project has two fixed price power agreements with different tenors and collectively covering 94% of its capacity. Powder Day Capital, an advisory firm based in Bridewater, New Jersey, advised Fortress on the hedges with counterparties including Morgan Stanley Commodities, EDF Trading and Axpo U.S.
The gas-fired generation project was the brainchild of former JP Morgan analyst Ryan Stewart, who was a managing director at Fortress in New York at the time the deal closed. He left Fortress shortly after shepherding the financing across the finish line to take up a position as a managing director at Ridgewood Infrastructure.
The deal illustrates an alternative route to financing hedged gas-fired projects in PJM, largely without the involvement of commercial or investment banks, though ING did provide a letter of credit and investment banks were involved in the subsequent monetization of a 50% stake in the project.
“That’s a good trade,” said an investment banker that was not involved. “It’s an aggressive play, but brilliant from a gas standpoint. I think it’s a brilliant project.”
Sponsors: Fortress Transportation and Infrastructure, GCM Grosvenor
Total debt: $742 million
Closing date: February 15, 2019
First lien loan: $445 million
Second lien loan: $143 million
Letter of credit: $154 million
Lead arranger: AMP Capital
Co-arrangers: ING Capital, Mirae Asset Daewoo, Elsdon Investment
LC issuer: ING Capital
Borrower’s counsel: Cravath, Swaine & Moore
Arranger’s counsel: Latham & Watkins
Project counsel: Morgan Lewis
Local counsel: Porter Wright Morris & Arthur
Commodity hedge adviser: Powder Day Capital
Independent engineer: Black & Veatch
Insurance consultant: Aon Risk Services
Admin agent: Cortland Capital Market Services
Sell-side financial adviser: Citi
Buy-side financial adviser: TD Securities
GCM Grosvenor’s counsel: Baker Botts
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