For project finance afficionados, the 744 MW West Deptford gas-fired project in New Jersey is historic. In 2012, it was the first merchant gas-fired asset to reach financial close since the 2008 financial crisis, setting down a major milestone for the market.
Seven years later, in 2019, LS Power refinanced the project in the term loan B market with a $500 million loan while retaining the existing complex collateral structure, despite overbuild concerns in the PJM Interconnection.
The project receives premium capacity pricing thanks to its location in the EMAAC delivery area, where auction prices have cleared at a premium of about $66/MW-day over RTO prices during the last 10 years.
It has fuel supply contracts for firm delivered gas with both Mercuria Energy America and South Jersey Resources Group, which, coupled with firm transportation contracts, protect it from swings in pipeline pricing and spark spread volatility.
Credit Suisse was left lead on the $445 million seven-year term loan, which was priced at 375 bp over Libor in July. The debt package also included a $55 million revolving credit facility.
Moody’s gave the loan a Ba3 rating with a stable outlook, while S&P Global Ratings gave it a BB- rating.
It was the second refinancing of the project since 2012. The first had taken place in 2015, a few month after commercial operations began.
After paying transaction costs, LS Power used the proceeds to refinance the existing debt and make a distribution to the consortium of investors that own the plant. Besides LS Power, they include Sumitomo Corp of Americas, Ullico Infrastructure, Prudential, Arctic Slope Regional, Marubeni, Kansai Electric Power Co, and Summit Global Management of America. LS Power had sold 82% of its own interest to these investors in 2016., while retaining a minority stake.
Sponsor: LS Power
Term loan B: $445 million
Revolving credit facility: $55 million
Spread: 375 bp
Index floor: 0%
Left lead: Credit Suisse
Bookrunners: Morgan Stanley, BNP Paribas, SunTrust Robinson Humphrey, Kookmin Bank
Borrower’s counsel: Latham & Watkins
Lenders’ counsel: Shearman & Sterling
See all of the 2019/2020 awards