Short list: Conventional Power Deal of the Year 2020
Power Finance & Risk is pleased to announce the short list for the following award: Conventional Power Deal of 2020.
Bringing a new-build gas-fired project across the finish line is no easy ask, and neither is putting complex acquisition financing into place or levering up debt on merchant or vintage assets, and so we have accordingly selected four financings in this category. Please let us know if your firm is missing from the credits.
CPV Three Rivers
Competitive Power Ventures’ $1.3 billion raise for its 1,258 MW Three Rivers gas-fired project in Grundy County, Illinois was the only conventional power project construction financing to close in 2020. CPV initially took proposals from lenders in March 2019 but PJM Interconnection capacity auction delays, followed by the COVID-19 pandemic and oil price volatility, meant that the deal had to be postponed and reworked. In its final form, it comprised a $750 million term loan with fixed- and floating-rate tranches, priced at 350 bp over Libor, plus equity from four co-investors. The project was financed on the basis of several gas-netbacks with undisclosed Canadian gas producers, with tenors of up to 10 years.
The deal closed on August 21, 2020. Coverage here and here.
Deal value: $1.3 billion
Term loan: $750 million
Tenor: Construction-plus-five years
Ancillary facilities: $125 million
Equity: $425 million
Equity investors: GE Energy Financial Services, Osaka Gas USA, Axium Infrastructure and Harrison Street
Lead arrangers: BNP Paribas, Crédit Agricole and MUFG
Lenders: CIT Bank, DNB, ING Capital, Migdal, Mizuho, Morgan Stanley, National Bank of Canada, Nomura, Prudential Capital (fixed rate), Shinhan Bank and Wooribank
Sponsor’s counsel: Latham & Watkins (debt)
Sponsor’s counsel: Bracewell (equity)
Sponsor’s financial adviser: Whitehall & Co (equity)
Lenders' counsel and private placement investors’ counsel: Milbank and Saul Ewing Arnstein Lehr
Other advisers: Jones Day and Hynds, Yohnka, Bzdill & McInerney
Power market consultant: ESAI
Mankato Energy Center
The hybrid financing that Southwest Generation arranged to support its $680 million purchase of the 760 MW combined-cycle gas-fired Mankato power plant in Minnesota from Xcel Energy was split between an investment-grade 4(a)(2) private placement and a commercial term loan. The deal was inked just months after Xcel had bought the plant itself from Southern Power for $650 million, as utilities started selling assets to reduce their financing needs and fund COVID-19 relief efforts.
The deal closed on July 21, 2020. Coverage here and here.
Buyer: Southwest Generation, a portfolio company of JP Morgan Asset Management’s Infrastructure Investments Fund
Seller: Xcel Energy
Deal value: $860 million
Coordinating lead arrangers: SMBC, CIBC and Natixis
Letter of credit and working capital facility: CIBC, SMBC and Natixis
Private placement: $400 million
Tenor: 19 years
Placement agents: CIBC, Natixis, Santander and SMBC
Issuer’s counsel: Orrick
Counsel to the private placement investors, credit facility lenders and letter of credit issuing banks: Morgan Lewis
Local counsel to buyer: Taft
Counsel to seller: Dorsey & Whitney
GenOn Rincon Power
GenOn Energy was able to secure a $250 million debt package to lever up two vintage gas-fired projects in California that had been online since the 1970s and would already have been shuttered had CAISO had not granted them reliability must-run status in 2018, for a few more years. Despite the 1,516 MW Ormond Beach and 54 MW Ellwood projects being near the ends of their lives, CIT Bank, Investec and Société Générale managed to add $170 million in term loan A debt for the assets, which priced at 250 bp over Libor. The loan has a 10% mandatory annual amortization and a 100% excess cash flow sweep.
The deal closed on November 18, 2020. Coverage here.
Sponsor: GenOn Energy
Deal value: $250 million
Term loan A: $170 million
Tenor: Three years
Pricing: L+250 bp
Debt service reserve letter of credit: $13 million
Project letter of credit: $67 million
Bookrunners: CIT Bank, Investec and Société Générale
Sponsor's counsel: White & Case
In May 2020, ArcLight Capital Partners wrangled a clubby $153.9 million debt package from a quartet of banks to finance its acquisition of the 570 MW Griffith Energy combined-cycle gas-fired plant in Arizona from Star West Generation, a portfolio company of Oaktree Capital Management. The deal was clinched after ArcLight outbid several rivals in a competitive auction process. The plant serves the Desert Southwest power market and had bid into merchant energy markets throughout the year, until Star West secured a new summer tolling agreement with Arizona Public Service through 2026.
The acquisition closed on May 1, 2020. Coverage here.
Buyer: ArcLight Capital Partners
Seller: Star West Generation, an Oaktree Capital Management portfolio company
Deal value: $153.9 million
Term loan A: $115 million
Tenor: Seven years
Revolving credit facility: $31.2 million
Debt service reserve letters of credit: $7.7 million
Lead arrangers: Crédit Agricole, CIT Bank, ING Bank
Lender: Siemens Financial Services
Lenders' counsel: White & Case
Buyer’s legal counsel: Milbank
Seller’s legal counsel: Morgan Lewis