BLCP: stage one is go
Although drawdown of $200 million has already been effected, the final financing package is not complete, and will eventually include a direct loan from the Asian Development Bank (ADB), a political risk guarantee (PRG) tranche with ADB as the guarantor, a JBIC direct loan and a NEXI-insured tranche.
The deal is a fully non-recourse transaction and is the largest project finance transaction in South East Asia since the Asian financial crisis. "The deal is also notable for having its uncovered tranche, the first time we have seen this for a Thai deal," says a financier involved in the transaction. In addition, equity is entirely back-ended giving the sponsors enhanced project returns. Construction is therefore funded by debt alone. It is only the second time that a Thai deal has included this feature, the source adds.
The reasons for the multi-stage approach lie in the EPC contract signed with Mitsubishi Corp, and the contractual obligations under the power purchase agreement (PPA) with EGAT. "In order not to incur any increased costs under the EPC contract terms, BLCP had to proceed with construction on 15 July, and therefore the sponsors wanted to reduce their financing exposure by having funding lines in place as soon as possible thereafter," says one banker close to the transaction. A lawyer involved in the transaction also notes that the terms of the PPA specified that the financing should be in place by October 1.
The initial offshore loan is provided in two tranches, an $80 million uncovered tranche and a $150 million tranche covered by political risk insurance from three private insurers. Lead arrangers are ANZ Investment Bank, BNP Paribas, WestLB, KBC, and SMBC. The Thai Baht tranche, provided by banks including Bangkok Bank, Bank of Ayudhya, Krung Thai Bank, and Siam Commercial Bank, now reduces to $870 million as a result of the signing of the first US Dollar facilities.
The second stage offshore financing is expected to come at the end of October and will include a $40 million direct loan from the ADB, a $70 million PRG tranche and further increases to the existing PRI and uncovered offshore tranches. With the two initial offshore financings combined, $394 million will have been committed. The uncovered tranche will increase to $90 million and the PRI tranche will increase to $150 million. Five more foreign banks will join as Lead Arrangers at this stage: SG, ABN Amro, Credit Lyonnais, Fortis and Nord/LB. According to the anonymous banking source, ADB has already received credit approval for its role in the deal and is now just awaiting final board approval.
The necessary approvals at the Japanese ECAs are expected in early December. Approvals will then be immediately followed by the addition of the JBIC and NEXI tranches. The exact amounts involved have not yet been set, but banking sources believe JBIC and NEXI, on an aggregate basis, will provide a direct loan of between $300 and $400 million, which will further refinance the Thai Baht loan and refinance the existing uncovered tranche and the undrawn commitments of the PRI tranche.
Offshore financing was partly sought because the power plant's tariff structure is mostly indexed to the US Dollar, with an offshore financing providing a natural hedge against any currency risks. One financier also notes that the offshore market is still more liquid than the Thai banking market for quality local projects. "But that is partly due to the scarcity of good deals around elsewhere," he says.
All loans carry a 15.75-year term. The debt to equity ratio averages at approximately 75:25 but for some facilities is as low as 78:22. Total cost of the power facility is about $1.45 billion with the project sponsors, Banpu (50%) and CLP International (50%) providing equity to cover the remaining costs.
ABN Amro and Thai finance house, Finansa, acted as financial advisers to the borrower. Baker & Mckenzie acted as the sponsors' lawyers. Latham & Watkins represented the international lenders, Allen & Overy represented the Japanese ECAs and Chandler Tong Ek were the lenders' local counsel.
WestLB is acting as documentation bank, Credit Lyonnais, technical bank, KBC, modeling bank, Fortis, insurance bank and SG is PRI Bank. Intercreditor agent is BNP Paribas and offshore facility agent is ANZ. Amongst the Thai banks, Bangkok Bank acts as onshore security agent and Siam Bank is onshore facility agent.
The history of the BLCP project stretches back to 1997 when BLCP was first awarded a PPA by the Electricity Generation Authority of Thailand. The Asian financial crisis put paid to an immediate start on the project and the subsequent slump in demand for electricity delayed the project six more years.
In that time, the ownership structure of BLCP has changed with initial investor PowerGen selling its stake to CLP. A further change in ownership structure is on the cards as Banpu and CLP are in talks with potential investors to sell a portion of their respective stake in the venture. Potential investors include Banpu's affiliate Ratchaburi Electricity Generating Holding and overseas power companies.
Status: First phase financing closed
Location: Thailand
Description: Non-recourse onshore and offshore bank debt financing for construction of power plant
Project Debt: $1.1 billion equivalent
Sponsors: CLP International (50%), Banpu (50%)
Financial advisors: ABN Amro, Finansa
Offshore lead arrangers:
ANZ Investment Bank, BNP Paribas, WestLB, KBC, SMBC, SG, ABN Amro, Credit Lyonnais, Fortis, NordLB
Legal Counsel:
Baker & Mckenzie (for the sponsors), Latham & Watkins (offshore lenders), Allen & Overy (Japanese ECAs) and Chandler Tong Ek (lenders' local counsel)
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