Rijnmond Power
European Power Deal of the Year 2002
2002 saw the successful financing of the Rijnmond hybrid-merchant gas-fired heat and power plant in the Netherlands, despite the backdrop of an unsettled UK power market. Sponsor InterGen was prepared to face an uphill struggle with lender appetite at a low, and brought about close, if not the end of syndication, before year-end. It is the first independent power project (IPP) in northwest Europe since the 1996 EU Electricity Directives, providing the ultimate testing ground for banking confidence and, lenders hope, a real turning point for a bruised power market.
InterGen (68% owned by Shell) wanted to structure the deal around mitigating this part-merchant market price risk, and the solution was an innovative PPA of 15 years dissected into three-year blocks offering both market-linked and contracted revenues. BNP Paribas and SG jointly underwrote Eu622 million ($655 million) in limited-recourse debt in four tranches, comprising a Eu405 million senior loan, a Eu15 million working capital and two equally split letter of credit facilities amounting to Eu41 million. InterGen's input was a Eu161 million equity bridge, lending considerable comfort to a part-merchant deal. Debt was syndicated down to a further eight banks ? Fortis, WestLB, Credit Lyonnais, HBoS, Bank of Ireland, NIB Capital, NordLB and Bayerische Landesbank. The project buys fuel under a gas sales agreement with NV Nederlandse Gasunie, of which Shell owns 25%.There is a full pass-through of gas costs to offtaker Nuon for the first, fully contracted five years of the PPA, which is an advantage to this risky phase of the project. The two subsequent five-year blocks will use a mix of a contracted formula and market-linked revenues. Shell is the steam offtaker. The 18-year repayment period operates with forward-looking coverage ratios and partial cash sweeps during years 6-18 of the repayment period. However to bring the average life down to 15 years cash sweeps are in place to service all debt for years 15-18, when the plant will be exposed to full merchant risk. Dorothy Thompson, a director at InterGen, says: ?There were three main issues that needed to be addressed with the Rijnmond project. First was securing a term contract in a very newly liberalised market with price uncertainty ? which was difficult. Secondly, financing the contract within the context of the collapse of the UK power market ? there should not have been an infection but people are only human and it did have an effect. Thirdly, making people believe there was a real difference in the market. It was a transaction of simplicity and elegance, not very complex. That makes it an easier risk to take on board.? The deal did suffer a slight delay in October last year, when bank appetite at sub-underwriting stage was less than expected. InterGen quickly addressed this with a pricing flex of 15bp to a base of 1306p over Euribor and banks were offered a sub-underwriting fee of 5bp for co-arranging slots. Significant due diligence, carried out by Elan, showed that the demand for clean heat and power was steady and unlikely to falter over the life of the contract. This lent peace of mind, as did having strong sponsor backing. Any risk presented by availability, performance and dispatch was sidelined with the use of proven technology ? Siemens V94.3A2 turbines ? and extensive research to prove demand. A joint venture comprising Bechtel and Enka ? better known to InterGen from its Turkish projects ? is EPC contractor for the plant. Work started in August last year and the plant is expected to reach commercial operation in 2004.
Rijnmond Energie CV
Status: closed 14 November 2002
Location: Rotterdam, Netherlands
Description: Eu622 million ($655 million) financing of a 790MW heat and power plant based on a hybrid-merchant structure
Sponsor: InterGen
Debt: Multi-tranche Eu461 senior debt comprising term loan, working capital and two letter of credit facilities
Leads: BNP Paribas, Societe Generale
Financial advisor: Deutsche Bank
Lawyers to the lenders: Shearman & Sterling
Lawyers to the sponsor: Clifford Chance (international) Nauta Dutilh (local)
Technical advisor: PB Power
Market advisor: Elan
Insurance advisor: Marsh
Model auditor: KPMG
EPC contractor: Bechtel and Enka
2002 saw the successful financing of the Rijnmond hybrid-merchant gas-fired heat and power plant in the Netherlands, despite the backdrop of an unsettled UK power market. Sponsor InterGen was prepared to face an uphill struggle with lender appetite at a low, and brought about close, if not the end of syndication, before year-end. It is the first independent power project (IPP) in northwest Europe since the 1996 EU Electricity Directives, providing the ultimate testing ground for banking confidence and, lenders hope, a real turning point for a bruised power market.
InterGen (68% owned by Shell) wanted to structure the deal around mitigating this part-merchant market price risk, and the solution was an innovative PPA of 15 years dissected into three-year blocks offering both market-linked and contracted revenues. BNP Paribas and SG jointly underwrote Eu622 million ($655 million) in limited-recourse debt in four tranches, comprising a Eu405 million senior loan, a Eu15 million working capital and two equally split letter of credit facilities amounting to Eu41 million. InterGen's input was a Eu161 million equity bridge, lending considerable comfort to a part-merchant deal. Debt was syndicated down to a further eight banks ? Fortis, WestLB, Credit Lyonnais, HBoS, Bank of Ireland, NIB Capital, NordLB and Bayerische Landesbank. The project buys fuel under a gas sales agreement with NV Nederlandse Gasunie, of which Shell owns 25%.There is a full pass-through of gas costs to offtaker Nuon for the first, fully contracted five years of the PPA, which is an advantage to this risky phase of the project. The two subsequent five-year blocks will use a mix of a contracted formula and market-linked revenues. Shell is the steam offtaker. The 18-year repayment period operates with forward-looking coverage ratios and partial cash sweeps during years 6-18 of the repayment period. However to bring the average life down to 15 years cash sweeps are in place to service all debt for years 15-18, when the plant will be exposed to full merchant risk. Dorothy Thompson, a director at InterGen, says: ?There were three main issues that needed to be addressed with the Rijnmond project. First was securing a term contract in a very newly liberalised market with price uncertainty ? which was difficult. Secondly, financing the contract within the context of the collapse of the UK power market ? there should not have been an infection but people are only human and it did have an effect. Thirdly, making people believe there was a real difference in the market. It was a transaction of simplicity and elegance, not very complex. That makes it an easier risk to take on board.? The deal did suffer a slight delay in October last year, when bank appetite at sub-underwriting stage was less than expected. InterGen quickly addressed this with a pricing flex of 15bp to a base of 1306p over Euribor and banks were offered a sub-underwriting fee of 5bp for co-arranging slots. Significant due diligence, carried out by Elan, showed that the demand for clean heat and power was steady and unlikely to falter over the life of the contract. This lent peace of mind, as did having strong sponsor backing. Any risk presented by availability, performance and dispatch was sidelined with the use of proven technology ? Siemens V94.3A2 turbines ? and extensive research to prove demand. A joint venture comprising Bechtel and Enka ? better known to InterGen from its Turkish projects ? is EPC contractor for the plant. Work started in August last year and the plant is expected to reach commercial operation in 2004.
Rijnmond Energie CV
Status: closed 14 November 2002
Location: Rotterdam, Netherlands
Description: Eu622 million ($655 million) financing of a 790MW heat and power plant based on a hybrid-merchant structure
Sponsor: InterGen
Debt: Multi-tranche Eu461 senior debt comprising term loan, working capital and two letter of credit facilities
Leads: BNP Paribas, Societe Generale
Financial advisor: Deutsche Bank
Lawyers to the lenders: Shearman & Sterling
Lawyers to the sponsor: Clifford Chance (international) Nauta Dutilh (local)
Technical advisor: PB Power
Market advisor: Elan
Insurance advisor: Marsh
Model auditor: KPMG
EPC contractor: Bechtel and Enka
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