Asia Power Deal of the Year 2001 - Meghnaghat and Haripur
Asia Power Deal of the Year 2001
Meghnaghat and Haripur
Taken together, AES's Haripur and Meghnaghat power deals represent the largest ever cross border, non-recourse debt financing arranged and raised for a private sector infrastructure development project in Bangladesh. The deals are also the first large-scale independent power schemes in the country to be developed, financed and implemented under Bangladesh's private sector power generation policy. In addition, Meghnaghat is the first project finance transaction to benefit from the ADB's partial risk guarantee scheme and to receive funding from the World Bank sponsored Infrastructure Development Company (IDCOL).
AES Haripur reached financial close on April 4, 2001 and AES Meghnaghat followed suit on April 11, 2001. Syndication for both deals, totalling $150.9 million, was launched simultaneously on April 19, 2001. The strong financing packages, each propped up by multilateral support, demonstrated considerable appeal during sell-down despite Bangladesh country risk.
Initial agreements for financing the 360MW combined-cycle Haripur project were signed with the World Bank and ANZ. The total cost is $180.3 million. AES contributes a total of $120 million to an advantageous debt/equity mix. It had previously provided $73.3 million in equity to expedite construction in 2000.
ANZ was brought on board after AES dismissed the original financing team consisting of Citibank and IFC. The ANZ structure is understood to have resulted in a more palatable debt/equity ratio ? a primary factor behind the deal's swift financial closure.
The final deal reveals a slightly trimmed-down debt package. It comprises a $60.9 million senior term loan facility guaranteed by the World Bank under its Partial Risk Guarantee programme, a $37 million partially-subordinated loan from AES and a pre-completion revenue tranche of $8.5 million. This latter portion, also guaranteed by AES, represents the projected revenue stream from the initial phase of plant operation.
ANZ is underwriting the multilateral tranche, which carries a 14-year tenor ? reduced from an original 15 years. The margin is set at 200bp over Libor with a repayment schedule requiring 26 equal semi-annual instalments. The World Bank's political risk guarantee tranche provides cover against political risks including default by the Bangladesh Power Development Board (BPDB) ? the offtaker ? or the Government of Bangladesh. AES won the mandate offering a level tariff of $0.277 a unit. The plant is to be developed under a 22-year build-own-operate (BOO) concession and became operational at the end of last year.
The larger of the two deals, AES Meghnaghat, aims to develop a 450MW combined-cycle gas fired facility at Meghnaghat, south of Dhaka. Total project costs are $300 million, of which AES provides an $80 million equity contribution. The $220 million debt facility splits into four tranches: a $50 million direct loan from the ADB with a 16-year maturity; a $20 million co-financing facility arranged under the ADB's Complementary Financing Scheme (CFS) with a 12-year tenor and a margin of 350bp during construction and 325bp thereafter; a $70 million 15-year facility guaranteed by the ADB through its Partial Risk Guarantee (PRG) program and an $80 million IDCOL (a Government of Bangladesh lending institution sponsored by the World Bank) facility.
The IDCOL facility breaks into two parts: a 16-year $20 million senior facility and a 22-year $60 million subordinated facility. Similarly, the ADB guaranteed portion splits into two: tranche A, a $20 million normal amortizing tranche, and tranche B which is $50 million in size with an eight year grace period and a margin of 225bp. Both the ADB guaranteed facility and the ADB CFS were sold to the market by ANZ, which also underwrote the $90 million amount.
AES is to provide free power to the BPDB for a limited time after which power is to be sold to BPDB for a level tariff of $0.279 under a 22-year PPA ? the supply and offtake agreements are similar for both deals. Gas supplies will come from Titas Gas Transmission and Distribution Company. For both agreements, obligations from the state agencies are guaranteed by the Bangladeshi government. Both plants are being designed by a consortium of Hyundai Engineering & Construction and Hyundai Heavy Industries.
Also notable about both deals is the fact that construction risk is minimal. Megnaghat was 80% complete and Haripur 90% wrapped up at the time of financing. Indeed, this helped their speedy closure and syndication. ?We were delighted with these projects,? says Chris Vermont, head of project and structured finance at ANZ. ?They moved extremely fast ? faster than any other regional transactions. This was really down to the tremendous co-ordination. But what is also very significant is that AES will be the lowest cost producer providing the cheapest power the country has ever had.?
Negotiations for a 450MW Meghnaghat phase two are now underway. Any new developments in the country's power sector are welcome news as around 85% of households have no electricity and power supplies remain severely stretched. Peak demand is around 3,150MW but supply is around 2,650MW. The government expects a total of 1,200MW to come on line this year ? a figure that includes repairs to old plants.
In Sri Lanka, AES concluded the financing for its 163MW Kelanitissa combined-cycle diesel fired plant shortly after the Bangladeshi packages in June 2001. That deal (in something of a financing hat trick) was also arranged by ANZ. Like
Meghnaghat, it benefits from ADB's extended political risk guarantee product to the tune of $52 million. The project is the largest independent power project in Sri Lanka and, at $104 million, represents one the largest non-recourse debt financings to date in the country. The plant is expected to be in open cycle commercial operation by mid-year and in combined cycle mode by mid-2003.
Meghnaghat and Haripur
Taken together, AES's Haripur and Meghnaghat power deals represent the largest ever cross border, non-recourse debt financing arranged and raised for a private sector infrastructure development project in Bangladesh. The deals are also the first large-scale independent power schemes in the country to be developed, financed and implemented under Bangladesh's private sector power generation policy. In addition, Meghnaghat is the first project finance transaction to benefit from the ADB's partial risk guarantee scheme and to receive funding from the World Bank sponsored Infrastructure Development Company (IDCOL).
AES Haripur reached financial close on April 4, 2001 and AES Meghnaghat followed suit on April 11, 2001. Syndication for both deals, totalling $150.9 million, was launched simultaneously on April 19, 2001. The strong financing packages, each propped up by multilateral support, demonstrated considerable appeal during sell-down despite Bangladesh country risk.
Initial agreements for financing the 360MW combined-cycle Haripur project were signed with the World Bank and ANZ. The total cost is $180.3 million. AES contributes a total of $120 million to an advantageous debt/equity mix. It had previously provided $73.3 million in equity to expedite construction in 2000.
ANZ was brought on board after AES dismissed the original financing team consisting of Citibank and IFC. The ANZ structure is understood to have resulted in a more palatable debt/equity ratio ? a primary factor behind the deal's swift financial closure.
The final deal reveals a slightly trimmed-down debt package. It comprises a $60.9 million senior term loan facility guaranteed by the World Bank under its Partial Risk Guarantee programme, a $37 million partially-subordinated loan from AES and a pre-completion revenue tranche of $8.5 million. This latter portion, also guaranteed by AES, represents the projected revenue stream from the initial phase of plant operation.
ANZ is underwriting the multilateral tranche, which carries a 14-year tenor ? reduced from an original 15 years. The margin is set at 200bp over Libor with a repayment schedule requiring 26 equal semi-annual instalments. The World Bank's political risk guarantee tranche provides cover against political risks including default by the Bangladesh Power Development Board (BPDB) ? the offtaker ? or the Government of Bangladesh. AES won the mandate offering a level tariff of $0.277 a unit. The plant is to be developed under a 22-year build-own-operate (BOO) concession and became operational at the end of last year.
The larger of the two deals, AES Meghnaghat, aims to develop a 450MW combined-cycle gas fired facility at Meghnaghat, south of Dhaka. Total project costs are $300 million, of which AES provides an $80 million equity contribution. The $220 million debt facility splits into four tranches: a $50 million direct loan from the ADB with a 16-year maturity; a $20 million co-financing facility arranged under the ADB's Complementary Financing Scheme (CFS) with a 12-year tenor and a margin of 350bp during construction and 325bp thereafter; a $70 million 15-year facility guaranteed by the ADB through its Partial Risk Guarantee (PRG) program and an $80 million IDCOL (a Government of Bangladesh lending institution sponsored by the World Bank) facility.
The IDCOL facility breaks into two parts: a 16-year $20 million senior facility and a 22-year $60 million subordinated facility. Similarly, the ADB guaranteed portion splits into two: tranche A, a $20 million normal amortizing tranche, and tranche B which is $50 million in size with an eight year grace period and a margin of 225bp. Both the ADB guaranteed facility and the ADB CFS were sold to the market by ANZ, which also underwrote the $90 million amount.
AES is to provide free power to the BPDB for a limited time after which power is to be sold to BPDB for a level tariff of $0.279 under a 22-year PPA ? the supply and offtake agreements are similar for both deals. Gas supplies will come from Titas Gas Transmission and Distribution Company. For both agreements, obligations from the state agencies are guaranteed by the Bangladeshi government. Both plants are being designed by a consortium of Hyundai Engineering & Construction and Hyundai Heavy Industries.
Also notable about both deals is the fact that construction risk is minimal. Megnaghat was 80% complete and Haripur 90% wrapped up at the time of financing. Indeed, this helped their speedy closure and syndication. ?We were delighted with these projects,? says Chris Vermont, head of project and structured finance at ANZ. ?They moved extremely fast ? faster than any other regional transactions. This was really down to the tremendous co-ordination. But what is also very significant is that AES will be the lowest cost producer providing the cheapest power the country has ever had.?
Negotiations for a 450MW Meghnaghat phase two are now underway. Any new developments in the country's power sector are welcome news as around 85% of households have no electricity and power supplies remain severely stretched. Peak demand is around 3,150MW but supply is around 2,650MW. The government expects a total of 1,200MW to come on line this year ? a figure that includes repairs to old plants.
In Sri Lanka, AES concluded the financing for its 163MW Kelanitissa combined-cycle diesel fired plant shortly after the Bangladeshi packages in June 2001. That deal (in something of a financing hat trick) was also arranged by ANZ. Like
Meghnaghat, it benefits from ADB's extended political risk guarantee product to the tune of $52 million. The project is the largest independent power project in Sri Lanka and, at $104 million, represents one the largest non-recourse debt financings to date in the country. The plant is expected to be in open cycle commercial operation by mid-year and in combined cycle mode by mid-2003.
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