Suez and Said: Egypt gets new BOOTs
Electricite de France (EdF) has reached financial close on its
estimated $695 million project to set up two power stations, in
Suez and East Port Said, Egypt, to each supply 680MW, on a build
own operate transfer (BOOT) basis. Syndication of $305 million in
debt was recently launched by lead arrangers Societe Generale (SG),
Barclays Capital and Credit Lyonnais. A further 15 banks are
reported to have joined the syndication team. The two projects are
being financed through one package which reached financial close on
April 3.
Financing splits into four tranches: a $90 million IFC A loan, a $305 million IFC B loan, a $200 million Edf backed equity bridge and a $100 million institutional tranche provided by John Hancock. A bridge loan, arranged and completed last year by Societe Generale, Barclays Capital and Credit Lyonnais, was put in place earlier to fund construction which has already begun.
The $305 million IFC B loan breaks into two portions: a $205 million 17 year loan, and a $100 million, 13 year portion. The margin on the construction phase, guaranteed by EdF, is 60bp. The operation phase sees the margin rise to 180bp, and then notching up on a four-yearly interval to 200bp, 225bp and 250bp respectively.
Syndication is expected to close by the beginning of May.
Says SG's Guillaume De Luze, ?the transaction has been a real success so far and has been very well received by the market. The loan is already oversubscribed. But given the excellent contractual framework, it comes as no surprise.?
The project is Egypt's second independent power financing, after 1999's Sidi Krir, sponsored by Intergen and Edison International. The pricing on this deal is purported to be slightly cheaper than on Sidi Krir, however. Furthermore, Edf, in contrast to the previous developers, is providing a construction guarantee. It is also paying withholding tax on the non IFC debt.
The IFC A tranche runs for 19 years.
The principal advantage of this structure with IFC involvement is that interest payments on the loan will be exempt from withholding tax ? supranational (multilateral) institutions are exempt. The tax is charged at a basic rate of 32%, dropping to 15% if the bank is in a country with a double taxation treaty with Egypt. IFC involvement also allowed the tenor to be stretched.
Says De Luze, ?Of course the IFC umbrella resolves issues such as withholding tax and, to some extent, their involvement helps explain the syndication's reception. But its important not to lose sight of the importance of the project's contractual fundamentals in getting this deal sold.?
The John Hancock portion is for 20 years, and has a fixed rate throughout ? between 200bp to 250bp over US treasuries, making the funds more expensive than the bank loans at the outset, though this evens out over the life of the loan.
The main contractors on the project are: Foster Wheeler Corporation, supplying the boilers for $110 million; Toshiba Corporation of Japan, with the $70 million turbine order; and a joint venture of SAE International and local Orascom Construction Industries, with the $80 million civil works contract. Alstom won the $9 million transformer supply contract, and Entropie picked up the $3 million order for desalination equipment.
Finally, CimiMontubi won the $30 million contract to carry out the mechanical erection for both plants.
The plants will both use natural gas as primary fuel, but will also be able to burn fuel oil as a back-up fuel. CityGas, a private venture which includes local Orascom, is to supply the Suez site with gas at $1.04 /BTU.
The Port Said site is being furnished with gas from Egyptian Gas Co (Gasco), and affiliate of the Egyptian General Petroleum Corporation, also at a cost of $1.04/BTU. Power Purchase agreements are in place for both schemes with the Egyptian Electricity Authority, which will buy the electricity over a 20 year period.
The projects are expected to reach commercial operation by 2003, and will provide a long-term source of low cost power for Egypt's ever expanding consumer and industrial base. Their combined total output will account for roughly 10% of Egypt's installed capacity.
EdF won the contract for the two plants in October 1999, following an international tender in which EdF submitted the lowest price of $0.0237 /kWh for the sale of electricity.
In the intervening period, EdF has concluded all major contracts for the plants.
Bids are due to be invited later this year for a 1,500MW combined cycle power station to be built on a BOOT basis in Nuberiya, in the Delta. EdF and Intergen are among the seven prequalified bidders.
Another project, a 750MW extension to the existing Cairo North power station, is expected to invite bids over the next few months. The EIB is currently studying a request for a $67.5 million loan for the project. The project has also been pledged $90 million by the Kuwait based Arab Fund for Social Development and $41 million by Jeddah based Islamic Development bank. It lost it BOOT status to Nuberiya and funding will not be carried out on a project basis.
Rising power demand, coupled with abundant gas supplies, the substitution of gas for oil in power generation and enabling private sector legislation, together spurred the development of Egyptian IPPs. Some estimates put Egypt's annual demand growth at 6%, meaning that an additional generating capacity of some 600-1,000MW needs to be added per year to keep up with that growth.
Port Said/Gulf of Suez IPPs
Status: In syndication
Location: Port Said, Gulf of Suez, Egypt
Cost: $695 million
Financing: $305 million IFC B loan, $90 million IFC A loan, $200 million EdF backed equity bridge, $100 million John Hancock institutional tranche.
Sponsors: EdF
Lead Arrangers: Societe Generale, Barclays Capital, Credit Lyonnais
Financial Adviser: Societe Generale
Financing splits into four tranches: a $90 million IFC A loan, a $305 million IFC B loan, a $200 million Edf backed equity bridge and a $100 million institutional tranche provided by John Hancock. A bridge loan, arranged and completed last year by Societe Generale, Barclays Capital and Credit Lyonnais, was put in place earlier to fund construction which has already begun.
The $305 million IFC B loan breaks into two portions: a $205 million 17 year loan, and a $100 million, 13 year portion. The margin on the construction phase, guaranteed by EdF, is 60bp. The operation phase sees the margin rise to 180bp, and then notching up on a four-yearly interval to 200bp, 225bp and 250bp respectively.
Syndication is expected to close by the beginning of May.
Says SG's Guillaume De Luze, ?the transaction has been a real success so far and has been very well received by the market. The loan is already oversubscribed. But given the excellent contractual framework, it comes as no surprise.?
The project is Egypt's second independent power financing, after 1999's Sidi Krir, sponsored by Intergen and Edison International. The pricing on this deal is purported to be slightly cheaper than on Sidi Krir, however. Furthermore, Edf, in contrast to the previous developers, is providing a construction guarantee. It is also paying withholding tax on the non IFC debt.
The IFC A tranche runs for 19 years.
The principal advantage of this structure with IFC involvement is that interest payments on the loan will be exempt from withholding tax ? supranational (multilateral) institutions are exempt. The tax is charged at a basic rate of 32%, dropping to 15% if the bank is in a country with a double taxation treaty with Egypt. IFC involvement also allowed the tenor to be stretched.
Says De Luze, ?Of course the IFC umbrella resolves issues such as withholding tax and, to some extent, their involvement helps explain the syndication's reception. But its important not to lose sight of the importance of the project's contractual fundamentals in getting this deal sold.?
The John Hancock portion is for 20 years, and has a fixed rate throughout ? between 200bp to 250bp over US treasuries, making the funds more expensive than the bank loans at the outset, though this evens out over the life of the loan.
The main contractors on the project are: Foster Wheeler Corporation, supplying the boilers for $110 million; Toshiba Corporation of Japan, with the $70 million turbine order; and a joint venture of SAE International and local Orascom Construction Industries, with the $80 million civil works contract. Alstom won the $9 million transformer supply contract, and Entropie picked up the $3 million order for desalination equipment.
Finally, CimiMontubi won the $30 million contract to carry out the mechanical erection for both plants.
The plants will both use natural gas as primary fuel, but will also be able to burn fuel oil as a back-up fuel. CityGas, a private venture which includes local Orascom, is to supply the Suez site with gas at $1.04 /BTU.
The Port Said site is being furnished with gas from Egyptian Gas Co (Gasco), and affiliate of the Egyptian General Petroleum Corporation, also at a cost of $1.04/BTU. Power Purchase agreements are in place for both schemes with the Egyptian Electricity Authority, which will buy the electricity over a 20 year period.
The projects are expected to reach commercial operation by 2003, and will provide a long-term source of low cost power for Egypt's ever expanding consumer and industrial base. Their combined total output will account for roughly 10% of Egypt's installed capacity.
EdF won the contract for the two plants in October 1999, following an international tender in which EdF submitted the lowest price of $0.0237 /kWh for the sale of electricity.
In the intervening period, EdF has concluded all major contracts for the plants.
Bids are due to be invited later this year for a 1,500MW combined cycle power station to be built on a BOOT basis in Nuberiya, in the Delta. EdF and Intergen are among the seven prequalified bidders.
Another project, a 750MW extension to the existing Cairo North power station, is expected to invite bids over the next few months. The EIB is currently studying a request for a $67.5 million loan for the project. The project has also been pledged $90 million by the Kuwait based Arab Fund for Social Development and $41 million by Jeddah based Islamic Development bank. It lost it BOOT status to Nuberiya and funding will not be carried out on a project basis.
Rising power demand, coupled with abundant gas supplies, the substitution of gas for oil in power generation and enabling private sector legislation, together spurred the development of Egyptian IPPs. Some estimates put Egypt's annual demand growth at 6%, meaning that an additional generating capacity of some 600-1,000MW needs to be added per year to keep up with that growth.
Port Said/Gulf of Suez IPPs
Status: In syndication
Location: Port Said, Gulf of Suez, Egypt
Cost: $695 million
Financing: $305 million IFC B loan, $90 million IFC A loan, $200 million EdF backed equity bridge, $100 million John Hancock institutional tranche.
Sponsors: EdF
Lead Arrangers: Societe Generale, Barclays Capital, Credit Lyonnais
Financial Adviser: Societe Generale
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