North American Power deal of the year
Calpine's push to become a major US independent power producer
(IPP) moved up a notch this year with the giant $1 billion revolver
it secured to finance a portfolio of hyper-efficient gas-fired
assets that it had in development in the US. The financing is set
to become the cornerstone of its expansion plans, not only because
of the pedigree of the projects covered, but also because the
flexibility that the facility grants can cover future parts of the
IPP's onward march.
The facility, which matures in August 2003, was sold down in New York and 50% over-subscribed at a time, according to CSFB, lead arranger and bookrunner, when sub-investment grade credits were facing a difficult market. Other lead arrangers were Toronto-Dominion, CIBC and Scotia Capital, with a further 12 banks coming in lower down the scale. The facility is priced at between 150bps and 212.5bps, according to Calpine's debt/capitalisation ratios.
Even in a year that has seen a number of ?genco? portfolio financings, including deals for Southern and Duke, the open-ended non-recourse construction deal outshone even larger deals. In part this is because, rather than use an SPV as a hasty means of bringing acquisitions off balance sheet, financing is being secured on the basis of creating a dominant position in a series of clearly delineated markets.
Calpine is clearly aware that a decent geographical spread is vital to exploit the disjointed pace of deregulation in the various US power markets. Perhaps unsurprisingly this deal focused on the advanced Texas, California and North-eastern regions, where the so-called ?initial? plants are located. More importantly, Calpine is hoping that the assets under construction will deliver the necessary efficiencies to enable them to dominate their respective power pools.
The deal, signed in August, not only involved a thorough understanding of merchant risk in a number of power markets, but also a rigorous supervisory structure for future projects to be funded under the facility. The four plants specifically included ? Sutter (Calif.), Westbrook (Maine), South Point (Arizona) and Magic Valley (Texas) ? are all either at advanced stages of development or construction. Only one of them, Westbrook, uses a traditional outside EPC contractor, in this case GE Power Systems and Burns & Roe, the others are built using in-house ?Calpine construct? principles that affirm the generator's belief that they are more than simply a power investor.
Nevertheless, with a one-stop development culture and a considerably streamlined due diligence process (which consists of a four-bank Technical Committee reviewing project prospects), Calpine can now hope to stay ahead of the competition even in the frenetic US merchant market. If predictions of an imminent asset dearth in the next few months materialise, as utilities and states reassess their approach to deregulation, the four-year facility will be all the more vital to Calpine's ability to remain as ?first mover? in the regions where it operates.
The facility, which matures in August 2003, was sold down in New York and 50% over-subscribed at a time, according to CSFB, lead arranger and bookrunner, when sub-investment grade credits were facing a difficult market. Other lead arrangers were Toronto-Dominion, CIBC and Scotia Capital, with a further 12 banks coming in lower down the scale. The facility is priced at between 150bps and 212.5bps, according to Calpine's debt/capitalisation ratios.
Even in a year that has seen a number of ?genco? portfolio financings, including deals for Southern and Duke, the open-ended non-recourse construction deal outshone even larger deals. In part this is because, rather than use an SPV as a hasty means of bringing acquisitions off balance sheet, financing is being secured on the basis of creating a dominant position in a series of clearly delineated markets.
Calpine is clearly aware that a decent geographical spread is vital to exploit the disjointed pace of deregulation in the various US power markets. Perhaps unsurprisingly this deal focused on the advanced Texas, California and North-eastern regions, where the so-called ?initial? plants are located. More importantly, Calpine is hoping that the assets under construction will deliver the necessary efficiencies to enable them to dominate their respective power pools.
The deal, signed in August, not only involved a thorough understanding of merchant risk in a number of power markets, but also a rigorous supervisory structure for future projects to be funded under the facility. The four plants specifically included ? Sutter (Calif.), Westbrook (Maine), South Point (Arizona) and Magic Valley (Texas) ? are all either at advanced stages of development or construction. Only one of them, Westbrook, uses a traditional outside EPC contractor, in this case GE Power Systems and Burns & Roe, the others are built using in-house ?Calpine construct? principles that affirm the generator's belief that they are more than simply a power investor.
Nevertheless, with a one-stop development culture and a considerably streamlined due diligence process (which consists of a four-bank Technical Committee reviewing project prospects), Calpine can now hope to stay ahead of the competition even in the frenetic US merchant market. If predictions of an imminent asset dearth in the next few months materialise, as utilities and states reassess their approach to deregulation, the four-year facility will be all the more vital to Calpine's ability to remain as ?first mover? in the regions where it operates.
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