Edison Mission closes Fiddlers Ferry and Ferrybridge
There is no limit to the appetite local and international banks
have for UK power deals. Latest to close is the £1,251 million
($2,020 million) financing for the acquisition by Edison Mission
Energy of the Fiddler's Ferry and Ferrybridge 2,000MW coal-fired
power plants previously owned by PowerGen.
After being in the market for less than six months, financing closed on December 8 with an official signing ceremony held in London. Arrangers for the £830 million 13-year term loan and the £20 million revolving credit were Barclays Capital, Bank of Montreal, Chase Manhattan, Credit Lyonnais, Credit Suisse First Boston, Dresdner Kleinwort Benson, Societe Generale and WestLB.
The number of banks joining syndication was capped due to Edison's desire to have a restricted number of banks involved in the deal. Twenty co-arrangers joined and the latest banks to enter the deal were Mitsubishi Trust and Sumitomo as managers with Arab Banking Corporation, Arab Bank and BBL as co-managers. Societe Generale and Chase Manhattan acted as syndication agents.
The deal reached financial close at the end of June this year before syndication started. It closed oversubscribed by 50%. A source close to Chase Manhattan says: "Syndication has been very limited with everybody in the arranging group reaching their target before it started. Very little has been left on the banks' books."
Priced at 150 basis points over Libor in the first 2 years and climbing to 190 basis points after 10 years, the facility was sold in both the UK and international debt market. Andrew Davison, assistant director in project finance at SG in London says: "We had a bullish approach that proved to be a winning one. Having a large arranging group made things easier for us and the result at syndication level has been of a relatively high final hold approval."
Market sources reveal that SG holds only £32 million from its initial intake, giving a flavour of how the popular syndication has been. Financial adviser to the concession awarder was Goldman Sachs while Merrill Lynch advised Edison Mission Energy. Legal adviser to the lenders is Shearman & Sterling while Linklaters and Jones Day Reavis & Pogue advised the Edison Mission Energy.
Stephen Peppiatt, partner at Shearman & Sterling in London says: "There has been tremendous pressure on PowerGen to get the deal done quickly. At the same time the acquisition of both Fiddler's Ferry and Ferrybridge represented a huge task for Edison Mission Energy. 2,000MW worth of generating capacity is an awful lot to buy and transform it into merchant power. Given the complexity of the deal it sold pretty well, making it a great achievement for Edison Mission Energy."
All signs coming from the UK power market are encouraging despite the moratorium imposed by the government in October 1998 on the development of new gas-fired power plants. The result that the government's White Paper has had in the market has gone beyond expectations. One London-based project financier says: "What National Power, Eastern Energy and PowerGen have done in diversifying their assets has been substantially above what the regulator demanded from them. Twelve months ago such as scenario would have been difficult to predict even for those who are very familiar with the UK energy market."
Financiers are only too happy to comply with such market conditions and ready themselves for a new stream of projects although it is difficult to see new opportunities coming in the short-term. Financing for the £123.75 million redevelopment of Fifoots Point 3936MW coal-fired power plant, sponsored by AES Electric, is the next deal in the market.
Taking a different approach from the financing structure of Fiddler's Ferry and Ferrybridge, Deutsche Bank is the sole arranger for the financing and is now waiting for responses from the market. Latest reports are that four banks are ready to join the deal.
A source close to Edison's deal gives an insight into the debt market for UK power deals: "What the market wants is tenors not beyond 15 years and pricing not below 150 basis points over Libor. These conditions are very competitive for the UK market and I believe that unless the deal is done on a club basis it is difficult to achieve lower prices."
It is unlikely there will be the same volume of UK power deals in 2000. But project financiers are confident there will be ample new business. SG's Davison is "waiting to see what will happen. A consolidation of the market is necessary but we are at the threshold of new events."
Peppiatt at Sherman & Sterling is convinced there will be more gas-fired power in the UK. "Competition has been intense over the last year with sponsors such as National Power dropping hugely in the market. There will be little more but we achieved a fair spread. Ultimately more gas-fired power plants will be developed. Gas is cheaper and cleaner: it cannot be held out of the power market for much longer."
While waiting for more projects to come into the UK market, local sponsors and financiers are looking at opportunities abroad. Deregulation of the power sector across Europe has been happening at a lower pace compared to the UK.
Nevertheless the potential is huge in countries such as Germany, France, Italy and Spain. Plans for the decommissioning of 10,000MW worth of generating power in Italy have engendered high hopes in those interested in developing a presence abroad (see Project Finance, November 1999).
But despite the short time to deregulation in most European countries it is still to be determined whether there is the potential to recreate those same favourable conditions that led to the boom in the UK power sector.
After being in the market for less than six months, financing closed on December 8 with an official signing ceremony held in London. Arrangers for the £830 million 13-year term loan and the £20 million revolving credit were Barclays Capital, Bank of Montreal, Chase Manhattan, Credit Lyonnais, Credit Suisse First Boston, Dresdner Kleinwort Benson, Societe Generale and WestLB.
The number of banks joining syndication was capped due to Edison's desire to have a restricted number of banks involved in the deal. Twenty co-arrangers joined and the latest banks to enter the deal were Mitsubishi Trust and Sumitomo as managers with Arab Banking Corporation, Arab Bank and BBL as co-managers. Societe Generale and Chase Manhattan acted as syndication agents.
The deal reached financial close at the end of June this year before syndication started. It closed oversubscribed by 50%. A source close to Chase Manhattan says: "Syndication has been very limited with everybody in the arranging group reaching their target before it started. Very little has been left on the banks' books."
Priced at 150 basis points over Libor in the first 2 years and climbing to 190 basis points after 10 years, the facility was sold in both the UK and international debt market. Andrew Davison, assistant director in project finance at SG in London says: "We had a bullish approach that proved to be a winning one. Having a large arranging group made things easier for us and the result at syndication level has been of a relatively high final hold approval."
Market sources reveal that SG holds only £32 million from its initial intake, giving a flavour of how the popular syndication has been. Financial adviser to the concession awarder was Goldman Sachs while Merrill Lynch advised Edison Mission Energy. Legal adviser to the lenders is Shearman & Sterling while Linklaters and Jones Day Reavis & Pogue advised the Edison Mission Energy.
Stephen Peppiatt, partner at Shearman & Sterling in London says: "There has been tremendous pressure on PowerGen to get the deal done quickly. At the same time the acquisition of both Fiddler's Ferry and Ferrybridge represented a huge task for Edison Mission Energy. 2,000MW worth of generating capacity is an awful lot to buy and transform it into merchant power. Given the complexity of the deal it sold pretty well, making it a great achievement for Edison Mission Energy."
All signs coming from the UK power market are encouraging despite the moratorium imposed by the government in October 1998 on the development of new gas-fired power plants. The result that the government's White Paper has had in the market has gone beyond expectations. One London-based project financier says: "What National Power, Eastern Energy and PowerGen have done in diversifying their assets has been substantially above what the regulator demanded from them. Twelve months ago such as scenario would have been difficult to predict even for those who are very familiar with the UK energy market."
Financiers are only too happy to comply with such market conditions and ready themselves for a new stream of projects although it is difficult to see new opportunities coming in the short-term. Financing for the £123.75 million redevelopment of Fifoots Point 3936MW coal-fired power plant, sponsored by AES Electric, is the next deal in the market.
Taking a different approach from the financing structure of Fiddler's Ferry and Ferrybridge, Deutsche Bank is the sole arranger for the financing and is now waiting for responses from the market. Latest reports are that four banks are ready to join the deal.
A source close to Edison's deal gives an insight into the debt market for UK power deals: "What the market wants is tenors not beyond 15 years and pricing not below 150 basis points over Libor. These conditions are very competitive for the UK market and I believe that unless the deal is done on a club basis it is difficult to achieve lower prices."
It is unlikely there will be the same volume of UK power deals in 2000. But project financiers are confident there will be ample new business. SG's Davison is "waiting to see what will happen. A consolidation of the market is necessary but we are at the threshold of new events."
Peppiatt at Sherman & Sterling is convinced there will be more gas-fired power in the UK. "Competition has been intense over the last year with sponsors such as National Power dropping hugely in the market. There will be little more but we achieved a fair spread. Ultimately more gas-fired power plants will be developed. Gas is cheaper and cleaner: it cannot be held out of the power market for much longer."
While waiting for more projects to come into the UK market, local sponsors and financiers are looking at opportunities abroad. Deregulation of the power sector across Europe has been happening at a lower pace compared to the UK.
Nevertheless the potential is huge in countries such as Germany, France, Italy and Spain. Plans for the decommissioning of 10,000MW worth of generating power in Italy have engendered high hopes in those interested in developing a presence abroad (see Project Finance, November 1999).
But despite the short time to deregulation in most European countries it is still to be determined whether there is the potential to recreate those same favourable conditions that led to the boom in the UK power sector.
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