After a year's delay, due to unfavourable market conditions, Acciona Energia reached financial close on its Eu835 million ($1.13 billion) 150MW portfolio financing of three solar thermal power plants in late December.

The deal partly refinances a Eu197 million bridge loan from February 2009 – provided by Banco Sabadell, WestLB, Banesto, BBVA and HSBC, which also acted as Acciona's financial adviser – which allowed construction to proceed on the three 50MW solar plants, two in Palma del Rio and one in Majadas.

Uncertainty over qualification for Spain's generous feed-in tariffs at the time the project initially appeared in the market was another reason, alongside the lack of lender liquidity at the tail end of 2008, why the project financing was delayed.

Financing comprises Eu542 million of senior debt, a Eu59 million VAT facility and Eu292 million in equity, giving the deal a 67:33 gearing. The senior debt has a 19.5-year tenor, but is structured as a soft mini-perm with a full sweep in year seven of operation and margins of 400bp over Euribor from then until the debt's nominal maturity date. Before that the debt is priced at 300bp during the construction phase, 325bp for the first three years of operation and 350bp from year three to year seven.

Swaps are in place for 90% of the debt during construction and 80% during operation. The average debt service coverage ratio is 1.3x.

The deal was 1.5 times oversubscribed. At the mandated lead arranger level there are eight banks lending Eu40 million each to the project: Banco Sabadell, Banesto, BBVA, Calyon, Dexia, HSBC, Banco Popular, Santander and WestLB. Providing Eu16.6 million each are Banco Espirito Santo, Caja Madrid, EBN, Helaba, ING, Intesa, La Caixa, Natixis, Rabobank and SG. Providing Eu8.3 million each are Bankinter and Banco Pastor. The remainder of the financing comes from Banco BPI, Caja Extremadura, Banco Gallego, Bancantabria, Caja Badjoz, Cajasol, Banco Cooperativo Espanol and Caixanova.

The deal is notable for its size and the number of banks involved in lending to the project. Otherwise it is fairly unremarkable – the market for solar thermal financings in Spain is approaching something like maturity following the financings of Solnova 1&3, Andasol 1&2 and Extresol 1&2 in the past couple of years. The need to qualify for the country's feed-in tariff has combined with economies of scale to peg 50MW as the clear optimal unit size for solar thermal power plants.

All three plants in the Acciona financing are scheduled to be operational by later this year, bringing to four the number of the company's 50MW Spanish plants in operation and meaning that Acciona will contribute 200MW towards Spain's national target of generating 500MW through solar thermal power by the end of 2010. A fifth Acciona plant, Alvarado 2 in Extremadura, is also in development, and on the other side of the Atlantic Acciona has the 64MW Nevada Solar One plant – operational since 2007 and generating 9% more power than forecast using Acciona's in-house technology, which it also uses for its Spanish plants.

Spain's complicated system of high feed-in tariffs to incentivise renewable generation was shrouded in confusion in 2008 when it became clear that the photovoltaic target was going to be met several years ahead of schedule, prompting a tariff cut that would leave some developers high and dry. However, with its longer construction periods – typically around a year and half – solar thermal power generation has crept towards the 500MW target at a more measured pace. Consequently tariffs for this solar power weren't revised downwards in 2008 as they were for PV, and Acciona's plants qualify for Eu0.2694/kWh set out in the 2007 Royal Decree on tariffs.

Like Acciona, Extresol 2 closed with a seven-year mini-perm, which ratchets up the margin to 400bp at year five. Sponsored by ACS, the project comprises just one 50MW unit – but managed to get higher gearing at 78%. The Eu281.6 million senior debt was a little over half the size of Acciona's, and drew in 13 participating banks with final hold positions ranging from Eu2.7 million to Eu38.7 million.
Acciona's 65% gearing is also low compared to Torresol Energy's 100MW Valle 1&2 project, which like Extresol achieved a debt-equity ratio of 78:22. Torresol, a joint venture of Sener (60%) and Masdar (40%), an infrastructure fund ultimately owned by the government of Abu Dhabi, reached financial close in July, but didn't sign until January, after meeting its conditions precedent. As well as the higher gearing, the financing is a much better deal all round for the sponsors than both the Acciona portfolio and Extresol, not least for managing to avoid the mini-perm. The Eu540 million senior debt on Torresol amortises over a 20-year tenor and has a flat rate margin of 325bp over Euribor.

Torresol was a highly atypical deal, however, and it is Acciona and Extresol that are setting the template. The attraction of forming a relationship with a new participant in the market, unburdened by a leveraged company balance sheet, was too enticing for the seven Spanish banks – Santander, La Caixa, BBVA, Instituto de Credito Oficial, Caja Madrid, Banco Popular and Banesto – lending to Torresol, with participations ranging from Santander's Eu112 million at the top end to Banesto's Eu56 million at the bottom, more than the individual bank's holding of the Acciona debt. The size and diversity of the lending group on Acciona's debt, featuring many international banks, made the mini-perm inevitable given the poor lending climate.

Majadas and Palma del Rio
Status: Financial close 23 December 2009
Size: Eu835 million
Description:
Eu542 million project financing of three 50MW solar thermal energy plants
Sponsor: Acciona Energia
Mandated lead arrangers: Banco Sabadell, Banesto, BBVA, Calyon, Dexia, HSBC, Banco Popular, Santander, WestLB
Financial adviser: HSBC
Lender legal counsel: Jones Day
Sponsor legal counsel: In-house
Insurance adviser: Willis
Technical adviser:
Garrigues Medio Ambientes