NextEra Energy Espana closed the Eu589 million ($875 million) 20-year limited recourse facility for its 99.8MW (2 x 49.9MW) Planta Termosolar Extremadura 1 & 2 concentrated solar power (CSP) project (also known as Project Sunshine) on 29 April 2011 – the largest CSP project in Europe to date. And despite the difficulty of raising debt for Spanish renewable projects in the current lending climate, the project is the first underwritten renewables deal in Spain in two years, pulling underwriting commitments from five banks.

The Eu819.8 million project involves the design, construction, finance, operation and maintenance of two 49.9MW CSP units with a total capacity of 99.8MW, on an 800-hectare land lease in the Autonomous Community of Extremadura, Spain. The project comprises a parabolic trough solar power plant with 640 solar collector assemblies, thermal storage facilities, conventional power block using 49.9MW Siemens turbines, a 20km tie-line, gas supply, water reservoir and associated facilities. Construction started in 2010 with estimated start-up dates in February 2013 for Termosol 1 and May 2013 for Termosol 2.

Spain entered the CSP market in 2007 with the establishment of the PS10 solar tower, which has a capacity of 11MW. By 2010, Spanish cumulative installed capacity reached 582.4MW making Spain, at the time, the highest solar CSP installed country in the world.

NextEra Energy Resources, through its subsidiary NextEra Energy Espana, looked to diversify its renewable growth outside of the production tax credit-dependent US wind market. Spain’s attractive government feed in tariffs presented a bankable long- term revenue stream.

“As an established renewables player we capitalised on core company strengths, in an established market with attractive economics based on the feed-in tariff,” says Aldo Portales, assistant treasurer at NextEra. “In addition, this project will use the same technology that we have successfully operated for more than 20 years in the US at our SEGS facilities.”

In December 2009, both Extremadura plants were included in the Spanish pre-registration list – the minimum requirement for any potential solar project in Spain.

Uncertainty over the future of the Spanish CSP tariff in 2010 provided the first major obstacle for the deal. However, the passing of Royal Decree 1614/2010 in December 2010 provided the regulatory clarity that NextEra and the market needed to move the project forward.

NextEra mandated SG CIB, Banco Santander, BayernLB, Bankia and BBVA to act as bookrunners on the deal in December 2010. At a time when no large underwriting was getting done in the Spanish renewables bank market – lenders were financing on a club basis only and not taking any underwriting risk – each bookrunner underwrote 20% of the debt.

Syndication was launched on 22 March 2011 with Banesto, Banco Popular, BNP Paribas, Intesa San Paolo, Bank of Tokyo-Mitsubishi UFJ, Banco Sabadell, La Caixa and Unicredit joining the bank group. The transaction had a 100% uptake and was oversubscribed by 36%. The final bank pool comprised around 59% local lenders and the remainder international.

NextEra is putting Eu190.5 million of equity into the projects – both of which respond on a joint and several basis to their obligations under the financing – and is financing on a 76/24 debt-to-equity ratio. The deal comprises a Eu589 million construction loan and a Eu40 million four-year VAT facility. Interest and principal on the construction loan is repayable semi-annually beginning in June 2014. The financing is structured as a seven-year soft-miniperm, with a full cash sweep from year seven to reduce the underlying 20-year debt tenor to 15.5 years from financial close.

Around Eu105 million of the funding available under the construction loan was drawn on 28 April 2011. The remainder will be drawn on a monthly basis through to completion of construction in 2013.

It is doubtful whether this type of financial structure will be repeated in the near future given the problems within the Eurozone. “While this transaction could serve as a model for other transactions in the CSP space, the market has shifted significantly, and it would be difficult to replicate this transaction in the current environment,” concedes Portales. Nevertheless, the project is a significant achievement in a very risk averse lending market.

Project Sunshine
STATUS: Financial close 29 April 2011?
TOTAL PROJECT COST: Eu819.8 million
TOTAL DEBT: Eu589.2 million
DESCRIPTION: Development of two 49.9MW concentrated solar power units with a total nameplate capacity of 99.8 MW in the Autonomous Community of Extremadura, Spain.
SPONSOR: Nextera Energy Resources
MLAS: Banco Santander, BBVA,Bankia, Bayern LB, Societe Generale, Banesto, Banco Popular, BNP Paribas, Intesa, La Caixa, Bank of Tokyo-Mitsubishi UFJ, Banco Sabadell, Unicredit
SPONSOR LEGAL COUNSEL: Uria y Menendez, Squire Sanders LENDER LEGAL COUNSEL Jones Day
FINANCIAL ADVISER: PricewaterhouseCoopers
TECHNICAL ADVISERS: RW Beck, Alatec
INSURANCE ADVISER: Aon
EPC CONTRACTORS: NextEra, SENER
O&M: NextEra Energy Espana Operating Services