Citi Goes Green with a $250 Million TLB for Terra-Gen
July 1, 2009
Citigroup is shopping a $250 million term loan B for Terra-Gen Power, a New York renewable energy company focused on geothermal, wind and solar power.
The bank held a meeting in a New York on June 29 and has set a commitment date for Tuesday. Price talk is at Libor plus 550 bps, with an OID between 95 and 98 and a 2.5% Libor floor.
The deal is “going well,” according to a New York-based investor. And the term loan, once it’s syndicated, will probably “trade well,” a Canada-based investor said. The Canadian investor added that, after factoring in the spread and OID, the loan will yield around 8%.
The proceeds from the loan, which will mature in five years and is being coupled with a $25 million revolver, will be used to refinance an existing bridge loan and to pay fees and expenses related to the transaction.
Moody’s Investors Service assigned a Ba3 rating to the term loan and revolver and gave the company a stable outlook. The rating reflects the company’s portfolio diversification across 21 plants and three types of renewable energy sources. It also reflects the cash flows from long-term power purchase agreements with primarily investment-grade counterparties; generally strong operating performance across its portfolio; a proven operating history; and strong political and regulatory support for renewable energy.
The company has contracts that will represent 90% of its annual revenue through April 2012, 60% from May 2012 to 2019, and 90% from 2019 to 2030.
Terra-Gen is currently developing two projects—Coso Power, a geothermal power plant, and Hay Ranch, a water pipeline that will be used for the Coso Power site. The company also owns two other geothermal sites—Dixie Valley and Beowawe, which are both located in Nevada. Between 60% and 70% of Terra-Gen’s revenues come from these geothermal sites, so if the geothermal reserve declines, it would pose a key risk for the company and could lead to a downgrade. Other risk factors include the fact that, between 2012 and 2019, Terra-Gen will be relying on floating sources of income from merchants; the company’s investment in the Coso Power site, which could result in possible cost overruns and reduced cash flows; the ability to obtain proper permits; its concentration in California; and the success of the refinancing.
Terra-Gen is owned by ArcLight Capital Partners and has received more than $700 million in equity from the Boston-based private equity firm.
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