International Power Receives Awards
(London - 15 January 2002) International Power is proud to announce the recognition it has received from the Project Finance International magazine (a Thomson Financial publication) in their Yearbook 2002. International Power won two prestigious awards - the 'Sponsor of the Year' award and the 'North American Deal of the Year' award.
Sponsor of the Year
"International Power had an active and successful debt raising year in 2001. The share price was a bit depressed, but perhaps not as badly as other developers in the sector. The jury is still out on the company which was spun out of National Power last year. Will it keep its independence? Its market capitalisation is just £2.4bn. If it does, will it perform as a growth stock? At the corporate level, the company's balance sheet was sorted out with a £350m multi currency corporate 3 year revolver priced at 175bp arranged by ABN AMRO, Deutsche, ING and RBS. The pricing is based on a rating grid formula and can range from 125bp to 225bp. Current rating equating to the 175bp price is below investment grade at BB. The revolver will be used for general corporate and development purposes.
The finance department was busy on the four major deals this year - ANP, AI Kamil, Shuweihat and Rugeley. Both ANP and Shuweihat, both billion plus deals, were struggles in syndication but both were eventually sold in the loan markets.
American National Power (ANP) was a very important deal for International Power. The company wants to establish itself as a developer of power plant in the developed world and obviously the US is a priority. The US$1.375bn ANP loan was used to finance, at the ANP not IP level, ANPs 4000MW of plant - some of which has been built and some is in construction. The problem with the loan was the Alstom GT26 turbines. AIl the schemes under construction will be using them and the machines have had their problems. So much so the loan had to be altered to allow for this risk. ANP obtained an investment grade rating, higher than the IP corporate, with a cash sweep installed. It revamped the contracts with Alstom under a performance recovery period (PRP) mechanism. The margin on the loan was upped 25bp along with the fees. Eventually the loan went in syndication during the summer. Shuweihat in Abu Dhabi is a single asset deal undertaken in joint venture with CMS. As such it is perhaps not as important as ANP but it is actually bigger at US$I.6bn. The loan backing this deal, underwritten by seven banks, was always going to test the market with its 20 year tenor with no cash sweep and lowish Mid East pricing. The deal was launched on September 10, one day before the New York terrorist attacks. It was clear the loan would struggle in syndication due to these two factors. At first the arrangers upped the fees and then the deal was flexed by 15bp. A US$350m Islamic tranche was added to the US$850m senior loan and US$350m equity bridge. The deal finally sold, even after CMS announced it was pulling out of international business apart from the Middle East to a collection of Middle East and hardy international banks. Al Kamil was a much smaller US$1OOm loan, sold at a time when Middle East perceptions were still on the up while Rugeley was a non recourse acquisition financing in the UK. Again the latter stretched the envelope via a 8 year mini perm with a 90% bullet repayment at the end. The deal is still in syndication as this piece is being written."
North American Deal of the Year
"American National Power's inaugural US financing was a tough one, and some may think it an unlikely choice for the most important deal in a year which has seen so many innovative, challenging and large financings from Teco Panda, NRG, Sithe, InterGen, and Tenaska, to name a few. But the ANP deal was the most significant because despite its struggles, it got done. It ended up oversubscribed, in fact, as a result of relentless hard work from its lead arrangers working to get through to a market that initially did not want to hear their story. Societe Generale, Citibank, Deutsche Bank, ING and ABN Amro had to get the market to do its homework on turbine issues. They had to deal with overbuild concerns in the two regions where the plants are located, Texas and Massachusetts, as well as a sponsor which was new to US power, no contracts for the capacity of the plants and unfortunate timing which coincided with the California crisis. The transaction was significant because ANP faced a critical need to develop strong banking support in the US, and success of the deal was being closely monitored in the equity markets. It was also the first financing of projects using the ARB GT 24 technology since problems with the technology were made public. The deal is a study in overcoming diversity. By working extensively with Alstom and the sponsor, the lead arrangers were successful in modifying the deal with a completion program to protect banks and put the market more at ease with the risks. And when the deal was facing its darkest moments, they came up with a backup plan and went out to assess interest from the institutional market. The US$1bn transaction finances five natural gas-fired combined-cycle plants in operation or construction representing 4,029MW of generation in ERCOT and NEPOOL. ANP should be remembered and used as a reference point as 2002 approaches and a whole new list of issues will surface. The market will struggle with Enron and NEPCO exposure and the re-launch of a few other deals that have struggled, as well as the omnipresent permitting delays, additional turbine problems, and countless unforeseeable others."
Source: Project Finance International Yearbook 2002.