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Americas Bank of the Year
Société Générale was the outstanding bank in the Americas for 2014. The bank made a major comeback from mainly advisory work and just over US$550m in lending in 2013 to lead roles in two of the largest and most significant transactions of the year, Cameron LNG and Freeport LNG.
For Cameron, SG acted as joint lead arranger, sole documentation agent and intercreditor agent on the US$7.4bn financing to back the development, construction and operation of a three-train, 13.5 MTPA natural gas liquefaction facility in Hackberry, Louisiana.
On Freeport, SG was joint lead arranger, bookrunner, co-structuring lead and syndication agent on the US$4.02bn financing of the second of up to three trains of the LNG export facility in Quintana Island, Texas. Train 2 will have an export capacity of 4.89 MMTPA. An innovative finance structure was employed to combine short-term and long-term financing across Trains 1 and 2.
The bank also acted as exclusive financial adviser to the I-4 Mobility Partners team covering bid strategy, ratings advisory, capital raising and hedging strategy on behalf of the I-4 Ultimate Project and acted as a lead on US$484m in senior bank project finance debt to back the Florida road P3.
In bonds, SG acted as joint lead placement agent on Enbridge Pipeline’s US$1.06bn private placement and joint bookrunner/co-lead placement agent on a C$352m Canadian private placement to refinance the Southern Light pipeline project that runs from Chicago to Edmonton. The deal was the inaugural project bond for Enbridge.
On the Hammerhead Solar transaction, SG acted as joint lead arranger and co-documentation agent on a US$250m construction loan/bridge-to-solar asset-backed security (SBS) for SolarCity. The deal was unique as it backed rooftop solar photovoltaic systems expansion for residential and commercial customers and was structured with refinancing in mind via the capital markets through a securitisation.
SG was involved in a number of the largest deals in Latin America. Following a few years of pull-back in the region from European lenders, the French bank has slowly been building its activity across a range of sectors, including renewable energy, mining and infrastructure.
The bank was at the forefront of a novel project financing backing Torex Gold Resources El Limon-Guajes gold mine in Mexico. It saw a US$375m debt package closed with the bank acting as documentation agent, where it mitigated issues surrounding the prolonged construction period and a complicated gold price hedging mechanism.
SG was one of the joint lead arrangers for a US$300m senior secured term loan signed in June 2014 to finance the construction and deployment of ArcLight Capital Partners’ Delta House semi-submersible floating production system in the deep-water Gulf of Mexico. It was a first-of-a-kind financing structure whereby a major offshore floating infrastructure vessel was financed on the basis of its cashflows coming from the underlying anchor oil fields, without the benefit of an investment-grade leasing counterparty. SG was able to leverage both its shipping and offshore finance, and reserve-based finance teams to complete the financing.
The bank has also been a key player in some of the most notable deals in the region this year. It is one of the banks in the syndicate committing to the seven-year, US$4.1bn term loan backing the Southern Gas Pipeline in Peru. Also in Peru, the bank is looking to fund part of the US$400m commercial loan tranche guaranteed by Italian ECA Sace alongside Italian state-owned lender CDP and by Intesa Sanpaolo backing the Lima Metro Line 2 project.
On the power side, it was one of the banks in the four-lender club backing Inkia Energy and Energia del Pacifico’s Samay I project. It also led Abengoa’s 144A bond issuance backing greenfield projects in the region, which saw coupons of 5.5% for the €256m euro-denominated tranche and 6.5% for the US$300m dollar-denominated tranche.
Its versatility across sectors in Latin America, its ability to leverage a number of its teams and its ramping up of activity by committing large tickets in the region made it one of the most prominent players in the market.
Americas Deal of The Year
The US$11bn Freeport LNG transaction was the most significant deal in 2014 project finance based on not only its size, at US$11bn, but also because of its complex structuring with separate financing of Trains 1 & 2 and the challenges it overcame with lenders taking full construction risk on the Quintana Island export facility near Freeport, Texas.
The deal was in the market at the same time as Cameron LNG, testing project lending capacity and definitely the more difficult sell. Unlike Cameron, the financing was able to get to financial close without completion guarantees or a major corporate sponsor like Sempra.
The financing was structured to get “best of both worlds” benefits – with long-term Nexi-backed debt for Train 1 and mini-perm debt from commercial banks on Train 2. The innovative financing structure with two separate financings for one integrated facility maximised and diversified available financing sources with export credit agency (ECA), commercial bank, infrastructure fund and strategic investor contributions to the project.
On Train 1, Macquarie Capital acted as financial adviser. On Train 2, Macquarie and Credit Suisse acted as joint financial advisers and joint equity placement agents. Credit Suisse acted as sole global co-ordinator of the Train 2 financing.
Freeport Train 1 is a Japanese-financed train with Osaka Gas and Chubu Electric providing the off-take of 2.2 MTPA each and cash equity of US$600m each. Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (Nexi) provided a direct loan of $2.7bn and insurance coverage to six banks. A US$1.12bn, 22-year, 112.5bp loan was provided by BTMU, ING, Mitsubishi Trust, Mizuho, SMBC and Sumitomo Trust. Fees were 80bp commitment and 70bp. The deal included a US$424m five-year letter of credit priced at 200bp with fees of 45bp and 70bp and a US$50m 22-year working capital facility.
Freeport Train 2 raised US$4.02bn through a syndicate of 25 commercial banks under a seven-year mini-perm construction facility priced at 225bp with commitment fees of 90bp and other fees of 250bp plus a working capital facility of US$50m. The commercially-financed train was supported by an off-take with BP Energy for 4.4 MTPA, with IFM Investors providing the cash equity of US$1.3bn.
The banks and allocations include the following: Credit Suisse (US$188.49m), HSBC (US$237.10m), Standard Chartered (US$233.01m), BTMU (US$188.49m), ING (US$188.49m), RBC (US$152.50m), BBVA (US$152.50m), Credit Agricole (US$233.01m), Mizuho (US$230m), Lloyds (US$233.01m), SG (US$188.49m), Scotia (US$188.49m), SMBC (US$188.49m), RBS (US$152.50m), Santander (US$85.25m), BMO (US$85.25m), CIBC (US$85.25m), Barclays (US$85.25m), ICBC (US$85.25m), MetLife (US$58.90m), Goldman Sachs (US$152.50m), Deutsche (US$152.50m), Intesa (US$152.50m), Natixis (US$152.50m), GE Capital (US$150m) and QBE Insurance (US$25.24m).
The deal included a first-of-its-kind contractual structure in the LNG industry utilising liquefaction tolling agreements where the project takes no upstream or downstream risk. The contractual and funding structure ensures that each train only funds 50% of the facility but has the appropriate security from the other train to ensure at least one train can be built without double commitments, alleviating project-on-project construction risk.
The US$3.9bn ECA financing from JBIC and Nexi for Train 1 represented the first-ever LNG project financing without a completion guarantee from the sponsors for both. The 3x oversubscribed commercial loan financing was reverse-flexed several times.
The project will be operated as one integrated facility with Freeport LNG as operator, with each entity having access to the entire facility to serve its customers.
Freeport LNG was advised by White & Case as financing counsel. JBIC, Nexi and the other Train 1 lenders were represented by Hunton & Williams as transaction counsel. The Train 2 lenders were represented by Chadbourne & Parke as transaction counsel.
Americas Transportation Deal of the Year
I-4 Ultimate Project
The US$2.3bn I-4 Ultimate Project in the urban Orlando area was the largest availability payment transaction ever undertaken in the US and was also notable as the largest greenfield P3 in the US to-date.
The Florida Department of Transportation (FDOT) awarded the contract to I-4 Mobility Partners OpCo, a consortium led by Skanska Infrastructure Development and John Laing Investments, to design, construct, finance, maintain and operate the project for 40 years.
The project involves reconstruction of 21 miles of I-4 from west of Kirkman Road in Orange County to east of State Road 434 in Seminole County. The project will provide a choice to motorists by adding four variable tolled Express Lanes to the I-4 while maintaining the existing free general use lanes. Through the PPP delivery model, the concessionaire was able to provide significant technical enhancements, including direct connections from the Express Lanes to SR 408, additional auxiliary lanes and an additional pedestrian bridge along the facility.
I-4 Mobility Partners’ final bid was approximately US$860m less than the highest financial proposal FDOT received. The project was able to secure a US$2bn private activity bond (PAB) allocation, the largest allocation under the programme to-date. It also received a US$949m TIFIA loan, the largest loan ever undertaken under the TIFIA programme for an availability payment P3 transaction. Design activities are currently under way and construction is expected to begin in 2015, with completion foreseen in 2021.
The I-4 project also saw the implementation of the new streamlined TIFIA loan process under which proposer teams are provided with a uniform term sheet upon which to base their assumptions regarding TIFIA loan terms and conditions. The process was instrumental in getting from an award to financial close within the four months remaining in the proposal validity period. With the help of a motivated team at the USDOT’s TIFIA office, the parties were able to reach financial close in a period of favourable interest rates, resulting in savings in financing costs of about US$70m compared with the interest rate assumptions built into I-4 Mobility Partner’s financial model.
SG, MUFG, CIBC, KfW-IPEX, AB Svensk Exportkredit, and Credit Agricole led the construction loan portion of the deal. The interest rate on the loan amounted to 4.04% with six banks. At the time of close, 35-year TIFIA loans were offering interest rates of 3.17%. Nossaman acted as counsel to the state. Latham & Watkins acted as counsel to lenders. Ashurst acted as counsel to the sponsor.
Americas Petrochemical Deal Of The Year
The Sasol Louisiana petrochemical plant expansion financing raised US$4bn in bank debt that is to be followed up with a bond issue early next year, all backing construction of an US$8.1bn ethane cracker and derivatives complex at an existing site in Lake Charles, Louisiana. The project will produce 1.5m tons of ethylene.
Banks in the deal include admin agent BTMU, account bank BofA ML, security trustee HSBC, Mizuho, SMBC, JP Morgan, Deutsche Bank, BNP Paribas, Barclays, Citigroup, KfW IPEX, EDC, ING, Intesa, Korea Development Bank, ICBC and UniCredit. RBS is advising.
The deal is unique as it leaves open a funding risk for the scheme if the credit markets turn. The deal will benefit from existing cashflows, the economics of an expansion as opposed to a greenfield plant and cheap local ethane prices.
The financing plan was designed to leave flexibility for a possible 96,000 bbl/d gas-to-liquids (GTL) investment at the same Lake Charles complex. The GTL project would involve an investment of between US$11bn and US$14bn but a final investment decision is not expected until the end of 2016.
Debt/equity split on the expansion financing is 50/50 and the coverages are above 2x. Pricing is around the 200bp mark. The term sheet was recently revised to give greater sponsor backing on the product price margins to support the investment-grade rating. The complex includes six chemical manufacturing plants.
Approximately 90% of the cracker’s ethylene output will be converted into a diverse slate of commodity and high-margin speciality chemicals for markets in which Sasol has a strong position, underpinned by collaborative customer relationships.
An additional US$800m will be invested in infrastructure and utility improvements, as well as land acquisition, to establish the Lake Charles location as an integrated, multi-asset site. Site preparation is under way, and the company expects that the facility will achieve beneficial operation in 2018. Latham & Watkins acted for the project company and Skadden acted for the lenders.
Americas Bond Deal of the Year
Abegoa Transmission Sur
Power transmission company Abengoa Transmision Sur’s (ATS) project bond deal in Peru was able to capture the zeitgeist in the market but also show what was possible with deals of this nature. The transaction ended up being the longest greenfield project bond issued from Latin America in history.
The Abengoa subsidiary sold its amortising US$411.6m 2043 senior 144A/Reg S issue through BNP Paribas and HSBC at Treasuries +333.3bp to yield 6.875%. Books reached an enthusiastic almost US$2bn that saw the participation of 115 accounts, which allowed the bond to be priced at the tight end of the 7% plus or minus 125bp guidance. The bond deal followed on from a June 2010 US$190m bridge loan and a March 2012 US$344m term loan.
An uptick in institutional investor appetite is allowing companies to increasingly use project bonds as a financing source and this deal really pushed the limits on both tenor and pricing. Institutional investors are becoming increasingly attracted to infrastructure, which offers higher yields than they might get from traditional investments in investment-grade sovereign and corporate debt, while also sating a need to match long-term assets and liabilities. Abengoa was able to tap into that appetite successfully.
The amortising structure has a 21-year average life and, according to Fitch, will carry a six-month reserve account for debt service, as well as a cash-trap mechanism to ensure timely debt service. The average debt service cover ratio is 1.39x and the minimum 1.24x. The deal also saw two cashflow trapping mechanisms: one driven by DSCR performance and applicable during the entire life of the trade and triggered at DSCRs less than 1.2x; and another not subject to DSCR performance activated five years prior to final maturity.
ATS was awarded a 30-year concession in 2010 from the Peruvian government to construct, operate and maintain one 500kV power transmission line 883km in length along the Peruvian coastline, two new 220kV transmission lines 32km in length, three new 500kV substations named Poroma, Ocoña and Montalvo and to expand one existing 500kV substation at Chilca and two existing 220kV substations at Marcona and Moquegua. Shearman & Sterling advised ATS and Mayer Brown represented the underwriters.
Americas Oil & Gas Deal of the Year
Los Ramones Sur
The Americas have seen a boom in pipeline activity on the back of cheap shale gas coming out of the US and the project financing of the Los Ramones II Sur project was the most prominent this year. It was the first deal closed on the back of the much-hyped Mexican energy reforms.
The sponsor group of GDF Suez and TAG Pipelines, a subsidiary of Pemex, closed US$890m in facilities supporting the construction and operation of this section of the pipeline. The project financing involves a US$864.7m, 20-year term loan and a US$25.94m standby facility. BNP Paribas and Banco Santander were financial advisers to the sponsor group.
The financing stood out for a number of reasons. The transaction was structured during the overhaul of the energy sector in the country, with the regulatory framework changing over the course of the financing. It is the first pipeline transaction in the country with a significant portion of rights of way outstanding at closing, which will give rise to a complex acquisition process during construction.
The deal features contingency for regulatory risk with one time tariff adjustment in the operation period. The term loan also saw the involvement of a raft of lenders, with international banks, local banks and agencies all committing to the debt package. The project has a total cost of US$1.081bn, meaning leverage of roughly 80%.
Credit Agricole was mandated lead arranger, administrative agent and documentation agent. BBVA Bancomer, Mizuho, Natixis, and Sumitomo Mitsui Banking Corporation were the commercial lenders, coming in with 60% of the debt, with Banobras and Nafin the development bank lenders filling in the other 40%. Deutsche Bank Mexico was the trustee on the deal. Ritch Mueller Heather & Nicolau advised the lenders in Mexico and Shearman & Sterling advised the lenders from the US.
Los Ramones is a project of national importance to the Mexican government and related companies such as Pemex and CFE. Both Ramones Sur and Ramones Norte will benefit from 25-year transportation services agreements with PGPB, a 100% subsidiary of Pemex. It is one of the largest infrastructure projects to be carried out in the country in decades.
The pipeline will be 291.7km long and have a diameter of 42 inches, running through the states of San Luis Potosí, Guanajuato and Querétaro. It will have a total capacity of 1,420m cubic feet per day and will be completed in the second quarter of 2016.
North American Power Deal of The Year
CPV St Charles Energy Center
Competitive Power Ventures (CPV)’s St Charles deal demonstrated returning market appetite for merchant power in 2014. A US$549.6m financing backed the US$775m, 725MW CPV St Charles Energy Center in Waldorf, Charles County, Maryland. The project was one of the first gas-fired merchant power plants to be financed in the growing PJM market in recent years and made it to financial close despite ongoing litigation surrounding the power purchase agreements.
The lending group included General Electric Capital Corporation as administrative agent, mandated lead arranger, left lead and bookrunner; CIT Finance, Credit Agricole, ING, Natixis, MUFG and NordLB as mandated lead arrangers, bookrunners, and co-syndication agents; and CM Life Insurance, Deutsche Bank, Massachusetts Mutual Life Insurance, Mizuho, Siemens and SG as lenders.
The financing required the use of a newer, more efficient fully-funded letter of credit facility, as well as a sophisticated approach to natural gas purchasing and hedging and complicated electricity off-take arrangements. St Charles also reflected the increasingly complex nature of the equity side of project finance, resulting in a very complicated series of equity documents and substantial, last-minute negotiations over the change of control provisions in the financing documents.
Additional challenges included the introduction of mezzanine debt that had to be harmonised with the provision of the other financing and tax equity documents, especially those relating to defaults and change of control.
The project will sell its capacity, energy and ancillary services into the transmission-constrained SWMAAC zone of the PJM market. The project’s proximity to PEPCO 230 kV transmission lines and the Dominion Cove Point natural gas pipeline make it extremely cost competitive.
CPV and its partners Marubeni and Toyota Tsusho broke ground on the project in early December. Latham & Watkins acted as counsel to the sponsor; Chadbourne & Parke acted as counsel to the lenders.
Latin American Power Deal of the Year
Latin America has seen a lot of growth in the number of private off-takers for power plants and this year the debt package backing the 517MW Kelar gas-fired project in Chile showcased just what is possible with this type of transaction.
BHP Billiton commissioned the project for its mining interests in the country and it was awarded to the sponsor group of Korea Southern Power Corporation (Kospo) and Samsung C&T Corporation. The project financing backing the US$602m gas‐fired project, which will also use diesel as a back-up option, featured US$477m of senior secured credit facilities, including a US$196m, 17-year direct loan from Kexim, a US$160m, 17-year commercial bank tranche guaranteed by Kexim, a US$89m, 17-year tranche in uncovered commercial bank debt and a US$32 letter of credit and working capital facility. This represents leverage of roughly 80% and attractive tenors.
Natixis was financial adviser to Kospo and Samsung C&T and mandated lead arranger, Kexim was another MLA, SMBC was sole co-ordinating lead arranger for the banks, and MUFG and Mizuho the other commercial bank lenders. The deal also featured a US$40m VAT facility provided by Banco Santander Chile. Pricing on the commercial bank tranche came in at around the Libor plus 200bp–250bp.
Of the covered US$160m tranche, the four commercial banks provided equal tickets of US$40m. Similarly, on the uncovered US$89m tranche, the four banks came in with equal tickets of US$22.25m. The US$32m facility featured a seven-year, US$12m revolver provided in equal tickets of US$3m and a seven-year, US$20m revolver provided in equal tickets of US$5m.
Kelar pushed the boundaries on tenor and the banks involved were able to place a number of different tranches within an overall solid package. The involvement of commercial banks, a local bank and an ECA are testament to this. Kelar is also a landmark deal as it is the first ever 100% South Korean consortium to penetrate the Chilean power market. It is also the maiden BHP captive power project and the first-ever IPP in Chile in which Kexim was the sole export credit agency on the deal.
Linklaters and Cariola advised the sponsors on the transaction and White & Case and Claro y Cia provided lender counsel.