PF Archive

Power

01 12 2005

Wolf Hollow acquisition launches WestLB and Goldman Sachs have launched syndication of the $400 million Wolf Hollow acquisition financing. Wolf Hollow is a 730MW natural gas-fired combined cycle power project located in Granbury, Texas. AES was the original developer of the project, but handed back the keys to the plant to its lenders after a downturn in merchant power prices. The plant has a power purchase agreement with Exelon Corporation that runs to 2023, while the remainder was dispatched into the Electrical Reliability Council of Texas (ERCOT). But this was not enough to support $285 million in senior debt, and Stark Investments and Sequent Power Partners ultimately agreed an acquisition that paid off the bulk of this debt. The deal breaks down into a 6.5-year $130 million first lien B loan (rated at B1 by Moody's), a 7-year $110 million second lien B loan (rated at B2), a 6.5-year $110 million synthetic letter of credit, designed to back the project's power purchase obligations, and a five-year $50 million working capital facility. Goldman Sach's J Aron trading arm is buying the remaining 50% of the project's output under a contract running to 2010. The deal launched on 1 December, and is scheduled to close syndication on 15 December. The financing will also enable the new owners to settle litigation with Stone & Webster, which took over construction of the plant from Enron subsidiary NEPCO. In many respects, as well as its likely final pricing, the deal resembles the La Paloma acquisition financing, which WestLB and...