Debt margins in the Thai power market have continued to drop and have reached a 10-year low for greenfield deals. Although welcome news for sponsors, it is a situation that lenders believe cannot last.
The greenfield independent power project (IPP) that will benefit from the 10-year pricing low is Gulf Power, backed by Thailand's Electricity Generating Plc (in which China Light & Power has a stake) and Japan's Electric Power Development.
In most respects, the Gulf Power project is a conventional Thai IPP venture, with a standard 14.5-year term for the offshore loan and unremarkable gearing.
Colin Chen, at Bank of Tokyo-Mitsubishi – one of the five arrangers, alongside Fortis, ING, DZ Bank and Mizuho – says the $129 million offshore loan will replace part of the $660 million-equivalent onshore loans, provided by Thai banks, including Siam City Bank, UOB Radanasin Bank and Thai Military Bank. "Its not a refinancing," says Chen. "The intention was always to have a US dollar tranche."
Last year, the sponsors were anxious to get a financing agreement signed, since the terms of their power purchase agreement (PPA) specified that they had to reach financial close within 18 months of being awarded the concession. "The quickest way to do this was to initially sign an interim agreement with local lenders," Chen says. Gulf Power and its bankers have set 15 November as the target date to close the offshore financing.
The lending margin for the offshore facility is...
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