North-west Europe has witnessed financial close of its first hybrid merchant power deal in years, and its first IPP since EU electricity directives were introduced in 1996. The Rijnmond power plant project signed on 14 November 2002 with a total financing of Eu622 million ($633.5 million). This comprised a BNP Paribas/ SG-led four-tranche debt facility of Eu461 million and a Eu161 million one-year InterGen equity bridge loan.
Rijnmond has an interesting financial structure built out around market price risk, using a hybrid structure, forward-looking ratios and partial cash sweeps. Because lenders are generally wary of taking on full merchant risk, the power purchase agreement (PPA) of 15 years is a comforting mix of three five-year blocks mixing fully contracted and market-linked revenues.
The contract structure is reminiscent of InterGen's US borrowing base approach, which matches leverage and debt to the proportion of contracted revenues and predicted spot prices. For the first five years of the contract, gas costs are passed through to offtaker Nuon (full pass-through of the gas costs). Revenues are fully contracted for this period, which is arguably the riskiest period for a power facility. For the remaining ten years, in two five-year blocks, of the PPA half of the output will use the first, contracted...
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