A Philippine island is destined to be the site of two geothermal power plants to be built with financing from U.S. private and government units.
California Energy Co., Omaha, will build the plants, with a combined base load rating of 300,000 kw, on Leyte Island. Financial backers include BA Securities Inc., and BA Asia Ltd., both units of BankAmerica Corp.; and Export-Import Bank (Ex-Im bank) and Overseas Private Investment Corp. (OPIC), both federal agencies (OGJ, Aug. 22, p. 26).
Electricity from the 180,000 kw Mahanagdong plant and 120,000 kw Upper Mahiao plant is earmarked for delivery to a combine of Philippine National Oil Co. and Energy Development Co. (PNOC-EDC) to help ease power shortages on Philippine islands Luzon and Cebu.
After a 10 year operating period, ownership of each plant will shift to PNOC-EDC at no cost under a build-own-transfer program designed to promote development of private projects in Philippines.
MAHANAGDONG FINANCING
Financing for the $320 million Mahanagdong project took final shape last August.
Capital structure consists of $240 million in term loans provided by Ex-Im bank and OPIC and about $80 million in equity provided by California Energy and an affiliate of project cosponsor Peter Kiewit Sons Inc., also of Omaha.
Construction debt financing will come from OPIC and a group of lenders led by Bank of America that includes American Pacific Finance Co., a subsidiary of California Energy.
In addition to its lead lending role, BankAmerica affiliates helped California Energy structure and arrange the Ex-Im bank, OPIC, and other financing support to the project and will provide agency, escrow, and trustee services to the project.
Martin A. Kamarck, Ex-Im bank vice-chairman, said, "Ex-Im bank intends to be a world leader in project finance to support private sector development in emerging markets."
Mahanagdong is Ex-Im bank's first limited recourse project finance transaction since formation of its project finance division last June. The division seeks to support loans based on the strength of a project's cash flow and contractual arrangements rather than on government or sponsor guarantees.
The Mahanagdong project set a precedent by bringing together the resources of Ex-Im bank and OPIC to provide limited recourse project financing. OPIC has more than 20 years of experience in project finance.
In addition to responding to the project's financing needs, OPIC gave further support by offering political risk insurance for California Energy's and Peter Kiewit's equity investments.
"Our goal is to build on our recognized expertise in project finance and insurance by offering efficient, speedy service to American private sector investors in emerging markets around the globe," said Ruth R. Harkin, OPIC president and chief executive officer.
UPPER MAHIAO
California Energy completed financing for its $220 million Upper Mahiao project last April.
Capital structure consists of $165 million in term loans provided by Ex-Im bank and a Philippine bank, United Coconut Planters Bank (UCPB), and about $55 million in equity provided by California Energy.
Construction financing came from an international group of commercial banks and UCPB. The international bank group will be covered by Ex-Im bank guarantees for political risk. OPIC political risk insurance also was arranged to cover California's Energy's equity investment.
BA Securities and BA Asia advised California Energy in structuring and arranging political risk support and direct financing from Ex-Im bank and in arranging the local bank facility.
Charles Snyder, BankAmerica team leader for both project financing assignments, said financings for the Mahanagdong and Upper Mahiao projects were arranged and closed in record time.
He said, "The ability of California Energy to arrange and close both financings was critical in meeting the company's contractual commitments to PNOC--EDC for these projects.
"These projects will become benchmarks for delivery of financial commitments and closing on future infrastructure projects."
