The best project finance deals eke out everything possible for the sponsor and when Canadian company Innergex Renewable Energy completed a US$803.1m financing package over the summer it really hit the jackpot. Innergex’s deal was part acquisition financing, part portfolio refinancing, and part greenfield project financing, running the full gamut of what is possible for a borrower.
The money secured included US$710m in green bonds maturing in 2036 priced at 6.28%, with a balloon payment of US$139m, as well as a US$93.1m letter of credit facility. The senior secured 4(a)(2) private placement deal niftily unlocked roughly US$31.45m in cash trapped in reserve accounts and benefited from a pre-hedging strategy providing an additional US$55.5m in cash. Its rating was BBB– from Standard & Poor’s.
SMBC and CIBC acted as placement agent and co-agent respectively for this transaction. SMBC acted as financial adviser to Innergex in respect of the structuring of the transaction, as sole green bond coordinator, and as sole issuing bank of the letter of credit facility. Clifford Chance and McCarthy Tetrault acted for the sponsors, while Paul Hastings repped the lenders.
The portfolio being refinanced includes a set of hydro assets already owned by Innergex and assets purchased from Aela Energia, an affiliate of Mainstream Renewable Power. The portfolio features a combination of solar, wind, hydro, and battery energy storage system (BESS) assets.
The net proceeds of the deal will be used to finance US$176.2m of the acquisition of Aela wind farms, while US$72.6m will be used to finance all development activities for the Salvador BESS project. The remaining balance will be used to repay US$548.7m of the existing debt backing the Aela farms and projects already owned by Innergex in the country.
The deal was the largest US private placement and largest renewable project bond from Latin America in recent history and one of the first to feature a new-build battery financing component. It saw a significantly oversubscribed book in the midst of volatile market conditions, with a final group of seven high-quality project finance-focused investors taking tickets.
The innovative transaction structure also featured a delayed draw to fund the BESS installation and target balance cash sweep mechanism to mitigate exposure to spot market pricing, something that had hit companies and project finance loans in the country in the past.
For the distance the deal was able to cover, its size, and the attractive terms, Innergex’s portfolio deal was the standout financing in Latin America’s renewables and power sector this year.