Terra-Gen Power L.L.C. has raised $1.2 billion to finance four wind energy projects in Kern County, California with a total generating capacity of 570 megawatts. The projects will be part of the Alta Wind Energy Center, a wind power development initiative that aims to produce 3,000 MW of electricity, of which 1,550 MW will be sold to Southern California Edison under a power purchase agreement signed in 2006.
The initial five projects of the initiative will have a total wind capacity of 720 MW. Terra-Gen already closed financing and began construction on the 150 MW Alta Project I in March of this year. The company expects to begin operations in January 2011.
The funds for the next four projects, Alta Projects II to IV, will come from about $580 million worth of pass through certificates due by 2035 via a Rule 144A offering, a $499 million construction bridge loan facility and $172 million worth of ancillary credit facilities.
The financing for the projects is designed as a leveraged lease where Citibank N.A. committed to purchase the projects once commercial operations starts and lease them back to Terra-Gen, which will then manage and operate the projects under long-term agreements.
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“We believe this transaction is the first to be structured as a leveraged lease in the wind space as well as the first 144A bond issuance for wind assets since 2005. We are hopeful that these benchmarks will expand the capital base available to fund future growth in the renewable sector,” said John O’Connor, chief financial officer of Terra-Gen.
The Rule 144A of the Securities and Exchange Commission modifies a two-year holding period requirement on privately placed securities to allow qualified institutional buyers to trade these positions among themselves. This substantially increases the liquidity of the securities affected because institution can now avoid limitations that are imposed to protect the public.
Citibank, Barclays Capital and Credit Suisse acted as joint book-running managers for the issuance of the certificates, while Mitsubishi UFJ Securities, Credit Agricole Securities, ING and Rabo Securities acted as co-managers.
Other banks and financial organizations involved in the transaction are MUFG Power and Utilities Group, Bank of Montreal and Rabobank.
Terra-Gen expects construction on the projects to begin immediately, although no specific date was given. Commercial operations are scheduled to begin by the first half of 2011.
All five projects will increase the installed wind capacity in California by over 25 percent and deliver enough electricity for 200,000 Californian households. The projects can also generate more than 1,500 jobs and bring over $600 million into the local economy, said Jim Pagano, chief executive of Terra-Gen.
The New York-based company owns 831 MW of renewable generating facilities across 21 projects. Its development subsidiaries hold over 5,000 MW of wind, geothermal and solar development projects across the United States.
