Water Deal of the Year
Mirfa IWPP financing
What is it?
A $1.5 billion financing package to fund the construction of the 238,665m3/d & 1,100MW independent water and power project at Mirfa in Abu Dhabi. The package has a 80:20 debt to equity split, with the $1.2 billion debt package structured under a ‘soft’ mini-perm loan agreement.
Who is responsible?
The project company is split between GdF Suez (20%) and the Abu Dhabi Electricity & Water Authority (80%). Thirteen banks provided debt funding: Abu Dhabi Commercial Bank, Crédit Agricole, First Gulf Bank, HSBC, KfW IPEX Bank, Mitsubishi UFJ, Mizuho Bank, National Bank of Abu Dhabi, SMBC, Sumitomo Mitsui Trust Bank, Bank of Tokyo-Mitsubishi, Shizuoka Bank, and Union National Bank.
What makes it special?
In a groundbreaking move, the use of a mini-perm debt finance structure was written into the deal right from the start. The seven-year initial loan period will allow the project company to refinance the debt at a more attractive rate once construction risk is eliminated, whilst also allowing it to tap new sources of finance such as the bond markets. The deal attracted an impressive level of oversubscription, resulting in an aggressive 110-basis-point initial margin.
The unexpected departure of GdF’s bidding partner Sojitz meant the team had to recreate the financial package from scratch at the eleventh hour. The consummate financial nous shown by GdF Suez – and the flexibility shown by ADWEA when raising its equity stake to plug the gap – engendered a high level of respect among the lender community, convincing commercial banks to flood back to the project within weeks.
The departure of Sojitz meant the project company could no longer rely on attracting Japanese export credit financing, which has long been a mainstay of the regional project market. Such was the confidence shown by the project company, however, that all Japanese commercial lenders kept their faith right through until financial close, despite the lack of involvement from Japanese developers and contractors.
Distinction
DC Water green bond
What is it?
A $350 million 100-year bond launched in July 2014 to part-fund the $2.6 billion Clean Rivers Project, which involves the construction of a deep tunnel system to transport stormwater and sewage to the Blue Plains Advanced Wastewater Treatment Plant. The bond carries an interest rate of 4.814%.
Who is responsible?
The client is DC Water, the water utility serving Washington, D.C. The joint-bookrunners for the bond were Goldman Sachs and Barclays. PFM acted as the client’s financial advisor. Vigeo provided an independent opinion on the bond’s sustainability credentials.
What makes it special?
DC Water underscored its reputation as a progressive pioneer in the public water utility space by launching its first ever green bond in July 2014. The issue marked the first municipal century bond ever to have been issued by a US water utility, and will allow DC Water to match the lifetime of its assets with that of its liabilities more closely than ever before.
As the market for green bonds exploded exponentially throughout 2014, the lack of formal regulation raised fears over “greenwashing”. DC Water’s decision to solicit a third-party opinion on the environmental, social and governance impact of its issuance marked the first time a US issuer had brought an independently certified green bond to market.
The choice of a 100-year maturity not only allowed DC Water to lock in historically low interest rates over an ultra-long repayment period, but will allow the costs of the infrastructure it is funding to be spread over several generations. The deal also served as a blueprint for the development of the US green bond sector as a whole, paving the way for a steady stream of water-related green bonds from Connecticut right across to Washington State.
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