International Power (LSE: IPR) has successfully completed the financing for Thai National Power 2 (TNP2), a new 110 MegaWatt gas-fired cogeneration project in Thailand. The company also sealed a power purchase agreement and an engineering procurement and construction (NYSE:EPC) agreement for TNP2. The FTSE100 constituent has also restructured the A$742 million debt of its Hazelwood power station and mine in Australia.
The TNP2 project will be located adjacent to International Power's existing 143MW Thai National Power (NYSE:TNP) gas-fired power plant. The majority of the new plant's output, approximately 90MW, will be sold to the Energy Generating Authority of Thailand (EGAT) through the 25-year power purchase agreement. The remaining output of up to 20MW will be sold to industrial users. The project is estimated to cost THB4,400 million (£82 million).
Through a new term loan IPR will raise THB4,100 million (£76 million), which will fund the new TNP2 project, and the re-leverage the existing TNP1 assets. The THB300 million (£6 million) balance will be funded by IPR directly. The two projects will have a combined debt to equity ratio of 75:25.
The new wholly owned plant is expected to be operational in 2012, and will be operated as a subsidiary of the existing TNP project. "The requirement for new generation capacity continues to grow in Thailand, and we are pleased to have successfully developed and financed the TNP2 project on attractive terms", International Power CEO Philip Cox said.
Due to TNP2’s close proximity to the existing plant, it will benefit from common facilities and will be operated by TNP under a similar arrangement to the existing plant. Natural gas will be supplied by the Petroleum Authority of Thailand under a 25-year agreement. The project will be constructed by Jurong, the Singapore based subsidiary of Ishikawajima Heavy Industries (NYSEARCA:IHI). Jurong will undertake the project through a fixed price, turnkey EPC contract. TNP2 will use General Electric’s LM6000PF gas turbines.
Elsewhere at its 1,675MW coal-fired Hazelwood power station and mine in Australia, IPR has restructured the existing non-recourse debt of A$742 million (£415 million). The new facility replaces the previous two-tranche structure, consisting of the A$297 million Tranche A and A$445m Tranche B.
The new singular A$742 million facility has a maturity date of 30 June 2012 and a margin of 400 basis points.
Disclosure: The author holds no positions in the company