El Paso Natural Gas Company. Under the El Paso Consent Letter Agreement Panda Gila River
agreed to ensure that metering equipment was adequate for measuring the flow of gas from El Paso
Natural Gas, and to demonstrate its creditworthiness to El Paso in accordance with procedures
defined in standard US Federal Energy Regulatory Commission (FERC) gas tariff agreements.
Fuel supply agreements
UPP entered into fuel supply agreements with Duke Energy Field Services Marketing and
with the Mexican state-owned utility Pemex. Panda Gila River entered into a similar agree-
ment with El Paso Natural Gas.
Service agreements
UPP entered into an Operations and Maintenance (O&M) Agreement with TPS Arkansas, a whol-
ly owned subsidiary of TPS; a power manager agreement with Aquila; a fuel manager agreement
with Noble, and a pipeline O&M service agreement with Tennessee Gas. Panda Gila River entered
into similar agreements with TPS Arizona, Aquila, Noble, and Hollomon Construction.
Water supply agreements
Under a water supply agreement with the Union County Water Conservation Board, UPP will
receive up to 25 million gallons of clarified water for use in electricity generation and in the
plant’s cooling towers.
How the financing was arranged
Citigroup and Société Générale served as lead arrangers for the financing. Eighteen banks
served as underwriters and 40 participated. Forty banks participated in the general syndica-
tion, which was oversubscribed by US$1.2 billion, including a 36 per cent oversubscription
on the US$500 million equity bridge loan and a 62 per cent oversubscription on the US$1.7
billion nonrecourse portion. The success of the syndication was credited to the relatively
straightforward structure, market-based terms and pricing, and aggressive marketing by the
sponsors through numerous face-to-face meetings with lenders.
The projects were expected to secure an investment-grade credit rating near the end of
the construction phase, at which point the pricing was expected to drop by 12.5 bps. The
increase of the spread over time was intended to be an incentive for the sponsors to refinance
in the capital markets at about the time the plants begin commercial operation.
Among the terms for the equity bridge loan was a ‘rating trigger’. If TECO Energy’s
credit rating fell below investment grade, TECO Energy would have to post a letter of credit
equal to the equity bridge loan.
Union Power industrial revenue bond
The financing of the Union project involves a lease from Union County, Arkansas, that provides
substantial property tax savings and is transparent to the lenders. The structure includes the
issuance of 20-year, tax-free industrial revenue bonds by Union County that are purchased by
PANDA ENERGY–TECO POWER JOINT VENTURE, UNITED STATES