Chapter 13

Panda Energy–TECO Power joint venture,

United States

Project summary^1

This project financing covers the construction costs for two 2,200 MW natural-gas-fuelled
power projects, the Union Power Station (also known as the El Dorado project) in Union
County, Arkansas, and the Gila River Power Station in Gila Bend, Arizona. They are the two
largest merchant power plants in the United States.

Type of project

Two 2,200 MW combined-cycle, natural-gas-fired power plants.

Country

United States.

Distinctive features

• The two largest merchant power plants in the United States.


• Uncertain power sales picture in both project markets.


• Sponsor liquidity issues.

Description of financing

The US$2.2 billion bank financing in 2001 to cover construction costs for the two sep-

arate power plants was structured as follows:

•a US$500 million equity bridge loan, priced at 87.5 basis points (bps) over the

London interbank offered rate (Libor), with a ‘rating trigger’ and full recourse to

TECO Power Services, to be paid off quarterly as units of the power plants enter

service; and

•a US$1.7 billion nonrecourse five-year loan, syndicated among 40 banks, with pric-

ing that started at 162.5 bps over Libor for construction, and increases to 175 bps

over Libor for the first year of operation and 200 bps over Libor for years two and

three.