Eurus Energy America and NRG Energy’s 45MW Avenal Solar plant is one of the first utility-scale photovoltaic solar plants, and certainly the largest, to close commercial bank debt in the US. Lenders on the $209.5 million deal were so eager to take part in the deal that, despite the tech­nolo­gy risk associated the relatively untested thin-film PV panels, it closed at pricing below the market rate for renewables in September 2010.

Natixis and UniCredit, joint lead book­runners, provided the $132.5 million fully amortising 16-year construction and term loan, $53.9 million cash grant bridge loan that matures shortly after commercial op­er­ations start and $23.1 million of seven-year letters of credit. Banco Santander, Credit Agricole CIB, Mizuho and Sumi­tomo Mitsui Banking Corporation joined as joint lead arrangers.

The deal’s structure, including a 20-year power purchase agreement with Pacific Gas & Electric (PG&E, BBB+/A-3 Stan­dard & Poor’s/Moody’s), a more than 25-year warranty from rated Sharp Electronics (A, S&P) for the solar panels, and a well-crafted construction contract with Ryan Company made it very appeal­ing to lend­ers. The sponsors invited 15 banks to par­tici­pate in the debt but decid­ed to limit participation to only the four lead arran­gers. The financing was over­subscribed and priced at roughly 225bp over Libor, a discount compared to re­new­ables project finance pricing at the time. The sponsors contributed roughly $32 million in equity, split equally between them.

“It was a great combined effort from both the sponsors and the lenders’ group to put the financing in place in a tight timeframe,” says Gaetan Frotte, assistant treasurer at NRG Energy, who worked on the deal. “Being the biggest PV construction financing in the North American market so far, it should serve as a reference for structuring future projects.”

The strong bank appetite is a positive sign for other solar PV projects currently in the pipeline. These include First Solar’s 50MW Silver State North plant in Nevada, NRG’s 290MW Agua Caliente plant in Arizona and Recurrent Energy’s 50MW Southern California Solar Farms.

The Avenal plant includes three neigh­bouring but separate facilities – the 9MW Avenal Park, 20MW Sun City and 19MW Sand Drag. It is located in the town of the same name, roughly 92.5km south-west from Fresno in the state’s Central Valley. All facilities use Sharp thin-film tandem-junction amorphous silicon PV panels, which are backed by the manufacturer’s warranty. Ryan holds a fixed-price, date-certain construction contract with the spon­sors. Operations are expected to start in June 2011.

Eurus, a joint venture between Tokyo Electric Power Company (60%) and Toyota Tsusho (40%), has been actively developing the plant since February 2009. That December it signed the PPA with PG&E, which was approved by the Cali­fornia Public Utilities Council in August 2010. The Japanese developer entered talks with NRG Energy about investing in the plant in late 2009 and the two parties reached an agreement to split the equity 50-50 during the first half of 2010. They worked together on securing the financ­ing and final permits throughout 2010 and financing signed on 22 September.

NRG Energy Services, a subsidiary of NRG, is responsible for operations and maintenance of the plant once it opens. Eurus Avenal Affiliates, a subsidiary of Eurus, is responsible for the facilities’ administrative services.

Avenal Solar Holdings
Status: Closed 22 September 2010
Size: $241.5 million
Location: Southern California
Description: 45MW three facility solar PV plant
Sponsors: Eurus Energy America and NRG Energy
Equity: $32 million
Debt: $132.5 million construction/term loan, $53.9 million grant bridge loan, $23.1 million in letters of credits
Bookrunners: Natixis and UniCredit
Lead arrangers: Banco Santander, Credit Agricole CIB, Mizuho and Sumitomo Mitsui Banking Corporation
Legal counsel: Orrick Herrington & Sutcliffe (sponsors) and Milbank (lenders)
Independent engineer: RW Beck
Solar resource consultant: BEW Engineering
Insurance consultant: Moore-McNeil
ITC cash grant adviser: KPMG
Construction contractor: Ryan Company
Panel manufacturer: Sharp Electronics