GIP-backed wind farm closes $1.2bn financing

Global Infrastructure Partners-backed Terra-Gen Power has closed on a $1.2 billion debt package that will enable it to construct what the renewable energy developer believes to be the largest wind farm in the United States.

The Alta Wind Energy Center in California is looking to generate 3,000 megawatts of power each year once all of its projects are operational. Approximately half of that capacity has already been purchased by Southern California Edison, an electrical utility.

The first phase of 150 megwatts closed in March after the company attracted about $400 million in debt financing. The additional $1.2 billion raised this week will go toward the next four phases totaling 570 million megawatts.

Terra-Gen said in a statement the $1.2 billion financing included three different types of debt instruments. Approximately $580 million came in the form of pass-through certificates, a type of debt that gives the certificate holder an equity-like interest in a pool of money backed by the repayments of the loan. Another $499 million came in the form of a construction bridge loan facility. The remaining $127 million was ancillary credit facilities, Terra-Gen said.

Construction is expected to begin next week and  the projects are expected to be operational in the first and second quarters of 2011.

Once the projects are operational, Citibank will purchase the projects and lease them back to Terra-Gen. This type of arrangement, called a leveraged lease, will transfer to Citibank the tax benefits associated with the ownership of the project while Terra-Gen will continue to benefit economically from the management and operations of the wind projects.

Terra-Gen chief financial officer John O’Connor said in a statement the Alta financing was the first leveraged lease in the wind sector since 2005.

For Global Infrastructure Partners (GIP), which purchased a 40 percent preferred equity interest in Terra-Gen in October 2009, the close of the financing may present an opportunity to convert some of the preferred equity into common equity. GIP founding partner Jonathan Bram previously told Infrastructure Investor GIP’s preferred equity would convert to common equity once the first phases of the project are financed and enter construction.

A spokesperson for GIP did not immediately return a request for comment on the potential conversion.

Private equity firm ArcLight is also an owner of Terra-Gen.

Terra-Gen said Citi, Barclays Capital and Credit Suisse acted as joint book-running managers for the issuance of the pass-through certificates. Mitsubishi UFJ Securities, Credit Agricole Securities, ING, and Rabo Securities acted as co-managers.

Mitsubishi UFJ Financial Group, Credit Agricole, ING Capital, Rabobank, Citi, Barclays, and Bank of Montreal acted as joint lead arrangers for the other credit facilities.