Macquarie reaches final close for £900m biomass project

The Australian investment bank has raised more than £650m in senior debt and is splitting an equity investment with Danish pension PKA.

Macquarie has reached financial close on a £900 million ($1.6 billion; €1.04 billion) combined heat and power (CHP) project that will generate 299MW in north-east England.

Two divisions of the Australian investment bank worked to bring the Tees Renewable Energy Plant (Tees REP) to its construction stage, which is scheduled to begin in the coming weeks. Macquarie Capital raised more than £650 million in senior debt and £250 million for working capital and operational purposes. Macquarie's Commodities and Financial Markets team arranged commercial and fuel supply agreements for the project as well as a long-term power purchase agreement.

Macquarie is taking a 50 percent equity stake in the project and has added Danish pension fund PKA as a 50 percent co-investor. Macquarie Capital has invested over €1.2 billion in European renewables over the last three years while PKA has committed more than £2 billion to climate-related projects. The pension aims to have 10 percent of its £28 billion portfolio invested in the sector by 2020.

According to Macquarie, the Tees REP will be the world's largest new-build biomass plant, sourcing its fuel from wood pellets and chips from certified sustainable forestry suppliers in the US and Europe. Enviva Wilmington Holdings, a joint venture between an affiliate of Enviva Holdings and affiliates of John Hancock Life Insurance Company, is supplying the required fuel.

MGT Power is the developer for this project and has worked with Macquarie since last summer to finance this project. It expects the Tees REP to be operational by 2020. The project will be located on a brownfield site near Middlesbrough.

MGT is an independent power developer that focuses on biomass projects. Ben Elsworth, chief executive of MGT's Teesside branch, said the project was a “huge team effort” to bring to financial close. “The Tees REP project had to overcome many hurdles and Macquarie's involvement as critical to this successful outcome,” he said.

Earlier this month, another biomass in the UK was cleared for development. Copenhagen Infrastructure Partners (CIP) teamed with a Scandinavian developer to build a 27.8MW CHP plant in southern England. CIP committed £160 million to project.