Press Release
Tokyo Office Represents JBIC and Commercial Bank Lenders in Limited Recourse Financing for Acquisition of CBK Power Project in the Philippines
First of its Kind Globally for an ECA
Tokyo, Japan, March 16, 2005 – A Japanese consortium comprising Electric Power Development Co., Ltd. (“J-Power”) and Sumitomo Corporation (“Sumitomo”) has signed financing documentation with Japan Bank for International Cooperation (“JBIC”), Mizuho Corporate Bank, Ltd. and ING Bank, N.V., making available limited recourse loans for the financing of the consortium’s acquisition of the CBK Power Project in the Philippines. The loans are expected to be drawn in two tranches reflecting a two-stage acquisition of the project by the consortium. An initial 50% interest has already been acquired by the consortium using sponsor funds (to be partly taken out by the loans), with the remaining 50% expected to be acquired in April.
Milbank represented JBIC, the commercial bank lenders and the agents. The Milbank team was led by Tokyo office managing partner, Gary Wigmore, and lead associate, James Murray. The core deal team for the financing also included Ken Hawkes, Melissa Lewis and Perry Hicks (Melissa and Perry currently on secondment to the Tokyo office).
Gary Wigmore commented: “This transaction represents a major milestone for JBIC, being the first time this governmental institution (or, as far as we are aware, any other export credit agency globally) has provided limited recourse project debt on a structurally subordinated basis. This new JBIC product is expected to be extremely popular among Japanese trading companies and utilities looking to make offshore acquisitions, and has the potential to provide a competitive advantage for Japanese participants in auction-style sale processes.” James Murray commented: “This role representing JBIC in the development of a “first-of-its-kind” financing product represents an important step in the growth of one of Milbank’s key client relationships in Japan. Our Tokyo team is ideally placed to take a leading role in this kind of work as Japanese investment abroad continues to expand.”
About the Project
The CBK Power Project is a 792 MW pump storage hydro facility originally sponsored by an Argentinean company, Industrias Metalurgicas Pescarmona S.A. (“IMPSA”) and Edison Mission Energy. The project benefits from a long term power off-take contract with government-owned power utility, National Power Corporation (“NPC”), and recently achieved completion for all nine units of the facility. The project has existing senior project finance debt in place in excess of $300 million, which ranks ahead in priority to the acquisition financing.
Milbank’s involvement with the project extends back to 1998, with the firm representing the senior lenders at the time of the original project financing and more recently in the representation of bridge lenders to IMPSA prior to the sale to J-Power and Sumitomo. In addition to the team members noted above, Alvin Leong, Brett King and Susan Thom (among others) have also acted in these various other CBK representations.
About the Financing
The acquisition financing comprises an aggregate of $100 million in available loans, held 60% by JBIC and 40% by commercial banks. The loans are scheduled to amortize over a seven-year period with possible cash sweeps during the term (subject to available dividends from the project). Sponsor support is available for repayment of the acquisition financing upon the happening of certain key project risks, representing a negotiated allocation of risk between the sponsor consortium and the lenders.
About the Sponsors
J-Power is a major Japanese power utility with a significant portfolio of investments in off-shore Independent Power Projects (“IPPs”). J-Power is partly owned by the Japanese government and certain government-owned power utilities, with the balance of its shares made subject to a recent Initial Public Offering. J-Power is expected to continue with its program of targeted off-shore acquisitions in the power sector over at least the medium term.
Sumitomo is a major Japanese trading company (sogo shosha) with investments across the globe and in a broad range of industry sectors. Sumitomo imports and exports metals, machinery, electronics, fuels, chemicals, textiles, and food products. It also is active in finance, logistics, and real estate. The company's top revenue producers are its consumer goods unit, which handles food and textiles, and its transportation and construction equipment business.
Like many other Japanese utilities and trading companies, J-Power and Sumitomo have been very active in recent years acquiring, developing and financing power assets in Asia and around the world.