DesertLink LLC

DesertLink/Silver Run/ Republic Transmission Line - Bond

Borrower (s)
Industry
Power/Electricity transmission
Area of finance
Project & Infrastructure Finance
Country
United States

Deal Overview

LSPG is a leading independent national transmission company with approximately $1.4 billion of owned rate base and over 620 miles of high voltage transmission. LSPG has assets in five RTOs, with five operational projects and two projects selected by regional ISOs as part of competitive RFP processes...

show more

LSPG is a leading independent national transmission company with approximately $1.4 billion of owned rate base and over 620 miles of high voltage transmission. LSPG has assets in five RTOs, with five operational projects and two projects selected by regional ISOs as part of competitive RFP processes and will be fully online by 2023. This project raises both utility-level and holding company debt financings to recapitalize at regulator-approved capital structures, fund construction costs, and consolidate portfolio leverage at a single utility holding company level. 

LSPG Holdings Subordination Risk: As a “Super HoldCo” LSPG Holdings is subordinate to both OpCo and TNT HoldCo debtholders. Distributions to the HoldCo are subject to satisfactory performance of Project companies’ debt, thus requiring Lenders to add an additional layer of scrutiny to their analyses to ensure the strength of OpCo/TNT borrowers.

Disallowance Risk at LSPG NY: The project’s ability to pass through its capital spending and operating expenses is dependent upon such expenditures being deemed “reasonable and necessary” by the FERC. If certain cash uses are challenged and ultimately disallowed as imprudent, LSPG NY’s margins and ability to generate cash flow could be adversely impacted. 

Strong Sponsorship: LS Power has successfully constructed and placed over 450 miles of utility-scale transmission projects in service over the last five years. As such, LS Power as owner is capable of developing and managing the construction of LSPGNY and LSPGCA given its significant experience with assets of this type. 

Contracted Offtake/Cash Flows: The offtake for each Project in this financing is regulated return on invested equity, regardless of throughput or availability by the Federal Energy Regulatory Commission. The OpCos will earn the FERC-regulated return for the entire life of each asset. 

Long Useful Asset Life: The OpCos are long-lived assets, eachwith a useful life of over 50 years. As a result, the projects will generate cash flows throughout, and several years after, the duration of the credit facilities. 

Geographic Diversification: The projects are located throughout the United States, mitigating the potential thatrisks threatening any one particular region will hinder the overall success of LSPG as a whole. 

LS Power Grid is a unique and challenging financing, requiring the combined analysis of several distinct energy markets, bank and bond hybrid financing dynamics, and a complex project structure – inclusive of several OpCos, a HoldCo and a Super HoldCo. Each Project is vitally important to its respective regional ISO, as the Projects were deemed necessary to relieve congestion and improve capacity during peak hours in each area. The multifaceted hybrid structure required close cooperation among the originations and private placement groups across several lending institutions in order to deliver the creative and flexible solutions required to complete the transaction. This, coupled with the market uncertainty that accompanies a global pandemic, make the LS Power Grid financing an exceptional example of an imaginative, multi-sector solution to a crucial financing.

show less
Deal Volume
$ 707.7m
Financial Close
28 December 2020
Sources
Submitted by participant(s)

All Dealmakers

Projects

LS Power Grid New York Transmission Line

Greenfield
Electricity transmission
United States
$ 854m

Silver Run Transmission Line

Greenfield
Electricity transmission
United States
$ 141.54m

Republic Transmission Line

Greenfield
Electricity transmission
United States
$ 141.54m