Innergex Renewable Energy Inc. has closed a $92.9 million non-recourse construction and term project financing for the Tretheway Creek run-of-river hydroelectric project located in British Columbia, Canada.
The $92.9 million construction loan will carry a fixed interest rate of 4.99%; upon the start of the project’s commercial operation, it will convert into a 40-year term loan and the principal will begin to be amortized over a 35-year period, starting in the sixth year.
The financing has been fully underwritten by National Bank Financial Inc. and Sun Life Assurance Company of Canada, with National Bank of Canada and Sun Life Assurance Company of Canada as lenders. National Bank Financial Inc. is acting as agent for the financing. Proceeds of the loan will be used to pay for the project’s construction costs, as well as a loss of $8.4 million realized upon settlement of the bond forward contracts used to fix the interest rate on the loan prior to closing and therefore protect the project’s expected returns.
This loss results from a decrease in benchmark interest rates between the date the bond forwards were entered into (August and September 2013) and the valuation date (September 30, 2014) and is compensated by lower interest payments for the duration of the loan. In addition, the project has obtained a $2.3 million letter of credit to finance the debt service reserve account for this project.
The Tretheway Creek hydroelectric project is located on Crown land, approximately 50 km north of the community of Harrison Hot Springs, British Columbia. Construction began in 2013 and commercial operation is expected to begin in the fourth quarter of 2015. Tretheway Creek will have an installed capacity presently limited to 21.2 MW and an average annual production estimated to reach 81,000 MWh, enough to power approximately 6,700 BC households.
All of the electricity the facility will produce is covered by a 40-year fixed-price power purchase agreement with BC Hydro, which was obtained under that province’s 2008 Clean Power Call Request for Proposals and which provides for an annual adjustment to the selling price based on a portion of the Consumer Price Index.Michel Letellier, President and Chief Executive Officer of Innergex, said:
“We are very satisfied with the terms of this financing agreement, which provides for fixed-rate debt at a very attractive rate and a term corresponding to the duration of the power purchase agreement for this project. This is consistent with the our strategy of using cost-competitive non-recourse financing in order to minimize risks and create value for its shareholders. Construction is progressing well and the project remains on time and on budget.”