Norton Rose Fulbright advises lenders on US$2.3bn financing for Southland repowering project

Global Business July 6, 2017

Global law firm Norton Rose Fulbright advised a consortium of lenders on an approximately US$2.3bn financing for the 1,394 MW Southland repowering project in Southern California sponsored by the AES Corporation. The financing consists of approximately US$1.48bn in senior secured notes due in 2040, a US$492m senior secured term loan due in 2027 and a US$300m senior secured letter of credit facility.

The consortium of lenders included 19 banks and 52 note purchasers. In addition to the construction and term financing of the project, we advised a consortium of eight lenders on a US$272m senior secured letter of credit facility to finance the sponsor's equity contributions for the project.

The Southland repowering project is the largest non-recourse financing for a battery-based energy storage project to date, and one of the first project financings for battery-based energy storage. Moreover, it is also one of the largest recent financings involving both a significant bank and bond tranche.

The Southland repowering project consists of 1,284 MW of efficient combined cycle natural gas generation and 110 MW of advanced battery-based energy storage. The gas-fired capacity is expected to enter commercial operation in 2020 and the energy storage capacity in 2021. This capacity will replace AES' 3.9 GW of existing gas-fired capacity currently slated to be retired at the end of 2020.

Under 20-year power purchase agreements auctioned off Southern California Edison (SCE), one hundred percent of the 1,384 MW capacity will be sold to SCE in exchange for a fixed monthly capacity fee that covers fixed operating cost, debt service and return on capital. In addition, SCE will reimburse variable costs and provide the natural gas and charging electricity. AES has also permitted 600 MW of additional capacity and is ready to respond to future solicitations if additional resources are needed in Southern California.

The team, led by Rohit Chaudhry (Washington, DC), included Matthew Gurch, Brian Greene, Robert Shapiro, Susan Cowell, Deanne Barrow, Ginger Collier, Molly Feiden, Justin Goushas (Washington, DC), Paul Weber, Jeffrey Escobar, Monika Szymanski and Jennifer Cook (New York).