Breath of fresh air
The US$692.55m financing package for the Monsoon Wind Power project in the Lao People’s Democratic Republic overcame several challenges including the large size and long tenors, as well as its cross-border aspect, to close successfully and win IFR Asia’s Frontier Markets Deal of the Year Award.
When the Asian Development Bank signed the mandate to arrange the debt requirement for the US$950m project in June 2021, it was the start of 20 months of hard grind in structuring and distributing the financing. The deal was signed in March 2023 with a diverse mix of lenders to become the largest syndicated renewable project financing from South-East Asia.
The 600MW wind farm is Laos’s first, as well as the largest in South-East Asia and the first Asian cross-border wind power project. It will supply power to neighbouring Vietnam under a 25-year power purchase agreement with Vietnam Electricity (EVN) via a cross-border transmission line.
A significant challenge for the project was the PPA’s ‘take-and-pay’ structure. A US$60m blended finance portion was structured as part of the financing package to mitigate the risk if EVN were to curtail power usage. ADB-managed trust funds provided the blended finance tranche to create an additional cashflow buffer and cash reserve that can withstand extreme curtailment for more than three years without triggering default.
The unusual blended finance portion of up to 21 years has a longer tenor than other senior pieces of the non-recourse PF – a US$100m 19-year A loan from ADB’s ordinary capital resources, a further US$382.55m in parallel loans with the same maturity and a US$150m 17-year B loan.
As sole mandated lead arranger and bookrunner, ADB arranged, structured, and sold down the financing through a comprehensive two-stage syndication process to find liquidity from public and private financial institutions in a region where long-dated PF deals are typically clubbed and rely on existing banking relationships.
Among the eight lenders committing to the senior tranches, three Asian commercial banks – Kasikornbank, Siam Commercial Bank and Sumitomo Mitsui Banking Corp – committed US$250m combined, while ADB, Asian Infrastructure Investment Bank, Export-Import Bank of Thailand, Hong Kong Mortgage Corp and Japan International Cooperation Agency took the remainder.
Thai renewable energy company BCPG, a unit of conglomerate Bangchak Corp, is the main sponsor with a 48.35% stake. Other sponsors are Impact Electrons Siam and STP&I (both from Thailand), Philippine conglomerate AC Energy, Japan’s Mitsubishi Corp and SMP Consultation from Laos.
Construction of the wind farm began in April 2023 and commercial operations are slated to start at the end of 2025. At full capacity, the Monsoon Wind Power project will generate approximately 1,700 gigawatt-hours of electricity per year.
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