Florida biomass project loan financing successful to date

By Matt Soberg | September 08, 2011

The Gainesville Renewable Energy Center is currently undergoing the bank loan syndication process, which has been successful to date. The 100-megawatt biomass facility, being constructed in Gainesville, Fla., closed approximately $400 million of project financing in June. The ongoing involvement of capital partners and financiers allows the project to remain on schedule with operations expected to begin at the end of 2013.

“The success of this transaction, completed on a tight timeline with the participation of eight sophisticated renewable project finance lenders, demonstrates that a well-structured biomass transaction is understood by the project finance market and results in a marketable asset class,” Chris Smith, financial advisor to project sponsors, said in a press release. 

The bank syndication process involves one or several arrangers, often times commercial or investment banks, to raise investor funding for a developer or issuer in need of capital financing. According to GREC, the syndication process is underway and successful to date with two banks committed and others contemplating advancement. 

“The Bank of Tokyo-Mitsubishi UFJ acted as coordinating lead arranger and, along with Natixis and Rabobank, as initial mandated lead arrangers,” according to the GREC. “ING Capital, SG Americas Securities, and Credit Agricole came in as mandated lead arrangers. CIT and DZ Bank have now also joined the bank group,”

In addition Smith added, “The project has extremely strong credit fundamentals, including an off-take contract for 100 percent of the output with an investment grade utility, a fuel cost pass-through mechanism, proven technology, and a firm-price construction contract backed by performance and delay damages.” 

Construction began in March 2011, and the GREC expects to be operational by late 2013.  The GREC has entered into a 30 year power purchase agreement with Gainesville Regional Utilities (GRU) for sale of the biopower. 

The GREC will be fueled by woody biomass including, tops and limbs from harvested trees, urban wood waste from landscaping contractors and power line/road contractors, and other lumber mill residues. One million tons of woody biomass will be necessary to fuel the plant annually, which will be obtained locally within a 75-mile radius of Gainesville. The GREC previously released that it will provide enough electricity to power 70,000 homes.