It is common with project financing deals, particularly during early stages, to underestimate complications beyond the major asset, such as a power plant. The “bankability” of many projects can often be determined through the planning and management of multiple risks beyond the switchyard. These risks include the interconnection and availability of the fuel supply and transmission lines, bottlenecking at the offtaker’s substation, or poor grid interconnectivity. These factors – if not considered early in planning – can hinder effective distribution.
This type of comprehensive planning was implemented in the case of GNPower Kauswagan’s 552 megawatt (4 x 138 net) coal-fired power project in Lanao Del Norte, Mindanao, Philippines. By thinking beyond the switchyard, the project was also set up to finance powerlines from the facility so that the grid connection would be in place at the same time the plant is completed.
Black & Veatch represented the interests of all lenders to the project, acting as Lender’s Technical Advisor or Lender’s Engineer to multiple onshore and offshore banks. The team helped the lenders understand and evaluate the powerline risk early in the process. For instance, the fuel supply risks were evaluated through a study of Indonesia’s coal market and suppliers, and other technical engineering risks were assessed as well. These were the same technical risks that often face similar projects in developing countries and, if not managed, can lead to the power plant becoming a stranded asset.
The US$1 billion project reached full financial close in September 2015 and is on course to provide stable and reliable power generation to the people of Mindanao. Black & Veatch provided overall technical due diligence on the project up to the financial close. During the loan tenure, the team will continue to provide monitoring services to the lenders for the construction, commissioning and operations.