Following the announcement of the deal between Sagicor Group Jamaica Limited (SJ) and New Fortress Energy Incorporated (NFE) last June, the US$285-million ($44.18-billion) bond raise for NFE South Power Holdings Limited (SPH) has received all regulatory approvals and will move on to phase two of the transaction.
SPH was formed in 2016 to own and operate the dual-fire combined heat and power plant (CHP) in Halse Hall, Clarendon. The facility opened in March 2020 at a cost of US$265 million, supplying power to the Jamaica Public Service Company Limited and steam to the Jamalco bauxite refinery under an 18.5-year agreement. It can produce up to 100 megawatts (MW) of electricity and approximately 50 MW of steam. SPH generated US$94.4 million ($14.63 billion) in revenue and had US$241.9 million in total assets in 2020.
With the facility in full operation, SPH will now use part of the proceeds of the bond raise to repay a US$140.74 million intercompany shareholder loan, US$19.58 million in interest on the loan and US$99.94 million owed to related parties. The remaining proceeds will be used to pay for the US$7.88 million in transaction fees, with US$16.86 million going to general corporate purposes. This will also realign the capital structure of SPH and extend the tenure of its debt.
“Sagicor is excited to partner with NFE South Power Holdings Limited to further develop their Clarendon Power Plant, as they continue to provide lower cost, lower carbon energy to Jamaica. We commend NFE for their commitment to improving Jamaica's energy security for the long term and are looking forward to arranging the remainder of this deal,” said SJ President and CEO Christopher Zacca. Sagicor Investments will be the lead arranger and broker for the transaction.
SJ will be the anchor investor and has completed its US$100-million ($15.50-billion) investment which is denominated in Jamaican dollars. SJ had $32.14 billion in cash and cash equivalents at the end of September 2021. The remaining US$185 million ($28.68 billion) will be funded by issuing the remainder of the bond to local, regional and international investors.
The current deal structure will see the Jamaica Central Securities Depository Trustee Services Limited acting as the trustee and NFE guaranteeing the bond issue by its SPH subsidiary. There will be a debenture and mortgage on site lease for SPH along with direct agreements for the repayment of the bond. The original structure of the deal was supposed to be a sale and lease back of the CHP facility with Sage Power Limited acting as the special purpose vehicle to facilitate the transaction as the beneficiary of a trust.
Sage had initially received a rating from the Caribbean Information and Credit Rating Services Limited (CARICRIS) on July 16 but withdrew it on December 29. SPH was assigned a 'good' creditworthiness rating by Caricris on December 31 and was assigned a CariA– regional scale rating and jmAA– national scale rating. This is just one rung below the AAA rating of highest on Caricris' rating scale.
“Sagicor has been a committed and creative partner to NFE on this transaction. The financing of the region's first gas-fired, co-generation power plant is a landmark deal that provides investors an attractive opportunity to participate in this key Jamaican asset. We look forward to building on this partnership and the opportunities that lie ahead to invest in Jamaica's energy transition,” said chairman and CEO of NFE Wes Edens.
NFE is a gas to power infrastructure company founded in February 2014 that seeks to use natural gas to satisfy the world's grower power needs. It recently received a rating upgrade from S&P Global Ratings from B+ to BB– with a stable outlook. NFE currently operates across 11 markets with more than 11 terminals. NFE built out two liquified natural gas terminals in Jamaica which are located in Old Harbour and Montego Bay.
NFE outlined in its second-quarter investor presentation that it had US$1.63 billion in capital needs and identified US$1.60 billion in potential funding sources. NFE generated double its revenue to US$674.18 million up to September 2021 but recorded a reduced net loss attributable to shareholders of US$53.75 million. NFE had US$6.67 billion in total assets and US$1.88 billion in shareholders' equity up to the end of the period. It expects that it would save US$210 million in annual cashflow once it achieves an investment-grade credit rating.