LEVERAGING LLOYDS’ U.S. CONVENTIONAL POWER EXPERIENCE TO FINANCE A PEAKER IN ALABAMA

Reaching the peak

One of the biggest challenges facing electric utilities around the world is how to guarantee the certainty of supply without driving up electricity costs for their customers, particularly during peak demand periods.  

Alabama Power Company (“APC”), a wholly-owned subsidiary of the Southern Company, is an electric utility in the U.S. that serves 1.4 million homes, businesses and industries in the southern two-thirds of Alabama.  The peak electricity demands of APC’s customers are driven by hot and humid summers which are commonplace in the Southern U.S. To ensure that the reliability of its electric supply, APC extended a 12-year Power Purchase Agreement (PPA) to NextEra Energy Resources’ (“NextEra”) Calhoun Power Project (“Calhoun”) - a 668-megawatt, simple cycle, gas-fired peaking power plant in Calhoun County, Alabama.

 

Agreeing finance

NextEra, a subsidiary of the $20 billion energy giant Florida Power & Light, is a major independent power producer in the U.S.  Lloyds Bank Commercial Banking (“Lloyds Bank”) Project Finance North America team worked with NextEra and three other financial institutions to develop a financing solution that was conservative and well-structured from a bank perspective, and economically beneficial from a client perspective Lloyds Bank acted as Joint Lead Arranger, Hedge Provider and Co-Syndication Agent for a US$32 million portion of Calhoun’s $128m Term Loan Facility.  Although the transaction is Lloyds Bank’s first lead arranger role in a conventional power project in the US, it complements a number of recent lead arranger mandates on NextEra’s wind project financings and further strengthens our relationship with key client Florida Power & Light.

 

View from the team

Christian Hammerbeck, Vice President Major Corporates New York, Lloyds Bank, said: “Peak power demands can put even the largest electric utility providers under intense strain as consumers, businesses and the wider economy demands instant access to electricity 24 hours a day, 365 days a year.

“As a peaking facility, Calhoun Power is critical to ensuring the reliability of electricity supply to APC, particularly in a state like Alabama where air conditioning is used to counter the high heat and humidity during the summer months which places additional demands on APC’s network.”

“We won the remit to fund the deal after demonstrating our appetite in the U.S. power sector and commitment to support our client throughout the economic cycle.”  

“This is the third lead arranger opportunity Lloyds Bank has undertaken during challenging economic conditions, highlighting our desire to continue building our presence in the US Project Finance market.”

Amy Black, Assistant Treasurer, Florida Power & Light, said: “The stable, contracted revenue streams generated by PPA’s play a key role in securing competitive, long-term financing for projects like Calhoun.”

“Lloyds Bank effectively addressed our financing requirements on the Calhoun transaction while executing the deal in a timely and professional manner.”