Etrion Corporation today announced completing the refinancing of a majority of the Company’s Italian solar parks with a Euro 222 million portfolio financing including long-term, non-recourse bank debt and project bonds. Marco A. Northland, the Company’s Chief Executive Officer, commented, "We are very pleased to close the Italian refinancing, which will result in a significant increase in annual cash distributions from our Italian projects. I congratulate Natixis, our arranger and bookrunner, and the Etrion finance team for completing this innovative solution to free-up cash and create real shareholder value. I am also very grateful to our advisors who worked around the clock with the lenders to close this transaction before year-end."
The Italian refinancing includes six out of seven of Etrion’s Italian solar projects (10 out of 17 solar plants) for a total of 53.6MW out of 60MW of installed capacity.
The Italian refinancing includes the following steps:
1. Creation of an Italian holding company, which will result in tax, accounting and reporting consolidation from 2016, allowing for considerable tax savings across the portfolio
2. Procurement of new senior financing, which is a combination of:
- Floating project finance bonds (Euro 35 million), listed on ExtraMOTPro managed by Borsa Italiana and purchased by the fund "SCOR Infrastructure Loans II",
- Floating project finance loan (Euro 177 million) provided by three Mandated Lead Arrangers, Natixis, BNP Paribas CIB and Creval,
- Debt service reserve facility (Euro 10 million) provided by three Mandated Lead Arrangers above;
3. Cancellation of the previous outstanding project debt, including repayment of outstanding loans, breaking of the related interest rate hedges and release of restricted cash in the debt service reserve accounts
4. Entry into new contracts to hedge interest payments at current rates, lower than original hedges; new interest rate hedges have been entered into with Natixis and BNP Paribas CIB, who acted as Hedge Counterparties.
Italian Solar Portfolio Optimization
The closing of the Italian refinancing largely completes the optimization of Etrion’s 60 MW Italian solar portfolio. This initiative will result in a 76% increase to the Company’s expected annual Italian cash distributions, from the 2014 run rate of approximately Euro 4.5 million per year to an average annual distribution of approximately Euro 7.9 million per year.
The Italian refinancing will contribute approximately Euro 3.1 million per year of this total as a result of a number of improved financing terms and conditions, including:
- Reduction of the all-in interest rate paid under the old project finance terms from approximately 7.0% to about half under the new financing
- Elimination of the previous cash sweep provisions
- Extension of the final maturity
- Simplification of the loan administration by consolidating four previous project finance loans into one portfolio financing
The balance of the improvement to the expected annual Italian cash distributions results from several factors previously announced, including:
- The renegotiation of the operations and maintenance ("O&M") contracts to reduce cost by up to 40% and increase the level of service
- The reversal of the "Robin Hood" tax, which reduced the corporate income tax rate applicable to most energy companies in Italy from 34% to 27.5%
The Company’s remaining solar project in Italy, Helios ITA (6.4MW), was not included in the Italian refinancing which still has potential for further optimization.