HSBC lights up offshore loan market with deal on 300 MW power plant

EUR 152.2 m loan mobilized in quick time sets benchmark in longest tenor for offshore commercial debt

The EUR 152.2 million loan arranged by global giant HSBC in quick time to facilitate the 300 MW combined cycle power plant has literally lit up the offshore debt market with an industry first.

The Bank said the loan facility is a new tenor set in the offshore commercial loan market and has set a benchmark in being the longest tenor ever achieved in Sri Lanka for offshore commercial debt.

HSBC acted as the Sole Mandated Lead Arranger to raise a loan of EUR 152.2 million to West Coast Power (Private) Limited.

The loan facility was arranged for up to 14 years; with seven export credit agencies in the US and Europe to help set up a 300MW Combined Cycle Power Plant in Sri Lanka. The project, which is funded by 30% equity and 70% bank debt, is the largest export credit agency financing concluded in Sri Lanka. The Ministry of Finance provided a 100% unconditional guarantee for the debt obligations of the borrower.

U D Jayawardene, Chairman of Lakdhanavi Ltd and Chief Executive Officer for West Coast Power (Pvt) Ltd said, “ On request of the government, the Kerawalalapitiya 300MW Combined Power Plant was modelled to solve the impending power crisis in the country. The project cost was Rs 30 billion and needed to be completed within 20 months, whereas the time frame to arrange a loan of this magnitude usually exceeds a year. However, with the assistance given by HSBC, who stood steadfastly with us as the debt arranger, we were able to obtain all the documentation needed to process the loan within just 6 months. HSBC also placed a bridging finance which helped us to place the initial equipment orders amidst arranging for the Euro 152.2 million term finance.

He further stated, “We are happy to say that due to the professional handling of the debt financing, we are very much on track to complete the project and avoid a power crisis in Sri Lanka”.

West Coast Power (Private) Limited, an independent power producer in the country was given the support from several sponsors including the government of Sri Lanka, Lakdhanavi Limited, Lanka Electricity Company Limited and the Employees Provident Trust Fund. West Coast Power Limited simultaneously entered in to a 25-year agreement with the Ceylon Electricity Board (CEB) for power purchasing and the Ceylon Petroleum Corporation (CPC) for the supply of fuel.

Lakdhanavi Ltd. has used its knowledge and expertise to model the power plant in a manner to produce the cheapest source of thermal power to the Ceylon Electricity Board. It is also the only Power Plant in the country containing the largest capacity, than any other in the country.

Trevine Fernandopulle, Deputy Chief Executive Officer and Head of Corporate Banking at HSBC Sri Lanka stated “HSBC is pleased to be associated with the Ministry of Finance and West Coast Power (Pvt) Ltd. in developing and financing a facility of this nature, which is based on a unique structure.”

He further stated, “The success of this loan epitomises HSBC’s resourcefulness as well as the bank’s continued commitment to develop and support the local financial industry. The loan facility is a new tenor set in the offshore commercial loan market and has set a benchmark in being the longest tenor ever achieved in Sri Lanka for offshore commercial debt.”

With strong local and foreign currency lending capabilities and an extensive global network, HSBC has a comprehensive range of financial solutions as well as a strong reputation with the competence to provide working capital and/or trade financing in Sri Lanka. The bank has an impressive record across the region with its global outreach and local associations, enabling it to provide innovative and customised solutions in the corporate and investment banking segment.