Bank of China contributes £17.21 million GBP to the €1.08 billion EUR tranche of a £2.16579 billion GBP syndicated loan for the 1.4 GW NeuConnect Interconnector Project (Linked to Record ID#102295)

Project narrative

On July 21, 2022, financial close was reached on a deal in which a syndicate of 21 lenders — including the Bank of China (BOC) — entered into a £2.16579 billion GBP ($2.59868 billion USD) syndicated green loan agreement with NeuConnect Britain Limited — an England and Wales-incorporated special purpose vehicle (SPV) jointly owned at the time of financial close by Meridiam Investment 3 S.A.S., a France-incorporated subsidiary of Meridiam (53.45% equity stake), Allianz Leben Infrastrukturfonds GmbH, a Germany-incorporated wholly-owned subsidiary of Allianz Capital Partners (20.78% equity stake), AZ-SGD Infrastrukturfonds GmbH, a Germany-incorporated wholly-owned subsidiary of Allianz Capital Partners (2.41% equity stake), APKV Infrastrukturfonds GmbH, a Germany-incorporated wholly-owned subsidiary of Allianz Capital Partners (3.01% equity stake), KPIC Netherlands B.V., a Netherlands-incorporated wholly-owned subsidiary of Japan's Kansai Electric Power Company (KEPCO) (18.34% equity stake), and FI1 Limited (a vehicle for the founders of Greenage Power and Frontier Power) (2% equity stake) — and NeuConnect Deutschland GmbH & Co. KG — a Germany-incorporated SPV owned by the same shareholders — and NeuConnect Netherlands B.V. — a Netherlands-incorporated SPV owned by the same shareholders — for the 1.4 GW NeuConnect Interconnector Project. This loan was divided into two tranches: a £1.307 billion GBP ($1.56824 billion USD) British pound sterling-denominated tranche with a maturity period of 25 years, a final maturity date of July 21, 2047, and an interest rate based on a floating rate plus a margin of 180 basis points (bps) during construction, then stepping up to a a margin of 160 bps from years 1 to 10 of operation, then stepping up to a margin of 175 bps from years 11 to 17, and then stepping up to a margin of 190 bps from year 18 to maturity; and a €1.08 billion EUR (£858.79 million GBP; $1.03044 billion USD) euro-denominated tranche with a maturity period of 25 years, a final maturity date of July 21, 2047, and an interest rate based on a floating rate plus a margin of 160 bps during construction, then stepping up to a margin of 140 bps from years 1 to 10, then stepping up to a margin of 155 bps from years 11 to 17, and then stepping up to a margin of 170 bps from year 18 to maturity. There was no cash sweep or bullet repayment as part of the tranches. The loan included standby facilities of £70 million GBP and €80 million EUR, debt service facilities of £50 million GBP and €40 million EUR, plus a VAT facility of £30 million GBP and €30 million EUR, letter of credit facilities of £36 million GBP and €30 million EUR, and liquidity facilities of £100 million GBP and €10 million EUR. This was a green loan considered by Moody’s ESG Solutions as being aligned with the four core components of the Loan Market Association’s Green Loan Principles 2021. This loan was secured by (i.e. collateralized against) a fixed charge with full title guarantee on the real property (a freehold interest of Land lying to the west of Grain Road, Isle of Grain, Rochester with registered title number K667654; a freehold interest in Land on the west side of Grain Road, Isle of Grain, Rochester, with registered title number K126230; a freehold interest on land on the north east side of West Land, Isle of Grain, Rochester with registered title number K747250; and a freehold interest on Land on the north and south sides of the road leading from Grain to Strood with pending title number TT138940); plant, machinery, vehicles, computers, office, and other equipment and chattels; all account proceeds; all of its investments; all of its intellectual property rights; assigned agreements (contracts, guarantees, bonds, hedging documents, etc.); all of its goodwill and uncalled capital; and transaction authorizations held by the companies, assigned by NeuConnect Britain, NeuConnect Netherlands, NeuConnect Deutschland, and NeuConnect Holdings B.V. — a Netherlands-incorporated SPV and holding company owned by the same shareholders as the other NeuConnect SPVs — and with Bondholders Limited as the security agent in a security agreement dated July 21, 2022. The collateral included a security with full guarantee of all rental income and related property rights and all assigned agreements and insurance proceeds charged by NeuConnect Britain; a security with full title guarantee for assigned agreements (various loan agreements, hedging agreements, and acceptable credit support) and insurance proceeds charged by NeuConnect Netherlands; a security with full title guarantee of assigned agreements (various contracts, guarantees, agreements, bonds, etc.) and insurance proceeds charged by NeuConnect Deutschland; and a security with full title guarantee for the assigned agreements (various loan agreements, etc.) charged by NeuConnect Holdings; a first floating charge with full title guarantee over the whole of its property, assets, rights and revenues charged by NeuConnect Britain; a first floating charge with full title guarantee of all its rights to, title and interest in the whole of its property, assets, rights, or revenues located in England and Wales as charged by NeuConnect Deutschland. NeuConnect Britain, NeuConnect Netherlands, and NeuConnect Deutschland each issued cross-guarantees for each other's debt. 18 lenders, including BOC, contributed £49.27 million GBP ($59.12 million USD) to the £1.307 billion GBP tranche, with the Japan Bank of International Cooperation (JBIC) committing £270.00 million GBP ($323.97 million USD) and UK Infrastructure Bank (UKIB) (£150.00 million GBP; $179.98 million USD). Record ID#102295 captures BOC's contribution. 18 lenders, including BOC, contributed the euro-equivalent of £17.21 million GBP ($20.65 million USD) to the €1.08 billion EUR tranche, with JBIC committing £160.50 million GBP ($192.58 million USD) and the European Investment Bank (£388.46 million GBP; $466.10 million USD). Record ID#102296 captures BOC's contribution. In addition to BOC, the following lenders contributed to the loan syndicate: JBIC, EIB, UKIB, Allied Irish Banks, p.l.c. (AIB), Talanx Group represented by Ampega Asset Management, Bayerische Landesbank (BayernLB), CaixaBank S.A., Crédit Industriel et Commercial (CIC), DZ Bank AG, Lloyds Bank, Mizuho Bank, Nippon Life Insurance Company, Norinchukin Bank, Norddeutsche Landesbank (NORD/LB), Coöperatieve Rabobank U.A., Shinsei Bank, Siemens Bank GmbH (on behalf of Siemens Financial Services), Sumitomo Mitsui Banking Corporation (SMBC), Sumitomo Mitsui Trust Bank (SMTB), Société Générale S.A. (SocGen). SocGen acted as sole financial adviser, mandated lead arranger, sole hedge execution bank, hedge provider, and account bank. NORD/LB and SMBC served as mandated lead arrangers. The proceeds were to be used by the borrower to construct the €2.8 billion EUR (£2.4 billion GBP) NeuConnect Interconnector, a twin 725-kilometer 525 kV High Voltage Direct Current (HVDC) subsea cable with a rated capacity of 1.4 GW connecting converter station in the United Kingdom and Germany, linking Britain's and Germany's electricity networks for the first time, including a grid interface on the Isle of Grain in Kent connecting it to National Grid's network on the U.K. side and a grid interface at Wilhelmshaven near Fedderwarden in Wilhelmshaven connecting it to Tennet's network on the German side. The interconnector went through British, Dutch, and German waters. The project allowing 1.4 GW of electricity to flow in either direction, would be enough to power up to 1.5 million homes. The project was expected to create £1.7 billion GBP in British consumer benefits over 25 years. This was the largest privately-financed interconnector to this point. The project was expected to improve the utilization of offshore wind capacity for both countries' coasts. The project was also expected to improve energy transition by reducing carbon emissions by 13 million tons over 25 years, improve the competitivity of the energy generation market, and improve the security of energy supply for both countries. NeuConnect Interconnector was especially viewed as important given the 2022 Russian invasion of Ukraine, which triggered Europeans to look for alternatives to Russian gas,. NeuConnect was seen as a strategic project because of its improvement of European energy security. It received heavy support from the British and German governments and various politicians. It was included in the European Commission’s list of Projects of Common Interest (PCI). Prysmian Group won a €1.2 billion GBP contract to supply and install the cable system, fiber optic cables on the land, and selected submarine sections and cable monitoring systems during the warranty period. Prysmian subcontracted Sumitomo Electric Industries, Ltd. to supply 150 km of submarine cable for the interconnector. Siemens Energy was responsible for the construction of two turnkey HVDC converter stations for the interconnector. A joint venture (JV) of built environment consultancy Arup and German engineering firm Fichtner was responsible for NeuConnect-related project services such as safety, health, environment, and quality (SHEQ) management. Gardiner & Theobald provided contract administration and project management services for the project at the Isle of Grain. Construction was expected to commence with the laying of NeuConnect cables in the fourth quarter of 2022 and then work on substations in 2023, with completion in 2028. Cable manufacture began in October 2022, and early works in Germany began in November 2022, with early works in the U.K. beginning in December 2022. Major works were to begin in 2023. Major works began in July 2023.