ICBC contributes $17.86 million USD to the $125 million USD revolving credit facility tranche of a $1.29923 billion USD syndicated loan for the 1,836 MW Guernsey Power Station Project

Project narrative

On August 29, 2019, financial close was reached on a deal in which a syndicate of at least 16 lenders — including the Industrial and Commercial Bank of China (ICBC) and China Merchants Bank Co., Ltd. — entered into a $1.29923 billion USD syndicated loan agreement with Guernsey Power Station, LLC — a Delaware-incorporated special purpose vehicle (SPV) jointly owned by Caithness Energy LLC (33.33% equity stake), Apex Power Group LLC (33.33% equity stake), and BlackRock, Inc. (33.33% equity stake) — for the 1,836 MW Guernsey Power Station Project. The loan was divided into three tranches: a $950.00 million USD senior term loan tranche with a maturity period of construction plus five years (eight years) and an interest rate based on LIBOR plus a margin of 300 basis points (bps), stepping up to 325 bps after four years; a $125.00 million USD senior revolving credit facility (RCF) tranche with a maturity period of eight years and a final maturity date of August 29, 2027; and a $224.23 million USD mezzanine debt tranche with a maturity period of five years provided solely by AMP Capital. ICBC contributed $122.14 million USD and China Merchants Bank contributed $54.38 million USD to the $950 million USD tranche, as captured respectively by Record ID#108331 and #108332. In addition to the two Chinese state-owned banks, the following lenders contributed the respective amounts to the loan syndicate: Aozora Bank, Ltd. ($20.00 million USD), Banco de Sabadell S.A. ($50.00 million USD), Crédit Agricole Group ($38.81 million USD), DZ Bank AG ($25.00 million USD), East West Bank ($30.00 million USD), Investec Bank ($38.19 million USD), KEB Hana Bank ($38.19 million USD), KB Kookmin Bank ($234.38 million USD), Migdal Insurance and Financial Holdings Ltd. ($80.00 million USD), NH Investment & Securities Co., Ltd (NH I&S), Nomura Holdings, Inc. ($76.38 million USD), Société Générale S.A. (SocGen) ($54.35 million USD), and an unknown lender(s) ($50.00 million USD). ICBC contributed $17.86 million USD to the $125 million USD RCF tranche, as captured by Record ID#108333. In addition to ICBC, the following lenders contributed to the loan syndicate: Crédit Agricole Group ($16.19 million USD), Investec ($16.19 million USD), KEB Hana Bank ($16.19 million USD), NH & IS ($16.19 million USD), Nomura ($32.38 million USD), and an unknown lender (s) ($10.00 million USD). Investec was the sole bookrunner and a coordinating lead arranger on the senior debt. Investec and Nomura served as co-syndication agents on the senior debt. ICBC, Crédit Agricole, KEB Hana Bank, NH & IS, and Nomura served as coordinating lead arrangers on the senior debt. China Merchants Bank, KB Kookmin Bank, and SocGen served as joint lead arrangers. The senior debt was two times oversubscribed. The proceeds of the loan were used by the borrower for the construction and development of the Guernsey Power Station, a combined-cycle natural gas-fired electric generation plant with a total capacity of 1,836 MW in Valley Township. Guernsey County, Ohio. The plant consisted of three General Electric (GE) 7HA.02 gas turbines operating in a single-shaft combined-cycle configuration connected to three W84 generators, with three STF-A 650 steam turbines and three GE triple-pressure reheating heat recovery steam generator (HRSG) turbines, making up three 550 MW blocks with an additional 186 MW capacity. The turbines were considered to be particularly efficient and could generate 438 MW in combined-cycle mode. The plant included dry air cooling, reducing water consumption by up to 95% compared to a conventional water-cooled plant. The plant also included supplemental duct firing, a selective catalytic reduction technology for reducing nitrogen oxide emissions and an oxidation catalyst for reducing carbon monoxide and volatile organic compound. The plant was designed to be capable of operating on hydrogen fuel, shale gas, high ethane, diesel, or crude oil, with Caithness planning to convert the plant into 100% hydrogen by the mid-2030s. The plant would be part of the PJM Interconnection and source natural gas from the Utica and Marcellus shale regions via the Rockies Express pipeline. The plant could produce enough electricity to power approximately 1.4 million homes. The project was expected by developers to create 1,000 jobs during construction and 25 to 35 permanent ones once complete. The $1.7477 billion USD project was jointly developed by Caithness Energy and Apex Power Group, with over $600 million USD in equity, with BlackRock providing $280 million USD of preferred equity and AMP Capital's $300 million USD mezzanine debt covering for Caithness Energy. The project was also backed by a five-year revenue put with Morgan Stanley and a 10-year natural gas netback agreement with Equinor. The developers also agreed to pay $42 million USD over 30 years to fund new school construction for Rolling Hills School in exchange of a local property tax exemption for 15 years. Gemma Power Systems was the engineering, procurement and construction (EPC) contractor for the project. GE won the contract to supply its power trains, to provide 20 years of service, and provide digital solutions including cloud-based predictive analytics for the plant in September 2019. POWER Engineers served as the design engineer of the plant. SMC Infrastructure Solutions won the contract for installing security systems, access control, and security cameras at plant in March 2020. Baker Concrete Construction, was also involved in construction. EPC Services Company, a subsidiary of Electrical Consultants Inc., provided design-build support for the plant's onsite switchyard, where 230 kV lines from the turbines merged into a collector bus and are stepped-up to 765 kV via auto transformers. Bi-Con Engineering, LLC installed metering station. Construction was expected to begin in August 2019, with commercial operations in the second half of 2022. Construction began in August 2019. The plant became operational on April 7, 2023. The developer promised to use a local workforce. However, during construction in June 2020, local union construction workers protested the hiring of out-of-state non-union workers, allegations which the company denied. Furthermore, environmental issues were noted. Site preparation altered the preexisting surface water flood, the site's leading water runoff from rainfall to flood neighboring properties. The Ohio Environmental Protection Agency issued two violation notices to Gemma Power System for erosion and sentiment run off, requiring a sediment settling pond and functioning surface skimmers at egress points. Mine mitigation for the plant, as an underground mine existed under it, required drilling injection wells every 25 feet over the site to be filled with toxic coal ash, specifically an authorized grout blend of water, Portland Cement, fly ash, and sand. Filling the mine raised the local water table, contaminating a neighboring water well, and showing the presence of contaminates associated with fracking waste water like methane, toluene, and benzene. During construction, the plant was subject to noise complaints with bursts due to unit restarts and steam blows while running in bypass mode. Gemma Power Systems erected a temporary sound barrier to minimize it. Even after construction and an expected decline in noise, as of 2024 noise events were reported, often because of repairs or equipment issues. ICBC and China Merchants Bank's involvement in financing the Guernsey Power Station Project became the source of local controversy. In August 2019, a group called Ohioans for Energy Security began a $1 million USD television and radio ad campaign with a 60-second spot featuring images of Chinese President Xi Jinping and Chinese officials in suits claiming that China was interfering with the American economy and the Ohio electric grid with narration telling viewers to not sign a petition supporting a referendum on House Bill 6, which was signed into Ohio state law in 2019 providing a $150 million USD per year subsidy for nuclear energy in Ohio beginning in 2021 to help prevent the closure of the two nuclear energy stations in the state. The bill was opposed by many environmental, businesses, and industry groups, including the natural gas companies. ICBC had contributed to syndicated loans for the Oregon Clean Energy Center, the Carroll County Energy facility, the Lordstown Energy Center, and the Guernsey Power Station. This allowed supporters of House Bill 6, such as the nuclear energy industry, to claim that the Chinese government was attempting to take control of Ohio's natural-gas fired plants, even though lending does not mean control (and ICBC was in a syndicate for those loans with other foreign banks) and the federal government via the Committee on Foreign Investment in the United States had the ability to prevent projects from proceeding if foreign investment posed national security risks (the owners of the nuclear plants in Ohio, FirstEnergy, had previously received loans from ICBC). Ohioans for Energy Security claimed that China was attempting to steal Ohio jobs, take over the electric grid and other energy infrastructure, and meddling in Ohio elections. Analysts noted that while the grounds of the argument were deeply problematic, the campaign tried to connect local energy issues to the national issues raised by President Donald Trump, who had won Ohio in 2016. The referendum missed its deadline to go on bailout and House Bill 6 went into effect in October 2019. Later in March 2021, House Bill 128 was passed that partially repealed House Bill 6.