The Coal Baseload Independent Power Procurement Programme Request for Qualification and Proposals (RFP) was released by the Department of Energy (DoE) in December 2014. The RFP allows preferred bidders, with the approval of the DoE, to undertake any refinancing or re-arrangement of the debt or equity at any time during the term of the Implementation Agreement (which is a period of 30 years).
DoE to share in the gains
As a condition of its approval the DoE is entitled to a share of any gain that the preferred bidder may receive as a result of refinancing or re-arrangement. The amount and the mechanics of the payment to the DoE of its share in the gain must be agreed to between the DoE and the preferred bidder at the time.
Notification of refinancing or re-arrangement
The Implementation Agreement will require preferred bidders to provide the DoE with written notice not more than 6 months before the mechanics of the proposed refinancing or re-arrangement are implemented.
The written notice to the DoE must contain the following information:
- the amount of the debt and the equity;
- the amount of accrued and unpaid interest;
- the prevailing interest rate; and
- payments due by and receivable by the preferred bidder under any swap or derivative contracts pursuant to the refinancing.
Notification post refinance or re-arrangement
Not more than 3 business days after the mechanics of the proposed refinancing or re-arrangement are implemented, the preferred bidder must notify the DoE in writing of the implementation. The notice to the DoE must contain the following information:
- details of the debt or equity;
- the prevailing interest rate; and
- details of any swap or derivative contract of the preferred bidder.
Preferred bidders must also provide the DoE with copies of the new finance agreements.
Conclusion
When considering any refinancing or re-arrangement preferred bidders must remember to factor in the DoE’s potential share of the gains when calculating any upside.