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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
The European Investment Bank (EIB) has used its new letter of credit (L/C) senior debt credit enhancement (SDCE) tool to support the financing of a major cross-border electricity interconnection for Italian state grid operator, Terna.
The Piedmont-Savoie or Italy-France interconnector is a EUR 1 billion-plus project (estimates range from EUR 1 billion to EUR 1.4 billion) and is being built, operated and primarily funded by Italy's Terna and French state grid operator RTE.
Project financing
In the Italian private sector part of the project, Interconnector Italia is the sponsor. Terna will build operate and maintain the private sector section of the interconnection in Italy under a EUR 415 million contract with Interconnector Italia.
Terna will also buy back the line after a 10-year operating period.
Breaking new ground
Debt backing for Interconnector Italia comprises a loan of EUR 338 million, of which Cassa Depositi e Prestiti (an indirect shareholder in Terna) is providing EUR 113 million, the EIB EUR 100 million with the remainder coming from Intesa Sanpaolo, Natixis and UniCredit.
This is the first deal for a privately funded interconnector in Europe and the first implementation of new Italian legislation requiring energy-intensive companies to help create a single European electricity market.
L/C enhancement
The whole deal is enhanced by a EUR 67.6 million EIB SDCE L/C to give lenders comfort.
This is the EIB's second deal to use the new SDCE L/C and the first time the tool has been used for a greenfield project. It was first used in 2016 on a German motorway refinancing.
This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.