ContourGlobal, an independent power producer with a diversified global presence, has closed its US$612 million refinancing of a 1,205 megawatt portfolio of natural gas power plants located in California, New Mexico and Texas.

The transaction comprised of a US$147.2 million project letter of credit (L/C) facility, a US$18.2 million Debt Service Reserve (DSR) L/C facility, a US$436.3 million term loan, and a US$10 million revolving credit facility.

The financing underlines how, in recent years, DSR L/Cs have been increasingly used in green bonds or infrastructure projects to ensure financing stability for environmentally friendly initiatives.

DSR L/C facility

The DSR L/C serves as a security mechanism, guaranteeing that funds will be available to cover debt service payments (principal and interest) in case the borrower is unable to meet these obligations from cash flow or reserves.

The facility acts as a backup source of liquidity to mitigate the risk of payment defaults and is commonly used in energy projects where cash flow might be variable or delayed during the project's operational ramp-up phase.

Refinancing participants and aim

ContourGlobal's refinancing was completed with the participation of large international banks, including Mizuho, MUFG, ING, Société Générale, Intesa San Paolo, Nomura, JPMorgan, Crédit Agricole Corporate & Investment Bank and Cadence Bank.

The aim was to refinance existing debt and re-leverage other gas-fired plants in Contour's portfolio.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.