News 11 Jan. 2011

Curtis Represents DOE in Project Financing of the World's Largest Wind Energy Facility

Curtis represented the United States Department of Energy (DOE) in its guarantee of a $1.3 billion project financing for a 845-megawatt wind farm -- the Caithness Shepherds Flat project -- being developed by Caithness Energy LLC and GE Energy Financial Services in eastern Oregon. The financing was the second to close under DOE's Financial Institution Partnership Program, with a federal guarantee issued under Title XVII of the Energy Policy Act of 2005 as amended by the American Recovery and Reinvestment Act of 2009. The Caithness Shepherds Flat project consists of 338 wind turbines supplied by GE. When completed, it will be one of the world's largest wind energy facilities. The power and renewable energy credits generated by the project will be sold to Southern California Edison under a 20-year power purchase agreement.

The debt financing consists of (a) a $525 million, 21.5-year, fixed-rate construction and term loan facility placed with institutional investors, (b) a $675 million 14-year, floating-rate construction and term loan facility syndicated in the commercial bank market, and (c) a $233 million letter of credit facility with an initial availability of 5 years from commercial operation. The facilities are 80% guaranteed by the DOE. The financing structure involved the creation of Delaware statutory trusts which issued notes and trust certificates divided into DOE-guaranteed and unguaranteed tranches. The sponsors are investing $718 million in equity, approximately $500 million of which is expected to be recouped upon project completion from a U.S. Treasury cash grant in lieu of investment tax credits under section 1603 of the Internal Revenue Code supporting renewable energy projects. The financing was led by Citibank N.A. with Bank of Tokyo-Mitsubishi UFJ, Ltd., RBS Securities and WestLB Securities, Inc. as Joint Lead Arrangers.

Curtis represented the DOE in the diligence, negotiation, structuring and approval process for the transaction, and acted as co-counsel to DOE with Clifford Chance in preparing the definitive documentation. Milbank represented the lenders and Chadbourne advised the borrower and sponsors. The Curtis team was led by partner Daniel Lenihan and associate Darío Avram with the assistance of Shafiq Perry and, on tax matters, Kuang-Chu Chiang.