Greece: Merchant power returns in hybrid financing

Author: | Published: 22 Feb 2011

A novel hybrid financing has been used to address the demand risk arising from a rare merchant power deal.

The sponsors of Greece’s Heron II power project, GEK Terna and GDF Suez secured a €200 million senior loan from a consortium of Greek banks and European Investment Bank (EIB). But with no obvious offtaker and forecasts of dwindling electricity consumption following the country’s financial crisis, the banks demanded a high level of comfort.

This was achieved by organising the facility as a corporate loan with the ability to convert to non-recourse at the banks’ election.

"The revenue projections were adversely affected by the economic crisis," said Euripides Ioannou, a partner with PotamitisVekris which acted for the sponsors. "To address this risk, last year we decided on the current structure which had some elements of sponsor guarantees but would switch to a pure project finance transaction once certain...