TRLPC-GE's energy investing business fires up power project funding

NEW YORK Fri Aug 8, 2014 9:23am EDT

NEW YORK Aug 8 (Reuters) - GE Energy Financial Services (EFS), General Electric's energy investing business, expects to close Friday on the third in a growing stream of financings it has led for new gas-fired plants as U.S. environmental regulations steer power generation away from coal.

EFS, through GE Capital Markets, led 14 other lenders providing $550 million in senior secured credit facilities backing construction of a natural gas-fired plant in Maryland for Competitive Power Ventures and its partners Marubeni Power and Toyota Tsusho.

In addition to financing, the new plant will also use GE gas turbines and technology.

The company declined to provide specific loan terms, other than that most are B to BB-plus credits and thus below investment grade.

"With the shale gas revolution, and with EPA regulations changing such that many coal plants are out of favor and slated for decommissioning, you're starting to see new construction gas-fired projects gain traction in some parts of the country," Carl Peterson, EFS managing director and head of debt origination, said in an interview.

EFS led or co-led $1.8 billion in financing for three new-build gas-fired plants over the past 12 months, driven by factors including the regulatory climate and shale gas revolution, he said. These were among the first major project financings for new gas-fired generation in the United States in at least five years.

Environmental Protection Agency (EPA) rules limiting greenhouse gas emissions from power plants contribute to the shift from coal to natural gas.

"We might see half a dozen transactions like this a year in the short term," said Peterson. "They didn't exist a couple of years ago. All three deals have been oversubscribed, and each deal gets more oversubscribed than the last deal."

EFS is growing while GE Capital as a whole is shrinking after the initial public offering of Synchrony, said EFS spokesman Andy Katell.

GE's Synchrony, the largest private-label credit card provider in the United States, late last month raised $2.88 billion in the biggest U.S. IPO so far this year.

"There's a lot of liquidity in the system, a lot of interest in energy, more transparency in the power market and a hunger for yield, so you're seeing a lot of appetite in this space," said David Nason, CEO and president of EFS. "This interest also introduces competitive pressures to the business."

In the project finance bank market, pricing has declined by about 75 basis points over the past year for most deals, lenders say.

The two previous deals EFS participated in over the past year involved power plants in Newark and in Woodbridge, New Jersey.

Stamford, Connecticut-based EFS holds about $16 billion in mainly North America-based investments. (Reporting By Lynn Adler; editing by Jon Methven)

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