Banks in Exelon Boston Generating's (EBG) $1.25 billion non-recourse loan facility have started prep work for taking control of the 2,400 MW generation portfolio from sponsor Exelon Corp. by hiring consulting firms to assess the value of the plants. Exelon last week signaled that it is looking to hand the plants back to the banks and will be writing off its $700 million equity investment.
The 19-bank lender group, led by BNP Paribas, has hired PA Consulting to analyze the market for the merchant plants' output and FTI Consulting to look at its financial picture, including determining the portfolio's working capital needs. "It's an evaluation of the plants," says one financier. This will allow the lenders to better assess how to sell the plants if they are returned by Exelon. An FTI official says the firm has been hired as financial adviser and will be working on the transfer of ownership. Calls to officials at BNP and PA were not returned.
A dramatic slump in wholesale power prices since EGB's non-recourse construction financing put in place 2.5 years ago (PFR, 2/5/01) has the left the now-completed portfolio unable to meet its $1.1 billion debt servicing coverage requirements. As a result lenders have been pushing Exelon to pay off some of the debt and restructure EGB's financing.
In an earnings conference call last week, Exelon officials said if the company had put more equity into EGB, or even guaranteed part of the debt, Standard & Poor's had made clear this would negatively impact the Exelon's credit rating. "These plants have very substantial value," Chairman John Rowe said on the call. "The lenders have a position where they appear highly motivated to hold the existing book value of their loans. We understand that...but that doesn't give us any maneuvering room."
The loan funded the construction of the 800 MW Units 8 and 9 at the Mystic power plant, and the 807 MW Fore River plant.
Some financiers suggest that Exelon may try to sell its equity stake before formally giving up on EGB and handing over the keys. "These projects are not underwater. There is equity value there," says one lender, who reasons Exelon's rating situation meant it couldn't hang on to the portfolio for a long enough period to unlock that value. Calls to Bob Shapard, cfo at Exelon in Chicago, and spokeswoman Linda Marsicano were not returned by press time.
