Nevada Power Co. is looking for a $200 million revolver to fund the acquisition of a partly completed 1200 MW power station project north of Las Vegas and will subsequently issue around $250 million in long-term bonds to pay down borrowings on the revolver. The replenished revolver will then be used to fund completion of the plant.
Merrill Lynch advised on the acquisition and will be one of the leads for the financing, but the company has yet to decide which other banks will be involved, noted Michael Yackira, executive v.p. and cfo. Nevada Power is acquiring the Moapa Valley power plant from Duke Energy for $182 million. Duke suspended construction in March last year. The company plans to spend around $376 million to complete the project and have it on line by the summer of 2006.
The revolver, which will likely have a three-to-five-year maturity, will initially be used to fund the acquisition. However, by year-end its capacity should have been freed up via the long-term bond offering and it will then be tapped on an ad hoc basis to fund construction, Yackira said. The company also will gradually drop equity into the project as well, ultimately resulting in a 50/50 debt-to-equity split.
Along with parent Sierra Pacific Resources, Nevada Power has had constrained access to the capital markets because of its sub-investment grade status. Both companies have managed to tap the bank market over recent months through deals secured against company properties, Yackira said. A recent $150 million loan facility was three times oversubscribed and had a range of lenders from relationship players like Union Bank of California to institutions such as American Express and Fidelity Investments. "It's a smorgasbord of firms," he said. "It's a good preface to going back to the market."