The syndication of at least two power project credits has been put on hold because the National Energy Production Co. (NEPCO), the contractor building the plants, is an Enron subsidiary. KBC Bank's Wolf Hollow project sponsored by AES and the TECO Power Services Trico deal led by Credit Suisse First Boston and BNP Paribas have been iced because banks are fearful of committing to a deal linked in any way to Enron. "Enron equals anthrax," to many bankers, said Eric McCartney, head of project finance for KBC said. He said when Enron drew down on its credit lines the banks got nervous. NEPCO is not part of the bankruptcy but there is too much uncertainty over the deals, he explained. A banker said other NEPCO projects may be thrown into default, even though the turnkey contractor is still a going concern. NEPCO provides turnkey solutions to build power plants.
As first reported on LMW's Web site last week, KBC is working with AES to find a solution to re-launch the $285 million syndication, with structural enhancements thrown in to reduce the risk. It has not yet been decided what form these enhancements will take, McCartney said. No banks had yet signed on to the deal and even if they had material adverse clauses would have enabled them to withdraw, a banker noted. Kenneth Woodcock, spokesman for AES referred questions to Kerry Yeager, project director for AES Wolf Hollow, who did not return calls.
The TECO Power Trico deal, a $647 million, five-year loan, has also been put on hold, said a banker. Banks were being asked to hold commitments until next year, but there were few takers, he added. It is unlikely that NEPCO will be replaced as the contractor in either case, as this can lead to costs of up to 10%, though it also depends on the stage of construction, a banker explained, adding the lead banks want to re-launch Trico in January. Linda Miller senior v.p, finance, for TECO Power Services, did not return calls, but a spokeswoman for TECO said there is no intention of changing the contractor and the construction is continuing. She could not comment on the bank deals. The CSFB banker responsible for the deal declined comment. Calls to BNP were not returned.