Diversifying US Ex-Im’s means of support

In May 2008, JP Morgan, GE Capital Markets Services and US Ex-Im structured a 12-year US$108.7mn transaction for the Turkish energy firm Aksa Enerji. Aksa is involved in the installation and operation of several major power stations generating and selling electricity into Turkey’s national grid, and is a subsidiary of the Turkish conglomerate Kanzanci Holding.

The financing package illustrates US Ex-Im’s commitment to its co-financing programme, with this deal being the most diverse co-financed transaction closed to date by the export credit agency (ECA). The transaction heralds a potential new degree of flexibility in the way US Ex-Im supports US exporters.

The facility was raised to enable the Turkish borrower to finance its purchase of GE LM6000 gas turbines that generate efficient power for using low NOx (nitrogen oxide compounds) emissions technology.

The turbines, as well as other essential plant equipment, are to be used for a new energy-efficient 238MW low NOx emissions power plant in Turkey’s Antalya region, a rapidly developing area of the country that suffers from power shortages.

Contracts were set up for the purchase of goods from key suppliers in the US, Canada, France, Hungary and the Czech Republic. GE Energy was the single largest supplier in this multisourced project.

The equipment purchases required long-term financing, and to fit this requirement, JP Morgan and GE drew on its extensive experience of working with US Ex-Im, specifically on its co-financing programmes.

Under the terms of the facility, US Ex-Im provided a full guarantee for the loan facility of US$99.7mn, of which US$44mn was used to support exports from France, Canada, Hungary and the Czech Republic, under counter-guarantee arrangements with the relevant ECAs.

The financing package also included a commercial loan of US$9mn from Turkiye Garanti Bankasi, a Turkish affiliate of GE, which funded early project costs with a door-to-door tenor of seven years.

Previously, US Ex-Im had only concluded co-financing credit agreements with a maximum of two additional export credit agencies at a time. Yet, in this landmark transaction, there are a total of three additional ECAs involved: Compagnie Francaise de’Assurance pour le Commerce Extérieur in France, Export Development Canada (EDC), and the Hungarian Export-Import Bank.

The environmental aspect of this project, in that the new plant uses energy-efficient equipment that minimises harmful emissions, also meant that Aksa qualified under US Ex-Im’s Environmental Exports Programme. This means the borrower can take advantage of a number of benefits, including the capitalisation of interest during the construction period, a tenor of 12 years, and the ability to make unequal semi-annual debt repayments that reflect cash flow generation, rather than the normally required equal amortisation. A two-tranche repayment structure addressed the dual stage – single cycle and combined cycle – project completion.

Margo Gill, who led JP Morgan’s structured trade finance deal team, comments: “We’re please to have played a significant role in this transaction. GE’s partnership with us made it possible to play a role in helping Turkey meet the power needs of its growing economy, to participate in a deal that promotes efficient energy production through US Ex-Im’s special loan programme – and to associate with our new client Aksa, a forward-looking company with an established and growing reputation for exploring alternate energy sources.”

Mohammad Kudia, senior vice-president at GE Capital Markets Services, comments: “Aksa’s determination and US Ex-Im’s forward-looking product and policy support with the co-financing ECAs enabled GE and JP Morgan to turn this into a successful project for Turkey.”

The plant was opened and started producing power commercially on January 7, 2009. The opening ceremony was performed by the Turkish prime minister Tayyip Erdogan.

Deal Information

Borrower: Aksa Enerji Uretim
Amount: US$108.7mn
Mandated lead arrangers: JP Morgan and GE Capital Markets Services
Lenders: JP Morgan Chase Bank and Turkiye Garanti Bankasi
Financial advisor: GE Capital Markets Services
ECAs: US Ex-Im; Compagnie Francaise de’Assurance pour le Commerce Extérieur; Export Development Canada (EDC); Hungarian Export-Import Bank
Tenor: 12 years (plus construction period)
Law firm: Allen & Overy
Date signed: May 2008