Société Générale, acting as sole mandated lead arranger/sole underwriter, and Italian export credit agency Sace have closed a €450mn refinancing facility for Maritza East III Power Company in Bulgaria. The purpose of the transaction is to refinance the existing limited recourse project finance facilities and fund additional project costs.

According to SG, key characteristics of the transaction include:

  •  An unconditional first demand guarantee from Sace for the full amount of the refinancing.
  •  An excellent closing time frame for a transaction of this scale and complexity.
  •  More competitive pricing for power project financing in Bulgaria.

Maritza East III Power Company, a company owned by the Italian power company Enel (73%) and the Bulgarian state-owned electricity company NEK (27%) was formed to own, refurbish and operate the existing four unit, 840MW lignite-fired power plant located near Stara, Zagora in south central Bulgaria.

The plant is a key component of the Bulgarian generating system supplying both base load and middle order demand. The refurbishment is critical to ensuring the competitiveness and long term future of the facility.

The first unit reached refurbishment completion earlier this year and substantial progress has been made on the second unit which is expected to return to service in early 2007.

Final refurbishment of all units is expected in early 2009. Production is contracted and sold to NEK under an availability based contract maturing end of 2023.

The original €350mn project debt, implemented in 2003 involved various sources of financing provided by local and international banks supported by the European Bank for Reconstruction and Development (EBRD) and Multilateral Investment Guarantee Agency (Miga).

Lenders claim the refinancing has been structured in order to:

  •  Reflect the improved risk environment (Bulgaria’s accession to the EU, nearly 60% of the refurbishment works achieved), through a substantial reduction of the debt costs and an increase of the tenor.
  •  As a result of lower debt costs, reduce the tariff payable by the offtaker and thus benefit Bulgarian consumers.
  •  Enhance operational management of the company through improved and more flexible covenants.