Panda Power Said to Seek $700 Million for Gas-Fired Power Plantby
Hummel Station to use hedge in lieu of power-purchase deal
Power project to be built alongside closed coal-fired plant
Panda Power Funds, a Dallas-based private equity investor, is seeking to borrow about $700 million to build a 1,000-megawatt natural gas-fired power plant in Pennsylvania, according to three people familiar with the deal.
Panda expects some of the funding to come from commercial banks and another portion from the term loan B market, which typically offers financing at higher rates, according to the people who asked not to be named because they weren’t authorized to discuss the deal. The debt will complement as much as $200 million in letters of credit. It may be offered as early as this week and will be rated.
The company has developed power plants in Texas and the mid-Atlantic since 2012, using financing from the term loan B market due to underlying revenue risk. Instead of signing long-term contracts to sell the power, it typically uses hedges to protect against fluctuations in power prices. Panda Power is expected to sign a hedging contract for Hummel Station before the financing closes, the sources said.
Panda Power and Sunbury Generation LP formed a joint venture in February to develop the Hummel Station, a combined-cycle project in Snyder County adjacent to the retired Sunbury coal plant. It’s expected to begin operations in the second half of 2017. Panda is the majority owner.