Morgan Stanley has signed a PPA covering the Duke Energy North America generation assets being acquired by LS Power. Details on the tolling arrangement, which has Morgan Stanley agreeing to purchase at least a portion of the 6.2 GW capacity, could not be ascertained. As a result of the PPA, Morgan Stanley also is requesting a participating role in a $1.6-1.7 billion financing being arranged by Credit Suisse, Goldman Sachs and WestLB to fund the acquisition, say banking officials involved in the deal. Calls to Simon Greenshields, global head of energy and natural gas trading in Purchase, N.Y., were not returned, nor were calls to officials at East Brunswick, N.J.-based LS Power.
Credit Suisse, Goldman and WestLB are arranging the financing as a B loan, synthetic letter of credit facility and a revolver. But they’re going to incorporate the PPA into the financing model because it provides the otherwise merchant operation with a more steady revenue stream. Syndication of the financing is slated for sometime next month. Officials at WestLB and Credit Suisse declined to comment and calls to Goldman were not returned.
LS Power is still awaiting regulatory approval which is due over the next few months, officials say. Duke Energy kicked off the sale of its assets late September (PFR, 09/26). WestLB acted as sole financial advisor for LS Power, and Credit Suisse and Goldman arranged staple financing said to be in the $800 million range. LS Power agreed to pay about $1.54 billion for the DENA non-Midwest assets.