Deal: Allen & Overy has advised ANZ as financier to Merredin Energy Pty Limited (“Merredin”) in relation to a $43 million refinancing of Merredin’s existing bonds.

Merredin is an open cycle gas turbine power station in Western Australia, approximately 240 kilometres from Perth.

Value: $43 million.

Area: Banking and finance, energy and resources.

Key players: The transaction was led by Sydney partner James Abbott and associate Catherine Dawson with support from Simon Huxley (partner), Melissa Grinter (senior associate), Rhiannon Habermann (associate) and Brigitte Samaha (law graduate).

Deal Significance: Merredin’s new debt facility has been provided by ANZ and includes a significant improvement in pricing and terms as well as an extension of the tenor of its debt to just over 11 years. The proceeds will be used to refinance existing bonds that were issued by Merredin in 2017.

Funds advised by Palisade Investment Partners, one of Australia’s leading independent infrastructure managers, hold a 46.7 per cent interest in Merredin.

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As well as improved pricing and terms for Merredin the new facility extends the tenor of the debt, with proceeds to be used to refinance existing bonds.

“Recent changes to the regulatory environment were key to enabling the parties to agree [on] a robust and long-term financing package, which removes refinancing risk for the asset," James Abbott, Allen & Overy partner said.

The refinancing follows a favourable regulatory change implemented in February 2020 which provides a guaranteed revenue floor on reserve capacity pricing for Merredin until September 2031. 

As a consequence of these changes, Merredin has been able to implement a fixed financing solution that removes future refinance risk from the business.

“This refinancing, combined with the recent favourable regulatory change, means that Merredin has secured long-term financing with an all-in interest rate at historic lows,” Palisade CEO Roger Lloyd said.

“This provides Merredin’s investors with certainty and stability of returns over the long-term through a combination of fixed revenues and a permanent financing solution that fully amortises Merredin’s debt over its legal maturity.

Merredin’s refinancing has been executed in accordance with Palisade’s broader Treasury risk management framework, which seeks to manage refinancing risk by targeting diversity of funding tenor and source across the portfolio, enhancing risk-adjusted returns to investors.”