Societe General receives Award and provides details on Sarulla Financing
Earlier this year, Societe General acted as one of the lead arrangers on the Sarulla geothermal power project, helping to raise $1.17 billion.
Societe Generale Corporate and Investment Banking is using its technical skills to win innovative and complex energy finance deals across Asia. In the past 18 months, the energy and natural resources financing group at Societe Generale Corporate & Investment Banking (SG CIB) has been part of some of the biggest energy finance deals of recent years. And in the past 18 months, the bank’s investment in the technical skills required to effectively finance underground reserves has allowed it to put together some outstanding deals in Asia.
Earlier this year, it acted as one of the mandated lead arrangers on the Sarulla geothermal power project, helping to raise $1.17 billion in a project finance deal that closed in May. The project will finance a geothermal power plant located on the Indonesian island of Sumatra, which will generate 320.8 megawatts of electricity once it becomes operational.
The challenge in structuring the financing, Clément de Givry explains, was getting lenders comfortable with the depletion rate of the reservoir that provides heat to drive the power plant’s turbines. “You can have a sudden depletion of the reserve – it may not be linear… It’s extremely technical and requires an intimate understanding of the physics of thermal decline and the geology of the rock.”
The deal was also complex, combining reserves-based financing with a relatively long tenor of 18 years. Nonetheless, the bank’s client says it is happy with the result. “SG CIB provided a rare blend of technical and financial expertise,” says Jumpei Sakaue, Indonesia-based project finance manager at Sarulla. “It was instrumental in bridging the engineering and financing aspects of this project, as well as assessing and modelling technical risks.”
The deal is set to be followed by others, Clément de Givry predicts. Indonesia has 40% of the world’s geothermal capacity and annual electricity demand growth of above 8%, as well as the region’s lowest rate of electrification, according to the Asian Development Bank. “Indonesia has been rushing to build more coal-fired power plants, but geothermal and hydro plants offer a means for it to balance its energy mix. There will be more of these transactions,” she says.
Source: Risk Net Website