-----Original Message-----
From: ec-bounces@osenergy.org [mailto:ec-bounces@osenergy.org]On Behalf Of Jonathan Rosenbaum
Sent: Monday, October 06, 2008 1:02 PM
To: James Kotcon
Cc: dteaney@appalachian-center.org; mjanes@hardynet.com; Joe Lovett; ec@osenergy.org
Subject: Re: [EC] Fwd: Longview updates

Jim I pulled this explanation for mezzanine financing from the investopedia site:

A hybrid of debt and equity financing that is is typically used to finance the expansion of existing companies. Mezzanine financing is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is generally subordinated to debt provided by senior lenders such as banks and venture capital companies.

Since mezzanine financing is usually provided to the borrower very quickly with little due diligence on the part of the lender and little or no collateral on the part of the borrower, this type of financing is aggressively priced with the lender seeking a return in the 20-30% range. 

 Mezzanine financing is advantageous because it is treated like equity on a company's balance sheet and may make it easier to obtain standard bank financing. To attract mezzanine financing, a company usually must demonstrate a track record in the industry with an established reputation and product, a history of profitability and a viable expansion plan for the business (e.g. expansions, acquisitions, IPO).

That puts it into good perspective.

-Jonathan

James Kotcon wrote:

To the Sierra Club Energy committee:

Any thoughts on what the articles below might mean?  I am not sure what "mezzanine" financing is, or what this means for the future of Longview, but I would agree with Paula's comments "not a good time to be asking for financing".  The article implies that "First reserve" now owns 90 % of Longview, does that mean Longview unloaded just in the nick of time?  Who would we be dealing with if the plant actually goes on line in 2011?  If so, in 2010, the non-profit funding from our air permit settlement comes in?

JBK

  

Paula Hunt <pjhunt@xemaps.com> 10/5/2008 9:19 AM >>>
        

Hi All,

Two things:

**********************

I found some photos of Longview... great shots 
http://good-times.webshots.com/album/565599401uSyMvK 

They are posted by a GenPower mechanical engineer (so his profile 
says). He must have a helicopter at his disposal...

He posted them late August and last updated them late September. The 
caption below says, "
Aerial Photos of Longview Power Plant and Force Drilling Work Site"

What are they drilling Jarrett?

Is it to stabilize the surface from undermining? They seem to have a 
lot of ponds onsite.

********************

The mezzanine financing for Longview is due soon (not a good time to 
ask for credit!):

  

 Commitments Due In Longview Financing
- 10/03/2008

Commitments are coming due in Merrill Lynch's $250 million mezzanine 
financing for Longview Power, owner of a 695 MW supercritical 
pulverized coal plant under construction in Maidsville, W. Va.

Ticket sizes were not specified for the debt, which will mature in 
February 2015, according to deal trackers, who say the lead has 
approached potential investors individually to judge the appetite of 
each. Pricing is reportedly 10% fixed plus 4% payment-in-kind. One 
deal tracker notes the lead also offered variable rate pricing that 
would roughly amount to 10%, but most investors have wanted fixed. 
Potential investors reportedly include ArcLight Capital Partners, 
Fortress Investment Group, Harbert Power, LS Power, Trust Company of 
the West and Union Bank of California. Officials at the firms either 
declined comment or did not return calls. Calls to Merrill officials 
were not returned. A spokeswoman for First Reserve Corp., which owns 
90% of Longview, declined to comment or make an official available, 
and calls to GenPower Holdings (10%) were not returned.

The owners opted for the mezzanine financing after terminating an 
auction for 49% of the company (PFR, 8/22). That auction came after 
a $450 million mezzanine financing was put on hold last year to test 
the waters of an auction. The project is set to come online in the 
spring of 2011. It has a five-year PPA for 300 MW with PPL Energy 
Plus and the remaining power will be sold into the western PJM market.
    

- paula





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