Hallador Energy closed a $600 million senior secured term loan facility with a three-year term and, subject to lender approval, a two-year extension option. The term loan facility consists of approximately $550 million funded at closing and an additional $50 million delayed draw term loan commitment available for up to 12 months. In connection with the term loan facility, the company also has the ability to establish a super-priority revolving credit facility of up to $75 million with a similar tenor, creating a financing package of up to $675 million.
Hallador expects to use borrowings from the facilities primarily to fund upcoming payment obligations under its turbine asset purchase agreement, transportation and refurbishment costs, pre-notice-to-proceed and other development costs, and construction of the company’s proposed new and efficient 460-megawatt natural gas fired Turtle Creek Gas project, which has an expected total project cost of less than $800 million. Approximately $120 million of the proceeds from the term loan facility will be used to repay the company’s existing $45 million term loan and $75 million revolving credit facility. Proceeds will also be used for general corporate purposes.
The company believes the facilities represent the largest component of its overall financing plan for Turtle Creek and address the majority of Turtle Creek’s expected capital requirements.
“Closing this loan is the largest single step in financing Turtle Creek,” Brent Bilsland, chairman and CEO of Hallador, said. “We chose this structure because it carries more debt than traditional bank project financing would typically allow. We are paying a higher rate for that capital, and we accept the trade. As Turtle Creek approaches and enters commercial operation, we expect to be able to refinance the loan on terms that reflect an operating plant.”
Bilsland continued, “Turtle Creek would continue Hallador’s transformation into a multi-fuel independent power producer and expand the scale of our power generation business. By leveraging existing infrastructure and critical generation equipment we have under contract, we believe we have positioned Turtle Creek to reach commercial operation on an accelerated timeline and at a capital cost well below comparable new generation projects. With demand for reliable, dispatchable power continuing to grow in MISO, we believe the combination of speed to market and capital efficiency makes Turtle Creek a compelling opportunity for Hallador and its shareholders. What the team remains focused on executing is straightforward but not assured: the turbines have to load, clear export, and be refurbished on schedule, and we have to contract the plant’s output at prices that justify the cost, as we have done at Merom.”
Kennedy Lewis Investment Management provided the term loan facility. PEI Global Partners acted as the exclusive financial advisor to Hallador in connection with this transaction.
