Polaris Infrastructure reaches deal on $110m debt refinancing

San Jacinto-Tizate geothermal plant, Nicaragua (source: PowerEngineers)

Just before the holidays, Polaris Infrastructure Inc. (TSX: PIF) announced that, with the coordination of a financial institution specialized in debt structuring for energy and infrastructure projects in Latin America and the Caribbean, it has signed a definitive financing agreement with three Development Financial Institutions (DFI’s) for a Senior Debt Facility totalling $110 Million USD for the Company’s wholly-owned geothermal subsidiary in Nicaragua.

This Senior Debt Facility will replace the existing Senior and Subordinated project loans in Nicaragua. Further to the December 2020 extension of Nicaragua’s Power Purchase Agreement (PPA) to 2039, and consistent with Polaris Infrastructure’s strategy, the Debt Re-Financing now aligns the amortization of the debt with the newly extended PPA. The Senior Debt Facility will have a 15-year term beginning in 2022, with an initial interest rate spread of 7.0% that will be reduced to 6.75% once the Binary Unit has been completed, which is currently scheduled for the fourth quarter of 2022.

The funding of the Debt Re-financing will be completed by late January 2022. The full, revised amortization schedule will be included in the Company’s annual financial statements for the year ended December 31, 2021.

Marc Murnaghan, Polaris Infrastructure’s CEO commented, “The alignment results in increased cash flow over the next six years, which will enable the Company to support its continued objective of diversifying by both jurisdiction and asset class. In addition, other changes such as removing the existing subordinated debt, reducing required cash and capital reserves will provide additional flexibility for the Company over the term of the contract.”

Source: Company release