8-KMaterial AgreementsFinancial Events

FTAI Aviation Ltd. 8-K Report, Material Agreement (Feb 19, 2019)

Filed February 19, 2019For Securities:FTAIFTAIMFTAIN

Summary

FTAI Aviation Ltd. (FTAI) subsidiary Long Ridge Energy Generation LLC (LREG) has entered into significant agreements for the construction of a 485 MW natural gas-fired power plant in Hannibal, Ohio. The company has executed an Engineering, Procurement, and Construction (EPC) agreement with Kiewit Power Constructors Co. for approximately $430 million, which includes the purchase of power generation equipment from General Electric (GE). Construction is slated to commence in Q2 2019, with a guaranteed substantial completion date of November 13, 2021. This development represents a major strategic move for FTAI into the energy infrastructure sector. To finance the project, LREG and another subsidiary, Ohio Gasco LLC, have secured substantial debt financing through two credit agreements. A First Lien Credit Agreement provides a $445 million construction and term loan facility, along with a $154 million letter of credit facility. Additionally, a Second Lien Credit Agreement offers a $143 million construction and term loan facility. Notably, these credit facilities are non-recourse to FTAI Aviation Ltd., mitigating direct financial risk to the parent company. The fixed interest rate for the first lien construction loans is 7.30%, while the second lien loans carry a variable rate plus a margin of 7.50%.

Key Highlights

  • 1FTAI's subsidiary, LREG, is constructing a 485 MW natural gas-fired power plant in Hannibal, Ohio, with an expected completion date of November 13, 2021.
  • 2The total aggregate value for the EPC and power generation equipment agreements (PIE) is approximately $430 million, with Kiewit and GE as key partners.
  • 3The project is financed through a First Lien Credit Agreement of $445 million (construction/term loan) and a $154 million letter of credit facility, and a Second Lien Credit Agreement of $143 million (construction/term loan).
  • 4The debt financing is non-recourse to the parent company, FTAI Aviation Ltd., limiting direct financial exposure.
  • 5Fixed interest rate on First Lien Construction Loans is 7.30% per annum; Second Lien loans have a variable rate plus a 7.50% margin.
  • 6LREG has entered into fixed price power agreements covering 94% of the plant's capacity, effective February 1, 2022, with weighted average fixed price of $27.30 per MWh.
  • 7The financing agreements include customary affirmative and negative covenants, as well as financial covenants such as minimum debt service coverage ratios.

Frequently Asked Questions

This 8-K filing announces material definitive agreements entered into by FTAI Aviation Ltd.'s subsidiary, Long Ridge Energy Generation LLC (LREG), related to the construction and financing of a new natural gas-fired power plant in Hannibal, Ohio.

The key financial commitments are the aggregate $430 million for construction and equipment. However, importantly, the credit agreements totaling over $588 million ($445M + $143M) are non-recourse to FTAI Aviation Ltd., meaning the parent company is not directly liable for these debts.

Construction is expected to commence in Q2 2019, with a guaranteed substantial completion date of November 13, 2021. The fixed price power agreements, covering 94% of the plant's capacity, become effective on February 1, 2022, suggesting that revenue generation is expected to begin around that time.

The First Lien Construction Loans and Term Loans have a fixed interest rate of 7.30% per annum. The Second Lien Construction Loans and Term Loans have a variable interest rate calculated by reference to an applicable treasury rate plus an applicable margin of 7.50% per annum (the 'Cash Rate').