Karadeniz

Karadeniz


Country Turkey
Sector Energy
Signing Date January 9th, 2015
Total Project Cost $107M
ICF Debt Pool Exposure $15M
IFI Exposure $50M (net of $10M B-Loan)

Project Description

The project is the construction of a 110 MW floating electric power generation station, Karadeniz Powership Zeynep Sultan (“KPS 11”). The Karadeniz Energy Group designs, builds and operates a fleet of powerships that provide base load or peak electric power to energy grids using dual fuel (HFO and natural gas) gensets under medium term contracts of up to 10 years. The supply of power by powership typically acts as a stop-gap measure that allows clients to supply their urgent electricity needs and to either refurbish or construct land-based power generation capability.

Financing Structure

The total Loan facility amount was USD 75M, including USD 15M from the ICF DP, USD 25M from FMO, USD 25M from DEG as well as USD 10M syndicated by DEG under a b-loan structure to Cordiant Emerging Loan Fund IV (CELF IV). The equity contribution totalled USD 27M.

Investment Rationale

Large Market Demand: The floating electric power generation station will target the Middle East and Africa, two regions where electricity is in high demand and short supply. Despite a number of long term power projects in various stages of development, these markets are currently relying on more expensive short term power generation technology as a medium term stop gap until more sustainable long term projects can be developed. Owing to the scale and technology of a powership, Karadeniz can provide a medium term power solution at a fifth of the price of the existing short term solutions. The competitive advantage of a powership is fourfold: faster and flexible delivery of power, cost and efficiency.

Strong Construction Track Record
Karadeniz currently operates a fleet of Powerships, four of which were constructed in the same shipyard undertaking the construction of KPS 11. The construction of KPS 11 is well underway, beginning September 2013, with the hull conversion almost complete. To date there have been no incidents or delays.

Strong Operational Track Record
Karadeniz also has a depth of experience operating in some difficult regions. Two ships have been operating in Lebanon since 2013 and three ships in Iraq since 2010 with very good operational and payment records. A further two ships had been operational in Pakistan until 2012. Two new ships are expected to start operation in Ghana within 2015.

Development Impact
The project will allow for the construction or refurbishment of electrical power generation in emerging markets. Access to electricity and improved electrical grids should help improve medical facilities, sanitation, etc. in operating countries.

Development Impact

The project will allow for the construction or refurbishment of electrical power generation in emerging markets. Access to electricity and improved electrical grids should help improve medical facilities, sanitation, etc. in operating countries.

Additionality

Aside from CELF IV, DEG was unable to attract sufficient financing from commercial lenders due to the unorthodox structure for a power deal, namely uncertainty of geographical deployment and the lack of a signed Power Purchase Agreement for KPS 11 as a condition precedent to disbursement. Karadeniz's business, however, remains robust and is well suited to the jurisdictions in which its ships operate.