Ashurst partner Carloandrea Meacci discusses his role advising the lenders on the EF Kosmos €1.02 billion refinancing with Rajeeb Gurung

How did the firm win this mandate?

The company ran a tender between law firms and we won based on our track record and price.

We have been working on solar financings for a decade, including on the largest solar plant in Italy before this. We have worked on tens if not hundreds of other solar deals whether M&A or financing. We have very strong record of accomplishment of advising on solar financing.

What was the most challenging part of the negotiations for the deal?

The fact that there was a tension between those approaching the deal as a pure project financing and those approaching the deal as more of a corporate type loan and corporate type risk. So this resulted in a number of discussions on many points.

Why were some parties approaching the deal as a project financing and some approaching it as a corporate loan?

Usually transactions are either clearly corporate or clearly project but it was the size that made it possible to change the approach. Usually in project finance, the borrower is an SPV - a company with single asset or portfolio of few assets. When, like in this case, the borrower is a company, which owns power plants with 400MW capacity, the company is larger than an SPV, almost a quasi-utility or utility scale. Utility-scale companies justify or deserve corporate lending more than project financing. But obviously the borrower was not really a utility so there was tension between the two approaches. Both made sense and both were questionable.

Was there any interesting or unusual about the structure of the refinancing?

The size was very large. It’s €1 billion, which is the largest in Europe ever. There is also the fact that there were two facilities one for the refinancing of existing plants and another for the refinancing of additional plants.

Why was the refinancing divided into two phases?

Some plants were already available for refinancing at the time of initial signing in April. Other plants were not ready for refinancing either because they were about to be acquired, or other reasons such that they were not yet ready to be financed or due diligence was not complete. So new facilities had been structured from the very beginning but had not been advanced at the beginning together with the other facility.

In general, how active have the banks been in financing solar projects in Italy?

Very active. Indeed in 2018 alone the two largest solar financings in Europe ever have been closed in Italy. One is EF Kosmos and the other is RTR. We have seen another one which was very large – Tages – which was approximately €500 million.

What have been the most active sectors for project finance in Italy in the last 12 – 18 months?

Probably solar and maybe toll roads. By active, I mean by volume. The number of deals may be different (many in solar, fewer in toll roads) but I would say these two sectors are most active.

What do you anticipate will be the main trends in project finance in 2019?

The solar market is moving towards unsubsidised projects. Therefore, that is certainly an area where we will see more deals.

The other trend is an increase in activity by those banks whose cost of funding has not increased as a result of recent turmoil in the Italian financial markets.