Dynegy's $1.1bn GasCo Senior Secured 1st Lien Term Loan Facility offers the opportunity to create gas-fired power plants cheaply with significant downside protection, a floating interest rate, a LIBOR floor and an attractive current yield of 9.25% (~8.75% YTM). The loan is L+775 with a LIBOR floor of 1.50%.
At a construction cost of $1,000/kw for combined cycle gas turbine plants (in July of this year Calpine told the City of Dover, Delaware utility committee that a CCGT facility can be built in 2015 for $1,100/kw) and $800/kw for simple cycle gas turbine plants, the 6,771 MW portfolio is worth ~$6.3 billion. The term loan is creating the gas power portfolio at 18 cents/dollar. NRG previously agreed to buy 57% of this portfolio (Moss Landing, Morro Bay, Oakland, and Casco Bay) for $1.36 billion, implying asset coverage of 1.2x and assuming no value for the other 43% of the portfolio. The NRG offer implies a value of $2.37 billion for the total gas portfolio, meaning the term loan is creating the gas power portfolio at 15 cents/dollar.