FuelCell Energy enters $87 million financing agreement with Investec

By Mary-Katherine Stinson

Lexington, Ky., May 25 – FuelCell Energy, Inc.’s wholly owned subsidiary FuelCell Energy Finance, LLC and its wholly owned subsidiary FuelCell Energy Opco Finance 1, LLC on May 19 signed a financing agreement totaling $87 million, according to an 8-K filing with the Securities and Exchange Commission.

The financing facility consists of a term loan facility not to exceed $80.5 million and a letter-of-credit facility not to exceed $6.5 million.

The term loan portion of the facility will accrue interest at SOFR plus an applicable margin of 250 basis points for the first four years and after at 300 bps.

Quarterly principal amortization obligations are required, based on a 17-year principal amortization designed to be fully repaid in 2039. Quarterly amortization payments are based on a 1.3x debt service coverage ratio based on contracted cash flows before module replacement expenses and drawdown releases.

The term loan may be prepaid at any time at the borrower’s option without premium or penalty. There will be liquidation costs if a prepayment occurs other than at the end of an interest period.

The term loan matures on May 19, 2030.

The borrower is required to maintain a total capital expenditures reserve of $29 million to pay for expected module replacements and a debt service reserve of at least six months of the scheduled principal and interest payments.

The borrower’s obligations are secured by the company’s interest in six operating fuel cell generation projects: the Bridgeport Fuel Cell project in Bridgeport, Conn.; the Central CT State University project in New Britain, Conn.; the Pfizer project in Groton, Conn.; the LIPA Yaphank project in Long Island, New York; the Riverside Regional Water Quality Control Plant project in Riverside, Calif.; and the Santa Rita Jail project in Alameda County, Calif.

At closing the entire $80.5 million of the term loan portion of the facility was fully drawn, of which $2.9 million was paid in fees and transaction costs.

The remaining proceeds of approximately $77.6 million were used as follows: approximately $15 million, plus about $7.3 million was released from reserve accounts held at PNC, to pay the lease buyout amounts and sales taxes and to re-acquire the three projects owned by PNC Energy Capital, LLC; approximately $11.4 million was used to pay in full debt owed to Liberty Bank, Fifth Third Bank and Connecticut Green Bank for the Bridgeport Fuel Cell project; approximately $1.8 million was used in a partial payment of the company’s long-term debt to Connecticut Green Bank; $14.5 million was used to fund a capital expenditure reserve account required by the terms and conditions of the financing agreement; and approximately $34.9 million was earmarked for the company to use in its sole discretion.

Approximately $11.2 million of restricted cash was released to the company because of the payoff of the company’s debt to Liberty Bank and Fifth Third Bank.

Investec Bank plc is the administrative agent, collateral agent and a lender. Investec, Inc. is the coordinating lead arranger and sole bookrunner. Bank of Montreal (Chicago Branch) is the mandated lead arranger and lender. Liberty Bank, Amalgamated Bank and Connecticut Green Bank are also lenders.

On closing, FuelCell Energy Opco Finance entered into agreements with Investec and Bank of Montreal as hedge providers in which it will pay fixed-rate interest of 3.716%. The net interest rate across the financing agreement and the swap transaction is 6.366% in the first four years and 6.866% after.

The hedge transactions are required to be in effect at all times during the entire amortization period and have a total notional amount at any time of at least 75% and no more than 105% of the total principal balance of the outstanding term loan.

FuelCell is a Danbury, Conn.-based designer and manufacturer of megawatt-scale fuel cell systems.

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