Houlihan Lokey Advises Bluewaters Power

Bluewaters is a fully contracted coal-fired power plant in Western Australia accounting for ~20% of the generation in the wholesale energy market. In addition to broader industry headwinds, Bluewaters was plagued by uncertainty of coal supply beyond 2023 from its supplier, Griffin Coal, following the expiry of Griffin Coal’s state agreement (mining permit). There are no other commercially viable long-term fuel sources that Bluewaters can rely on.

Due to the uncertainty beyond 2023, and despite generating ~A$90 million EBITDA per annum, Bluewaters Power (Bluewaters) was unable to refinance its debt. Bluewaters’ existing shareholders (and providers of $340+ million in subdebt and shareholder loans), Sumitomo Corporation and Kansai Electric Co. (or “sponsors”), were unwilling to contribute additional equity. The original local and international bank syndicate subsequently traded the debt to a group of funds led by Oaktree and Elliott (at a material discount to par).

Houlihan Lokey led negotiations with the lenders and their advisors over 15 months. On November 12, 2021, Bluewaters executed amendments to its SFA, which extended the maturity of the facility to June 2027 (approximately seven years from original maturity) to allow stability to establish a coal supply solution and maximize value for all stakeholders. Without incurring new debt, the company entered into a bespoke agreement that seeks to provide lenders an appropriate financial return (including make-whole) at a future point in time where the valuation and solvency of Bluewaters can be better determined. The agreement also bridged the divergent views on value held by the sponsors and lenders through a unique return grid structure.