Energy Project Financing

Natural gas storage facility finances repayment of construction funding

Gill Ranch Storage LLC is the operator of a 20-billion-cubic-foot natural gas storage facility that was constructed in October 2010 just west of Fresno, California. The facility was built with funding from its parent company, NW Natural, at a time when credit conditions made outside financing unattractive. By the summer of 2011, it was looking for a way to repay at least a portion of those construction funds.

Gill Ranch Storage spoke with a number of potential investors but soon focused on Prudential Capital Group, which had been in discussions with the company since it began developing the project in 2009. In addition to a strong relationship-based approach to its lending activities, Prudential Capital brought extensive experience working with regulated utilities and their subsidiaries and had financed other gas storage facilities.

Within a short period of time, Prudential Capital structured a transaction that made economic sense for both parties. Prudential Capital would serve as sole investor in the deal, purchasing $40 million in senior secured notes issued by Gill Ranch Storage. The private offering closed on November 30, 2011. It featured a $20 million fixed-rate tranche and a $20 million floating-rate tranche.

In a transaction where speed and efficiency were prerequisites, Gill Ranch Storage chose Prudential Capital for the ease and certainty of its execution capabilities, its creative and flexible transaction capabilities, its track record in working with regulated utility companies, and its relationship-based approach to mid-market lending.