Lenders came out in droves last week to finance the two largest merchant power plants in the nation. Panda Energy and TECO Power Services (TPS) said 40 banks participated in the general syndication, which was oversubscribed by $1.2 billion, including a 36% over-subscription on the $500 million equity bridge loan and a 62% oversubscription on the $1.7 billion non-recourse portion.

The five-year bank financing will cover construction of the Union Power Station, located in El Dorado, AR, and Gila River Power Station, located in Gila Bend, AZ. The two plants represent almost 4,400 MW of new gas-fired generating capacity.

The transaction was described as one of the most widely syndicated large-scale merchant plant financings this year and drew such interest, according to its sponsors, because of its “clean structure,” the superior profile of the projects and high projected debt service coverage ratios. Citigroup and Societe Generale were the lead arrangers for the financing. “The overwhelming enthusiasm for this transaction across such a wide number of banks is a reconfirmation of what we have known all along that these are great projects with highly committed sponsors,” said Chris Beale, Citigroup’s global head of project finance.

“Not only was the deal successful in and of itself, it has also changed the nature of our relationships with the banking industry, in terms of expanding our network of banks and redefining our working relationships in the banking community,” said TPS Senior Vice President-Finance Linda Miller.

Panda Energy Senior Vice President Bryan Urban said the success of the financing “overwhelmingly demonstrates that there is still a strong bank market for merchant deals, but it is also a market that you have to approach very strategically. These projects are the new benchmark for the power industry.”

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