CFC Leads $780M Syndication To Support STEC Acquisition

 

CFC and South Texas Electric Cooperative (STEC) recently closed a $780 million syndicated term loan credit facility, providing bridge financing for STEC’s acquisition of two existing natural gas-fired power plants, the Braes Bayou and Brotman facilities, in Texas.

The two quick-start, dispatchable generation assets add a combined 768 megawatts of capacity to STEC’s portfolio and support a broader initiative to address projected generation deficits and rising electricity demand across the ERCOT market.

“The plants’ use of ProEnergy PE6000 turbines provides the dispatch flexibility associated with 10-minute fast-start capability, while also delivering high availability and strong start reliability,” STEC Manager of Power Supply John Packard said. “In addition, the mix of contracted heat-rate call options and uncontracted capacity offered STEC near-term cash flow stability, along with longer-term operational flexibility and the ability to grow into the capacity over time.”

Flexible Structure Supports Strategic Objectives

To support the acquisition, CFC structured the facility with a flexible, dual‑tranche design that balanced execution certainty, pricing efficiency and interest‑rate risk management. The loans were syndicated with bank partners and other lenders in two maturity tranches allowing STEC to refinance the facility in stages rather than replacing the full $780 million at once.

“Flexibility was the most important factor for us,” STEC General Manager Clif Lange said. “The bridge financing gave us the ability to move forward with the acquisition while preserving our options to convert to long-term debt when the timing and terms make sense.”

CFC CFO Ling Wang said the structure reflects CFC’s ability to tailor financing solutions to complex, large-scale transactions.  

“CFC worked with STEC to evaluate both the immediate acquisition financing and its longer-term capital needs, developing a structure that balanced funding certainty, flexibility and cost efficiency,” Wang said. “Given the size and tight timeline of the transaction, CFC recommended a bridge-to-term approach.”

CFC has supported STEC’s syndicated financing needs for more than a decade, serving as lead arranger and administrative agent on prior transactions. That relationship proved critical as financing needs evolved during negotiations.

“As the dynamics of the transaction changed, CFC was incredibly nimble and creative,” Lange said. “The answer was never no, it was always, ‘Let us see what we can do.’ That flexibility made a meaningful difference in getting this transaction across the finish line.”

CFC CEO Andrew Don said the financing reinforces CFC’s role as a trusted arranger of large-scale syndications. In fact, currently, there are 36 active syndicated credit facilities in the electric cooperative sector. CFC is the lead arranger and administrative agent for 29 of the 36 syndications.

“CFC has decades of experience arranging large-scale financings for generation and transmission cooperatives,” Don said. “As the market leader for syndications for electric cooperatives, CFC is widely respected in the bank loan market for delivering well-structured, financially sound deals. Our long-standing relationships with members enable us to arrange cost-effective, customized financing solutions that best meet their needs.”  

Supporting Reliability and Long-Term Growth

With the acquisition complete, the plants enhance STEC’s ability to manage market volatility while supporting system reliability and future load growth across its service territory.

“These assets allow us to better control our own destiny,” Lange said. “They strengthen reliability during tight market conditions, give us flexibility in how and when we operate and provide capacity we can grow into over the coming decades.”

Beyond energy production, the facilities also support STEC’s participation across multiple ERCOT market products that contribute to overall system reliability.

“The facilities are well suited to provide ancillary services such as non-spinning reserve and ERCOT contingency reserves,” Packard said. “Their operational characteristics allow STEC to participate in multiple market products, improving overall system reliability while creating additional value streams that ultimately benefit cooperative members.”

South Texas provides wholesale power to nine distribution cooperatives serving more than 340,000 consumers across Central and South Texas, supported by a diversified generation portfolio totaling more than 2,650 megawatts of capacity.

Since 2005, CFC has completed more than $42 billion in syndicated loan transactions supporting electric cooperatives nationwide.