Latin Finance - July 2008 - (Page 30)

brazil hydro Power by Water by Dan Horch razil’s hydroelectric sector is having a busy 2008. Following last December’s auction of rights to build and operate a 3,150 megawatt plant at Santo Antonio on the Rio Madeira, in May the government auctioned rights to build and operate a 3,300 megawatt plant at Jirau, on the same river. For Santo Antonio, Brazilian utility Cemig – a member of the Madeira Energy consortium that won the auction – estimates a budget of 12.2 billion reais. At Jirau, Gil Maranhão, director of business development at Suez Energy Brazil, the leading member of the winning consortium there, tells Latin Finance that the expected budget is 9 billion reais. In both, Brazil’s state development bank, BNDES, will finance up to 75% – half in direct loans and half through banks, which will take on credit risk in return for a share of profits. For the part that the BNDES loans directly, it will charge TJLP (6.25% at the start of June), plus 0.5% remuneration, plus a rate of 0.46%-2.54%, depending on project risk. For the part loaned out through local banks, the BNDES will charge 100 basis points over TJLP, and financial institutions will take an additional fee depending on negotiations with the construction consortia. Maurício Stolle Bähr, chairman of Suez Energy Brazil, estimates the BNDES financing will come at a tenor of 20-25 years. He adds that Suez will also consider export credit financing to cover part of the funding. This option, however, will depend on where it purchases the equipment, now being negotiated. B Two multi-billion dollar Brazil hydro projects seek financing and the state is offering ample support. The biggest transaction is yet to come. Hydro focus: investors are piling into a very active sector for Brazil Pierre Dupui, executive superintendent of credit markets for Santander’s Brazil operations. “Banks’ appetite for this kind of deal is very high, and we like to participate in them.” Santander is part of the team assembling financing for Santo Antonio. project’s viability, risk, and potential return, which will determine what percentage they finance, at what cost, and at what maturity,” Luiz Fernando Rolla, CFO of Cemig, tells LatinFinance. “We expect a decision by August, and money should be released after September.” Meanwhile, a person close to the BNDES, who asked not to be identified, says the bank expects to provide 7-8 billion reais for Santo Antonio. At Jirau, Maranhão expects to receive BNDES financing for 70%-75% of the total. The consortium has had several meetings with the BNDES, but it has yet to present a formal proposal. In late May, it held a Whetting Investor Appetite Since negotiations are ongoing, the bankers presentation for banks who might involved – including the BNDES – declined participate in BNDES indirect loans. “There’s a lot of interest,” Maranhão adds. to comment, citing confidentiality “The BNDES’s loans via banks are very agreements. But members of the winning well structured, and they’ve been using this groups shared some details. system successfully for years,” says Jean “The BNDES is currently analyzing the Gearing Up for IPO For the equity part of these deals, Dupui says there are several options. Sometimes sponsors finance it entirely – as Maranhão indicates that Suez Energy is likely to do. In other cases, they turn to parties including banks and international private equity funds, whose interest in such projects has grown dramatically in recent years, according to Dupui. “These are long-term projects,” he says. “But they will have steady positive cashflows starting in just a few years. Then when you see how shares of electricity generation companies in Brazil have risen in recent years, you 30 LATINFINANCE July/August 2008

Table of Contents Feed for the Digital Edition of Latin Finance - July 2008

Latin Finance - July 2008 Contents Investment Banking Outlook Compensation Survey Colombia Investment Banking Borrowers vs. Investors Banorte Profile Braskem Financing Strategy Brazil Hydro Finance Peru Port Privatization Panama Money Flows Argentina Local Markets Guide to Banking Technology Who Said That?

Latin Finance - July 2008

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