Latin Finance - September/October 2014 - 30

BEST POWER FINANCING
BEST RENEWABLE ENERGY FINANCING
BEST INFRASTRUCTURE FINANCING:
ANDES

BEST INFRASTRUCTURE FINANCING:
BRAZIL

COMING TOGETHER: Chaglla hydroelectricity project in Peru, which
united development banks

SETE BRIDGE LOAN

CHAGLLA HYDROELECTRIC

The extent of funding
needed to tap Brazil's
ultra-deepwater pre-salt oil
fields is driving financing
innovations

The Peruvian power sector saw a number
of financial innovations over the period of
these awards. Eten's $132.8 million bond,
which allowed the project to secure 20-year
financing, and the $432 million bond for the
ATS transmission line, a greenfield project,
also deserve mention.
The deal for the Empresa de Generación
Huallaga hydroelectric plant, however,
stood out as one of the biggest project
finance deals ever closed in Peru. The
406-megawatt project, dubbed Chaglla,
will be one of Peru's biggest electricity
generators. It has an estimated total project
cost of about $1.2 billion, and received $774
million in loans, with tenors of 17.5 and 18.5
years.
The financing was particularly notable
for bringing together three development
banks: Brazil's BNDES, the Inter-American
Development Bank (IDB) and Peru's
development bank, Cofide. This was vital at
a time - July 2013 - when European banks'
lending capacity was constrained.
"I think just having the tenor, the three
multilaterals and all the international
commercial banks involved, made it a really
special transaction," says Ricardo Vieira, at
BBVA's Latin America project finance team,
and one of the bankers involved in the
transaction.
The Odebrecht-sponsored project has
a 15-year power purchase agreement with
state-owned energy generator Electroperú
starting October 2016. The project was
tendered by Proinversión, the Peruvian
investment promotion agency. The
financing includes a $334 million IDB A/B
loan, of which the B tranche, provided by
partner banks, was $184 million. There was
also a $340 million loan from BNDES, and
$100 million loan from Cofide.
The A loan has a tenor of 18.5 years, the B

30 LATINFINANCE.COM - September/October 2014

Source Odebrecht

One of Peru's largest-ever
project financings broke
ground in bringing together different developments
banks

loan has tranches with tenors of 17.5 to 18.5
years, while the BNDES and Cofide portions
also have tenors of 18.5 years.
BBVA, Crédit Agricole, Norway's DNB,
Société Générale, and Sumitomo Mitsui
Banking Corporation , came in as lenders in
the B tranche. Deutsche Bank was the agent
bank. Of the law firms, Milbank advised
Deutsche Bank, while Clifford Chance was
counsel for the A/B loan, and White & Case
was counsel to the sponsor.
Putting the various government banks
together added time and complexity
in complying with each bank's funding
criteria. But having them on board was
important to gaining such large size and
long tenor, says Gunnar Pinassi, a director
at Odebrecht Infrastructure Latin America,
who has hopes the same approach could be
used in other projects.
"We see it could be replicated in other
countries as well," says Pinassi. LF

RICARDO VIEIRA, BBVA

"JUST HAVING THE
TENOR, THE THREE
MULTILATERALS
AND ALL THE
INTERNATIONAL
COMMERCIAL BANKS
INVOLVED, MADE IT
A REALLY SPECIAL
TRANSACTION"

The discovery of pre-salt oil deposits in
Brazil has pushed the country into the top
10 oil producers globally, but accessing
ultra-deep water oil fields demands a host
of new equipment.
Construction of 29 drill rigs to tap the
deposits falls to Sete Brasil. The task is
expected to cost some $25 billion.
"This is a unique process: it's very big,
very complex, and effectively without
precedent," says Ricardo Froes, chief
financial officer of Sete.
Some $6 billion of the capital will come
from shareholder equity - Petrobras,
BTG Pactual and pension funds Petros
and Funcef are among the largest owners
of the company - while the rest is set to
come from debt. BNDES is to put in some
$9 billion, making it one of the largest
commitments it has ever made.
The long-term financing has yet to come
on board, however: Froes expects to start
closing those deals in October. The first
stage of funding the operations involved
short-term bridge financings.
Sete arranged four bridge loans. Three
of those - the first, second and fourth loans
- were project financings. The third bridge
loan came at the holding company level.
Without assets to secure the loan, the deal
was instead backed by future capital calls
on the company's owners. The transaction
is the first example of such a structure being
used in a cross-border deal from a Brazilian
borrower.
"The third bridge came once we already
had some debt, we were more levered,
and the risk was a little different," explains
Froes. "So we had to develop a structure
that was a little more sophisticated to make
it possible for other banks to participate."
Borrowing at the holding company level
also increased the flexibility for Sete to
allocate the funds to where the resources
were most needed, in contrast to a more
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