LatinFinance - September/October 2013 - 36

it remained the engineering, procurement
and construction (EPC) contractor. LF

BEST POWER FINANCING

MÉXICO
GENERADORA
DE ENERGÍA

decided to put it all in the local market.”
Sold in June 2012, the deal was Peru’s
first domestic market transaction worth
more than $500 million-equivalent, the
country’s largest project bond and a record
tenor for the local market. Banco de Crédito
del Perú and Banco Internacional del
Perú (Interbank) lent the bank tranche.
The involvement of these two gave the
institutional investors confidence, Rocha
says.
BNP Paribas was arranger and placement
agent for the bonds, which were divided
into a 371 million sol tranche and an 807
MARCOS ROCHA, INVEPAR

“WHEN WE SPOKE
WITH INSTITUTIONS
IN PERU, WE SAW
THEIR APPETITE WAS
VERY BIG”
million sol inflation-adjusted tranche,
triple-A rated on a domestic scale. The
loan pays 8.75%, the bond 8.58%, and the
inflation-linked bond 6.45%.
The brownfield urban toll road
expansion is due to be finished in 2014 and
is expected to cost $983 million. It included
25 kilometers of roads, a short portion of
which is tunneled under the Rímac River.
The 30-year concession, extended in
early 2013 by 10 years, was Invepar’s first
project outside Brazil. Invepar is owned
by Brazilian construction firm OAS and
pension administrators Previ, Funcef and
Petros. OAS had won the project, first
known as the Línea Amarilla, in 2009, and

36 LATINFINANCE.COM - September/October 2013

México Generadora de Energía’s (MGE)
sale of a 30-year project bond in November
2012 incorporated construction risk
into a debt issue — a rare feat and one
that contributes to the transaction’s
significance.
The $575 million deal finances
two 250 megawatt gas-fired power
plants in Sonora, Mexico, and related
infrastructure. The plants were 88% and
51% complete, with around 15 months of
construction still to go, when the bond was
sold.
Its greenfield risk, as well as the bond’s
smooth execution, put the transaction
ahead of others under consideration
for the category. These included a $335
WORTH A LOOK: Debt markets
merit analysis for project funding,
says Grupo México CFO Daniel
Muñiz

©REUTERS

BRIGHT FUTURE: The Vía Parque
Rímac road project was financed
by the first domestic Peruvian deal
over $500m

Bond investors proved
better placed to pick
up construction risk
for a Mexican power
plant than bank lenders, opening the way
for more infrastructure
debt sales

million loan for Mexican power plant and
compression station Energía San Luis de
la Paz and Compresión Altamira, a $1.05
billion loan for Chilean coal power plant
Empresa Eléctrica Cochrane, and a $590
million loan for Peruvian hydroelectric
plant Cerro del Águila.
In MGE’s deal, a 20-year power
purchase agreement helped build investor
confidence. Built by Siemens, the plants
will supply Grupo México’s Mexicana de
Cobre and Buenavista del Cobre mines,
reducing electricity costs there. They will
also help Grupo México unit Southern
Copper, which is the off-taker, become
self-sufficient for electricity. The deal was
originally conceived as a syndicated loan,
but later taken to the bond market where it
was more than three-times subscribed.
Sold by Grupo México special purpose
vehicle MGE, the bonds are collateralized
by first priority security on all assets,
collection rights under contracts, and
equity interests of the issuer. The power
plant is of strategic importance to Grupo
Mexico: supplying power itself brings the
cost down from around 11 cents per kilowatt
hour to seven.
The 2032 bond was priced at par with a
5.5% coupon, to yield 388 basis points over
US Treasuries. Morgan Stanley was sole
structuring agent and a joint bookrunner
with Bank of America Merrill Lynch and
HSBC. The deal drew broad interest, with
investors from the Asia, Europe, Latin
America and the US participating. Asset
managers, pension funds, and hedge funds
made up the bulk of the investors. Around
30% was sold domestically.
“We priced the bond very successfully
after we got the sense that there was a
very deep market and appetite for all
kinds of bonds, so we decided to go with
this structured project finance bond,”
says Daniel Muñiz, Grupo México’s chief
financial officer. Strong demand for the
Baa2/BBB rated deal — around 150 accounts
put in orders — was a result of its structure,
as well as interest rates and interest in
Mexican risk, he says. “It was very well
structured as well in terms of contracts,
risks, allocation of risks,” says Muñiz. As it
becomes more difficult for banks to lend at
long tenors, the debt market is likely to play
a bigger role, he says. “There was a lot of
interest in the plant. And I think more and
more with the capital restrictions on banks,
this kind of structure will merit at least
analyzing on a project by project basis for
companies out there.” LF


http://www.LATINFINANCE.COM

LatinFinance - September/October 2013

Table of Contents for the Digital Edition of LatinFinance - September/October 2013

Latin Finance - September/October 2013
Contents
Front notes
People news
Debt news
Equity news
M&A news
After the storm
Advantage Mexico
Treading water
New structures
Mexico
Regaining the Initiative
Deficit Ahead
Building up
Switching Course
Brazil
Work in progress
Extreme makeover
Mind the gap
Brazilian life insurance
Andean
Breaking the fall
Reaching out
Market movers
Paraguay
Smoothing the cycles
Thinking big
Parting Shot
LatinFinance - September/October 2013 - Latin Finance - September/October 2013
LatinFinance - September/October 2013 - Cover2
LatinFinance - September/October 2013 - Contents
LatinFinance - September/October 2013 - 2
LatinFinance - September/October 2013 - 3
LatinFinance - September/October 2013 - Front notes
LatinFinance - September/October 2013 - 5
LatinFinance - September/October 2013 - People news
LatinFinance - September/October 2013 - 7
LatinFinance - September/October 2013 - Debt news
LatinFinance - September/October 2013 - 9
LatinFinance - September/October 2013 - Equity news
LatinFinance - September/October 2013 - 11
LatinFinance - September/October 2013 - M&A news
LatinFinance - September/October 2013 - 13
LatinFinance - September/October 2013 - 14
LatinFinance - September/October 2013 - 15
LatinFinance - September/October 2013 - 16
LatinFinance - September/October 2013 - 17
LatinFinance - September/October 2013 - 18
LatinFinance - September/October 2013 - 19
LatinFinance - September/October 2013 - 20
LatinFinance - September/October 2013 - 21
LatinFinance - September/October 2013 - 22
LatinFinance - September/October 2013 - 23
LatinFinance - September/October 2013 - After the storm
LatinFinance - September/October 2013 - 25
LatinFinance - September/October 2013 - Advantage Mexico
LatinFinance - September/October 2013 - 27
LatinFinance - September/October 2013 - Treading water
LatinFinance - September/October 2013 - 29
LatinFinance - September/October 2013 - 30
LatinFinance - September/October 2013 - New structures
LatinFinance - September/October 2013 - 32
LatinFinance - September/October 2013 - 33
LatinFinance - September/October 2013 - 34
LatinFinance - September/October 2013 - 35
LatinFinance - September/October 2013 - 36
LatinFinance - September/October 2013 - 37
LatinFinance - September/October 2013 - 38
LatinFinance - September/October 2013 - 39
LatinFinance - September/October 2013 - 40
LatinFinance - September/October 2013 - Mexico
LatinFinance - September/October 2013 - Regaining the Initiative
LatinFinance - September/October 2013 - 43
LatinFinance - September/October 2013 - Deficit Ahead
LatinFinance - September/October 2013 - 45
LatinFinance - September/October 2013 - Building up
LatinFinance - September/October 2013 - 47
LatinFinance - September/October 2013 - 48
LatinFinance - September/October 2013 - 49
LatinFinance - September/October 2013 - 50
LatinFinance - September/October 2013 - 51
LatinFinance - September/October 2013 - Switching Course
LatinFinance - September/October 2013 - 53
LatinFinance - September/October 2013 - 54
LatinFinance - September/October 2013 - 55
LatinFinance - September/October 2013 - 56
LatinFinance - September/October 2013 - Brazil
LatinFinance - September/October 2013 - Work in progress
LatinFinance - September/October 2013 - 59
LatinFinance - September/October 2013 - 60
LatinFinance - September/October 2013 - 61
LatinFinance - September/October 2013 - Extreme makeover
LatinFinance - September/October 2013 - 63
LatinFinance - September/October 2013 - 64
LatinFinance - September/October 2013 - 65
LatinFinance - September/October 2013 - 66
LatinFinance - September/October 2013 - Mind the gap
LatinFinance - September/October 2013 - 68
LatinFinance - September/October 2013 - 69
LatinFinance - September/October 2013 - Brazilian life insurance
LatinFinance - September/October 2013 - 71
LatinFinance - September/October 2013 - 72
LatinFinance - September/October 2013 - Andean
LatinFinance - September/October 2013 - Breaking the fall
LatinFinance - September/October 2013 - 75
LatinFinance - September/October 2013 - 76
LatinFinance - September/October 2013 - Reaching out
LatinFinance - September/October 2013 - 78
LatinFinance - September/October 2013 - 79
LatinFinance - September/October 2013 - 80
LatinFinance - September/October 2013 - 81
LatinFinance - September/October 2013 - Market movers
LatinFinance - September/October 2013 - Paraguay
LatinFinance - September/October 2013 - Smoothing the cycles
LatinFinance - September/October 2013 - 85
LatinFinance - September/October 2013 - Thinking big
LatinFinance - September/October 2013 - 87
LatinFinance - September/October 2013 - Parting Shot
LatinFinance - September/October 2013 - Cover3
LatinFinance - September/October 2013 - Cover4
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