LatinFinance - September/October 2013 - 37

BEST RENEWABLE
ENERGY FINANCING

OAXACA II & IV
Financing two wind
farm projects in southern Mexico was hard
work, but the deal
stands out for attracting
bond investors to a new
type of risk
Noteworthy financings of renewable energy
projects in Latin America are no longer
hard to find.
In August 2012, Peru’s Cerro del Águila
hydro-electric power plant, set to be
the country’s biggest, called for a highly
sophisticated structure for its $590 million
loan.
Meanwhile, French developer EDF last
October took out a stunning 14.2 year local
currency loan, structured under local law,
for its 3.56 billion peso Eoliatec del Istmo
wind farm in Mexico.
But none stood out as much as the
success of Acciona Energía in luring
bond investors for the first time to a Latin
American renewable energy project — in
this case, the Oaxaca II and IV wind farm
project.
The two power plants in the La Ventosa
region of Mexico’s southern Oaxaca
province each generate 102 megawatts.
Both have 20-year, dollar-denominated
power purchase agreements with the
national grid, the Comisión Federal de
Electricidad (CFE). The 13-year average life
bonds were also denominated in dollars,
and took 144A/RegS format.
Investors were not asked to consider
construction risk: work had started on
the plants in July 2010, financed by a $450
million bridge loan, guaranteed by Acciona.
By the first quarter of 2012, both were fully
operational.
However, the novel nature of the
transaction was reflected in an execution
process that involved a certain degree of
price discovery.
Originally, lead managers BBVA, BNP
Paribas, Crédit Agricole, Santander and
Société Générale had targeted a deal of

more than $330 million, yielding around
6.5%. After an execution that stretched
more than a week, the deal yielded 7.25%.
It was also scaled down as a result of its
higher cost: the two bonds came in at $148
million and $150 million.
Still, as the first of its kind the deal
has shown that Latin renewable energy
projects can be financed through the bond
market. It also revived a market for power
bonds that had been dormant in the region
since 2007.
Sold in August 2012, the bonds drew
demand from Mexican pension funds
and insurers, as well as institutional
investors from the US. The final pricing
offered around 3% more than CFE risk,
market participants judged at the time of
execution. LF

AS THE FIRST OF ITS
KIND THE DEAL HAS
SHOWN THAT LATIN
RENEWABLE ENERGY
PROJECTS CAN BE
FINANCED THROUGH
THE BOND MARKET.
IT ALSO REVIVED A
MARKET FOR POWER
BONDS

NOVEL RISK: Mexico’s pension
funds and insurers subscribed
to Latin America’s first bonds to
finance a wind power plant

BEST OIL/GAS FINANCING

OLEODUCTO
BICENTENARIO
DE COLOMBIA
Highlighting the
growing strength of
Colombian banks, oil
pipeline Bicentenario
was funded purely by
local lenders, in an
impressive marker for
the country’s financial
progress
Significant developments in oil and gas
infrastructure in Latin America have led the
way for a number of impressive financings
recently.
In May, a $730 million equipment-backed
loan for a pipe-laying vessel, PLSV Pipelay,
brought a new type of risk to market. In
December, a syndicate of international
banks came together for the $3.1 billion loan
for Mexican petrochemical plant, Etileno
XXI, one of the largest outside the Middle
East.
But what stood out for particular acclaim
was that a syndicate of local banks was able
to arrange a 2.1 trillion pesos ($1.2 billion)
loan for Colombia’s Oleoducto Bicentenario
de Colombia.
Despite local lenders’ familiarity with
Colombia’s oil industry, putting the
deal together was not straightforward.
Regulatory limits on how much each bank
could lend to a single company meant
Bicentenario was unable to borrow more
than $2.2 billion.
Given the size of the loan, regulatory
limits also meant the borrower needed
more than half the local banks to lend at full
capacity to get the deal done. Ultimately,
the 12-year loan drew broad support, with
10 banks approving $1.79 billion for the
deal.
There were nevertheless advantages
in going to the local market, says Manuel
Zarama, chief financial officer at Oleoducto
Bicentenario (which is owned by seven oil
producers, including Ecopetrol and Pacific
Rubiales).

September/October 2013 - L ATINFINA NCE.COM 37
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