Latin Finance - October 2008 - 30

endesa interview thermal generation is very expensive,” Antoñanzas says of the operating companies’ generation mix. “Having a lot of hydroelectric power is good for us.” Hydro power has long been the staple in Chile thanks to abundant resources. Endesa is set to bring the 2,750-megawatt HidroAysen project near Coyhaique in the Andes online in 2010. However, overexposure to rain concerns ratings agencies and investors, spurring plans for greater wind power as Endesa looks to generate half of the renewable power in LatAm. The firm has almost half the thermal generation existing in LatAm, and there is little in the way of renewables generally in the region, so the goal is not unrealistic. explains, but he says there are no definitive plans yet. Do not expect a booming wind project finance market like the US or Europe, though, as Endesa is building wind on balance sheet for now. “It’s too early to have project finance,” Antoñanzas says. “Now it is not so clear what the returns are. But if energy prices remain high, they could become financeable.” Endesa and Enersis are not strangers to project finance. A $1.11 billion, 15year syndicated loan that closed this summer through a club of nine banks – for construction of an LNG import facility at Quintero Bay, in which Endesa has a 20% stake – was one of the largest in Chilean history. However, most debt financing is done at the corporate level. Endesa Chile CFO Manuel Irarrázaval says the company will need to go to market for $200 million in projects before year-end. will be paying a bit more next year than the Libor plus 75 basis points it got then, as spreads continue to widen. At Enersis, Antoñanzas says the firm is trying to extend the maturity of its $8 billion in consolidated debt from five years. “Next year will be an important year,” he says. “We will have $1.5 billion to raise.” In the remainder of this year, he says the firm aims to raise about $300 million. Tricky Refinancing Year “We have a large quantity of cash generated by our power facilities,” says Irarrázaval. “But we can see going to the market for additional funds if it meets our profile and maintains an investment grade rating. In the next few years, we could be going to the markets for $1.2 billion per year in additional funds.” This includes money for refinancings and operational expenses. Next year will be tricky for refinancing at both the Enersis and Endesa Chile levels. Endesa faces $631 million in maturities next year in Chile, and $350 million from other markets. The toughest will be a $400 million dollar-bond due 2009 and Irarrázaval says the issuer is studying bank loans, international bonds and local bonds to cover it. The bank and international bond markets are difficult, he says, with higher rates owing to the credit crisis in the US. Chilean level are also elevated, making conditions a bit worse, but Irarrázaval still sees a very strong market there. In June, Endesa Chile refinanced $400 million in bonds through a sixyear syndicated loan from BBVA, Caja Madrid, Bank of Tokyo, Santander and Banesto. Irarrázaval imagines Endesa Power to the people: Antoñanzas Endesa’s Peru and Colombia subsidiaries are frequent issuers in local market – accounting for nearly 30% of Endesa Chile’s total debt – and Irarrázaval expects that to continue as it builds more there and capital markets continue to develop. Continued demand would see its 600 plus megawatts being developed in the two countries grow, provided regulation remains stable. “We want to invest in growing markets in terms of energy consumption,” says Antoñanzas. “We are looking for stable regulation. It doesn’t matter if the regulator is tough. The problem is when regulators start changing the rules.” Particularly attractive are governments developing policies that support renewables, like Chile and Brazil. “The market right now is demanding renewables,” he says “They are more expensive than other types, but people want it. If people want it you have to deliver.” LF Pushing into Colombia: Valcarce Chile and Brazil are the markets where wind power is seeing most development. But the nascent sector accounts for less than 1% of Endesa’s LatAm generation. Chile’s stable regulatory environment has allowed it to take the lead, requiring that each generator have a certain portion of renewable generation in its mix, or face a penalty. Endesa is in the process of adding 60 megawatts to its 20 megawatt Canela wind project that started generating last year. Valcarce says its Chilean wind pipeline for the next several years stands at 330 megawatts of new capacity. Enersis has also signed contracts for more than 500 megawatts of wind exploration in Brazil. Colombia and Peru merit study, Valcarce 30 LATINFINANCE October 2008

Latin Finance - October 2008

Table of Contents for the Digital Edition of Latin Finance - October 2008