LatinFinance - July/August 2015 - 34

"These countries have committed to exploit their geography," he says. "They are
in the middle of the continent, equidistant
to everyone, close to a canal that connects
two oceans. These are their advantages:
these countries have placement, not commodities."
Emphasis on partnership
In addition to fostering cooperation, governments have been laying the groundwork
for an infrastructure boom by revamping
legislation to incentivize the private sector with public-private-partnership (PPP)
opportunities. Honduras and Guatemala
passed bills in 2010 to create Coalianza and
Anadie, respectively, agencies mandated
to bridge public and private interests while
coordinating efforts to develop infrastructure. El Salvador created Proesa with the
same goal last year.
Honduras also improved its PPP regulations in 2010, to expedite interactions
between regulators, investors, developers
and contractors. The regulatory framework is crucial for energy projects, which
require certainty for their long-term commitments, says Héctor Olea, president
and chief executive at Mexican energy
company Aura Solar, which is developing a
solar project in Honduras.
The new rules underpin a pipeline of
some 300 megawatts of solar projects that
are being developed, and they are attracting new investment, he says. "Fresh investment of up to $600 million has entered the
country in this sector alone during the last
six to 10 months," Olea says.
The PPP model allows Central American
governments to outsource some of these
infrastructure projects and more effectively
focus resources on addressing significant
social, security, healthcare and educational
issues that persist in the region, say proponents. Improving these conditions complements efforts to foster foreign investment,
as prospective players gain comfort from
the stabilizing business environment
Honduras stands out in the region.
"Crime rates have declined. The government has done a lot to reduce the violence
related to drug trafficking," says Javier
Atala, general manager and executive vice
president of Ficohsa, which became the
country's biggest bank this year when it
closed the acquisition of Citi's operations in
Honduras. "This has improved the country's positioning to draw credit, which is
perceived as positive by foreign investors
and developers."

34 L ATINFINA NCE.COM - July/August 2015

DANIEL SIMON, JPMORGAN

"THE MOST
IMPORTANT FOR US,
IS HAVING A DIALOGUE
WITH THE
GOVERNMENT TO
STRUCTURE THE
CONCESSION IN A WAY
THAT ADDRESSES
THE SPECIFIC RISKS
FOR THOSE PROJECTS
AND ALLOWS FOR US
TO GET COMFORT
AROUND PROVIDING
LONG-TERM
FINANCING"

At the table
The private sector is responding to calls to
lead many mega infrastructure projects in
the development pipeline today. Companies are bidding for tenders and winning
concessions to build or renovate highways,
roads, airports, seaports, and power generation and transmission projects.
Solar company SunEdison is developing
three facilities in Choluteca, Honduras, using a $146 million credit facility from multilaterals, such as the International Finance
Corporation (IFC) and Cabei. In transport
infrastructure, Philippine company International Container Terminal Services
(ICTSI) won a 30-year concession from the
Honduran government to renovate and
manage a specialized container and cargo
terminal in Puerto Cortés, which requires
upwards of $600 million in funding. A new
airport in Palmerola, Honduras, has an initial development price tag of $120 million.
Logistics and energy are hot spots, as
governments seek to gain independence
from the volatility in oil markets. Meanwhile, local exporters are pushing to build
infrastructure to more smoothly bring their
products, mostly agricultural, from the
countryside to shipping centers.
The Autopistas del Atlántico project in
Honduras, known as a tourism corridor,

illustrates how a positive dialogue with the
government can facilitate project finance.
A concessionaire backed by Colombian and
Honduran builders Grodco and Prodecon,
respectively, wrapped up a $145 million
financing package for a toll road. JPMorgan
joined with a $100 million ticket.
"The most important for us, is having a
dialogue with the government to structure
the concession in a way that addresses the
specific risks for those projects and allows
for us to get comfort around providing longterm financing," Daniel Simon, executive
director at JPMorgan, says.
"We are now looking at other projects
as well, based on the partnership we have
with the Honduran government and the
dialogue that we have been able to achieve.
We are evaluating which make the most
sense for us, as an institution, to continue to
be supportive of the government there."
Lighting the way
Multilaterals and export credit agencies are
key to developing the project finance market for commercial lenders in the region.
Their high degree of due diligence signals
the viability of projects and offers comfort
to other banks. Partnerships with such
institutions help developers design funding
strategies that make tender and concession
bids more competitive.
"Having the IFC on board implies that
developers, sponsors and contractors are
subject to a very strict monitoring, given its
higher standards of supervision," says Olea,
of Aura Solar. "Its involvement secures special attention to social, environmental and
labor issues. It sends a message to investors
of trustworthiness."
In addition to the SunEdison transaction
in the same province, the IFC's participation was fundamental to executing the Aura
Solar II project financing in Cholutecas.
Aura Solar signed a 20-year power purchase agreement with Honduras's Empresa
Nacional de Energía Eléctrica last year and
committed to developing a 61 megawatt solar plant and 13 kilometers of transmission
lines. The $120 million development cost
comprised 25% equity and 75% debt.
The IFC led a long-term club loan with
German development bank KfW DEG and
Banco Nacional de Comercio Exterior (Bancomext) participating. The deal marked
a first for Bancomext supporting an infrastructure project outside Mexico.
The IFC has committed and mobilized
more than $1 billion for renewable energy
projects in Central America since 2010. It

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