PFR's Deal of the Year Awards are back, recognizing excellence in power project finance and M&A. Check out the shortlisted deals in the Latin America Project Finance category.

Congratulations to everyone who worked on the shortlisted deals:

  • Golar Power and Ebrasil’s Porto de Sergipe I LNG-to-power primary project financing in Brazil
  • Enel Green Power's primary project financing of its Mexico solar portfolio
  • EVM Energia and GE Energy Financial Services' primary project financing of their EVM II gas-fired combined-cycle project in Mexico
  • Canadian Solar's primary project financing of its Cafayate solar project in Argentina

Deal profiles:

Porto de Sergipe I

Sponsor(s)

Golar Power (Golar LNG and Stonepeak Infrastructure Partners), Ebrasil

Assets

A 1,551 MW LNG-to power project in Barra dos Coqueiros, Sergipe state, Brazil.

Deal Type

Senior secured private placement bonds

Deal Value

$1.47 billion, of which R$3.4 billion ($1 billion) is a 14-year local currency project bond securitization arranged by Goldman Sachs, $200 million is a 15-year loan from the International Finance Corp. and $288 million is a combination of local and dollar financing from IDB Invest.

Closing Date

April 19

Bookrunners

Goldman Sachs
International Finance Corp.
IDB Invest

Legal Advisers

Milbank (borrower, U.S.)
Stocche Forbes (borrower, local)
White & Case (lenders, U.S.)
Machado Mayer (lenders, local)

Other Involved Parties

Swiss Export Risk Insurance (export credit agency)
World Bank (currency swap provider)
Mott Macdonald (lenders’ engineering consultant)
Grupo Mercados Energéticos Consultores (IFC’s technical adviser)
General Electric (equipment supplier)

Notes:

This large transaction, supporting what will be the biggest gas-fired combined-cycle project in Latin America, drew on a full suite of risk management tools including an export credit agency wrap from Swiss Export Risk Insurance—on the basis that parts and services are being supplied by a Swiss subsidiary of General Electric—and a currency hedge from the World Bank. The largest portion of the deal, the wrapped bond issuance arranged by Goldman Sachs, involved a complex securitization structure through a special purpose vehicle domiciled in Luxembourg.

Enel Green Power’s Mexico Solar Portfolio

Sponsor(s)

Enel Green Power (developer), CDPQ and CKD Infraestructura México (equity investors)

Assets

A portfolio of three solar projects totaling 1,056 MW in Mexico.

Deal Type

Project finance loan

Deal Value

$605 million

Closing Date

Sept. 28

Bookrunners

BBVA, CaixaBank, MUFG, Natixis

Legal Advisers

Norton Rose (borrowers)
Shearman & Sterling (lenders, U.S.)
Ritch Mueller (lenders, local)
Clifford Chance (EIB)

Other Involved Parties

Bancomex, European Investment Bank, IDB Invest (lenders)

Notes:

When the results of the first Mexican power auction were announced in early 2016, it was widely assumed that one of the winning sponsors, Enel Green Power, would use its balance sheet to fund construction. So it came as a surprise to some when the company reached out to banks for project finance proposals for its three contracted solar projects later that year. The explanation was that the company was shifting to a build-sell-operate model and intended to lever up the projects to make them more valuable to potential buyers. Goldman Sachs and BBVA ran an auction for EGP’s whole Mexico renewables portfolio in 2017, eventually identifying Caisse de depot et placement du Québec and CKD Infraestructura México as the buyers that would take an 80% stake in the assets. The identities of the ultimate owners of the projects was an important factor in structuring the debt on the solar projects, so the financing was put on the back burner during the auction process. In an interesting twist, CKD would hold its stake through a so-called Fibra-e listed vehicle, qualifying for beneficial tax treatment. The project finance deal finally closed in September in the form of an 18-year term loan, producing a roughly 60:40 debt-to-equity ratio.


EVM II

Sponsor(s)

EVM Energia (60%), GE Energy Financial Services (40%)

Assets

An 850 MW gas-fired combined-cycle project in Mexico City.

Deal Type

Hybrid project finance loan and U.S. private placement

Deal Value

$740 million, comprising a$469 million 22-year senior secured U.S. private placement, a $125 million senior secured term loan and $146 million in letters of credit.

Closing Date

Sept. 24

Bookrunners

BNP Paribas, Citi, Sumitomo Mitsui Banking Corp.

Legal Advisers

Shearman & Sterling (borrower, U.S.)
Ritch Mueller (borrower, local)
Milbank (lenders, U.S.)
Galicia (lenders, local)

Other Involved Parties

Bancomext (VAT facility provider)
General Electric (equipment supplier)

Notes:

The sponsors simultaneously tapped the bank and U.S. private placement markets, optimizing financial flexibility and equity returns. Delayed draws over 17 months on the private placement minimized negative carry and the long tenor allows for full amortization over the 20-year tenor of the power purchase agreement. The deal also benefited from an engineering, procurement and construction wrap from GE. The private placement was more than two times oversubscribed, despite uncertainty around the change of government in Mexico, and the notes were priced at the tight end of initial price talk, coming about 62 basis points outside the yield offered by comparable bonds of offtaker Comisión Federal de Electricidad in the secondary market. It was the largest ever 4(a)(2) project bond offering backed by assets in Mexico.


Cafayate

Sponsor(s)

Canadian Solar

Assets

An 80 MW solar project in Cafayate, Salta Province, Argentina.

Deal Type

Construction-to-term loan

Deal Value

$50 million, split into $30 million, $15 million and $5 million tranches.

Closing Date

Nov. 20

Bookrunners

Corporación Andina de Fomento (lender and mandated lead arranger)
Banco de Inversión y Comercio Exterior, Banco de la Ciudad (lenders)

Legal Advisers

Akin Gump (borrower, U.S.)
Beccar Varela (borrower, local)
Clifford Chance (lenders, U.S.)
Martinez de Hoz & Rueda (lenders, local)

Other Involved Parties

Power China (EPC contractor)

Notes:

In a year of what President Mauricio Macri described as “endless storms” for the Argentine economy, Canadian Solar landed a deal to finance the 80 MW Cafayate solar project in Salta Provice in November, eight months after poaching it out of the bankruptcy of Isolux Ingeniería. Based on a $56.28/MWh power purchase agreement awarded in round 1.5 of the Renovar program in 2016, the deal comprises 15-year loans from CAF and BICE and a 10-year loan from Banco de la Ciudad. Construction financing is being provided by EPC contractor Power China, neutralizing construction risk for the lenders. Nevertheless, the deal “will likely be deemed the most difficult transaction in the country during the past year,” according to a person who worked on it. Canadian Solar is looking for a further $25 million debt commitment to round out the project’s capital structure this year.

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