Latin America is bustling with opportunities for project development and M&A, according to Pedro Barriuso, ceo of Blackstone’s new power and energy development company Fisterra Energy. Solar, wind, combined cycle assets, and hydro projects of utility scale are of interest to the shop, which is scoping out Mexico, Columbia, Peru and Chile for deals in the region. “There is a strong appetite for electricity and a strong possibility to develop those projects, because of the offtakers and because of the countries,” Barriuso says. Fisterra aims to lever up its assets, and is also plans to look at similar facilities in the Middle East, Africa and Europe.
Pedroi Barriuso |
Barriuso is ceo of Blackstone’s new power and energy development company Fisterra Energy in Madrid. He’s a former executive chairman of Element Power and ex-head of Iberdrola Renewables. He sat down with Nicholas Stone, PI’s senior project finance reporter, to discuss the shop’s objectives in Latin America and opportunities for power project finance and M&A in the region. What was the motivation for partnering with Blackstone and forming the company now?
Joining a company like Blackstone leaves no doubt; it’s always a good thing. They have excellent people, investment expertise and an excellent track record. So the decision was not very difficult. On top of that, in my previous company, Element Power, our investment focus was solely in renewable energy. At Blackstone, we are going to invest more broadly in energy, not just renewables. Our scope is much bigger and much wider, which affords us access to more attractive development opportunities.
What is your view on the power and energy project finance landscape in Latin America?
There are countries like Mexico, Colombia, Peru, and Chile that are very good and growing a lot. They need electricity of all kinds, both renewable and non-renewable. We’re seeing gas, combined cycle, hydro and a general shift towards power generating facilities which use more diverse fuel types. There are plenty of opportunities in these countries and in Brazil. Perhaps the only problem in Brazil is that investment IRRs are not sufficient, in the sense that everybody is looking to invest there. Brazil has been very fashionable for many years, so right now that market is a little overheated. Also, the price of electricity is low so the opportunities are not that interesting. But in other Latin American countries, there are many opportunities, even for transmission lines and service stations.
What kinds of projects hit the sweet spot for Fisterra?
We are going to look at renewables (solar and wind) as well as combined cycle gas and hydro plants in attractive geographic regions. Another type of project that may be of interest to us would be high voltage transmission lines.
Any more specifics on those projects in terms of capital you can deploy?
We are going to concentrate on medium to large projects because there are clear economies of scale. We probably wouldn’t invest in a 20 MW wind farm--below 100 MW is too small. The same applies to hydro plants--20 MW is too small. We would like to concentrate on transactions of $75-100 million in equity and upwards.
How much can Fisterra invest in total?
We don’t have a limit. We are a company that is now owned 100% by investors of Blackstone, and Blackstone is a very large private equity firm. When we select a project, they will decide whether to approve it or not, but there are no explicit limitations. Let’s say the round figure that we would like to invest at the beginning would be $500 million. It could be $300 million, or it could be more. It depends on the quality of the projects that we present to them.
What does your pipeline of deals in Latin America look like and how many deals do you think you will do this year?
We are only now pursuing deals because we only created the company last Wednesday. But we have been working in Latin America for many years. In our previous lives, we were with Iberdrola, so we know what is happening in the Latin American energy market, from the tenders that we know will launch in Mexico in the coming months, to the hydro plants that are going to be built in Colombia and Chile...I think Latin America is very robust and healthy. Chile is an excellent country, and in Mexico there is the Comisión Federal de Electricidad, which is an excellent company and a more reliable offtaker than some of the utilities in Europe or in the United States. There is a strong appetite for electricity and a strong possibility to develop those projects, because of the offtakers and because of the countries.
Are you interested in partnerships or buying entire projects?
In principal, we would like to take majority stakes. Partnerships? Yes, why not? But we would always prefer to have a majority stake in the project. Sometimes it helps to have local stakeholders or local shareholders and sometimes it doesn’t. We can go into Colombia with some Colombian investors, or go into Mexico with Mexican investors. That’s not a problem for us.
How many people are on your team? Where is it based?
Ten people are on the team. These are the same people who came with me from Element Power and Iberdrola before that. Some of those people have been installing everything from gas combined cycles to solar plants to wind farms to service stations and high voltage transmission lines. We don’t want to have a large overhead structure until we have enough projects and we close one or two significant deals. Then, we’ll take on some more people. We are based in Madrid, although three people on the team have been living in Mexico for five years and others have been living out of Spain, Latin America and Italy. We have to work where the projects are, so if you have a big project in Chile, the guys will have to go to live in Chile for a few years.
How will Blackstone look to finance any development projects or M&A activity?
We are definitely going to look for debt for every project. If you have a strong sponsor and the project is good, once you complete the technical due diligence and structure the offtake, I think there will be a great deal of interest from financial institutions. It’s not like pre-2008, when developers were able to leverage the projects up to 90% and more. Now, it’s between 70-75%, maybe 80%, depending on the quality of the project. Normally it would be banks or insurance companies. But I would say banks would be more traditional.
