Latin American Power deal of the year
Financing for the $448 million AES Parana 826MW natural gas-fired
combined power plant closed at the end of June 1999. It is the
first non-recourse financing for a power deal in Argentina and an
important landmark for power financing in the power sector across
the Latin America continent.
A joint venture between AES Parana (66.67%) and PSEG Global (33.33%) won the concession in 1993. Parana is the first true merchant power plant to be done in the country and will be completed by the end of 2000. Japan's Nichichem and Mitsubishi Heavy Industries are building the plant.
Throughout the four years it took before reaching financial close, the project has shown strong survival skills. Going beyond anybody's expectations given the number of difficulties of emerging markets throughout the end of 1998 and beginning of 1999, AES Parana has proved the potential for merchant power financing in Latin America.
The financing package was split between A and B loans worth a total of $112 million from the Inter-American Development Bank (IADB) and a $102 million facility provided by Japan Bank for International Cooperation (JBIC). Six commercial banks joined the deal as lenders including WestLB, Bank of Tokyo-Mitsubishi, ING, KBC, Hypovereinsbank and MeesPierson/ Fortis Bank.
Acting as legal adviser to the common lenders, Jay Grushkin, partner at Milbank, Tweed, Hadley & McCloy in New York, says: ?The transaction took a long time and it involved a lot of creativity. AES Parana stands today as a very attractive template for other Latin American countries interested in developing merchant power on a project finance basis. The deal survived the Asian crash, the Russian and Brazilian debt market crises proving the determination and commitment of both sponsors and financiers behind the project.?
Given JBIC's 30% stake in IADB, the feeling in the market is that more Japanese-backed funds will go to projects in Latin America. With the exception of Argentina, JBIC has not ventured south of Mexico leaving regional profitable markets such as Brazil largely untapped.
With the return of stability in the Latin American financial markets, it is expected that the year 2000 will be marked by more investments in the region.
The privatization of power utilities across the region, Argentina in particular, is expected to boost the interest on behalf of international developers for more projects.
Throughout the years to come AES Parana will retain its position as benchmark deal for merchant power financing in Latin America.
A joint venture between AES Parana (66.67%) and PSEG Global (33.33%) won the concession in 1993. Parana is the first true merchant power plant to be done in the country and will be completed by the end of 2000. Japan's Nichichem and Mitsubishi Heavy Industries are building the plant.
Throughout the four years it took before reaching financial close, the project has shown strong survival skills. Going beyond anybody's expectations given the number of difficulties of emerging markets throughout the end of 1998 and beginning of 1999, AES Parana has proved the potential for merchant power financing in Latin America.
The financing package was split between A and B loans worth a total of $112 million from the Inter-American Development Bank (IADB) and a $102 million facility provided by Japan Bank for International Cooperation (JBIC). Six commercial banks joined the deal as lenders including WestLB, Bank of Tokyo-Mitsubishi, ING, KBC, Hypovereinsbank and MeesPierson/ Fortis Bank.
Acting as legal adviser to the common lenders, Jay Grushkin, partner at Milbank, Tweed, Hadley & McCloy in New York, says: ?The transaction took a long time and it involved a lot of creativity. AES Parana stands today as a very attractive template for other Latin American countries interested in developing merchant power on a project finance basis. The deal survived the Asian crash, the Russian and Brazilian debt market crises proving the determination and commitment of both sponsors and financiers behind the project.?
Given JBIC's 30% stake in IADB, the feeling in the market is that more Japanese-backed funds will go to projects in Latin America. With the exception of Argentina, JBIC has not ventured south of Mexico leaving regional profitable markets such as Brazil largely untapped.
With the return of stability in the Latin American financial markets, it is expected that the year 2000 will be marked by more investments in the region.
The privatization of power utilities across the region, Argentina in particular, is expected to boost the interest on behalf of international developers for more projects.
Throughout the years to come AES Parana will retain its position as benchmark deal for merchant power financing in Latin America.
Request a Demo
Interested in IJGlobal? Request a demo to discuss a trial with a member of our team. Talk to the team to explore the value of our asset and transaction databases, our market-leading news, league tables and much more.