The Ps8.9 billion ($684 million) debt financing for 396MW Mareña Renovables wind project was one of the year’s largest power financings in Mexico. The dual-tranche financing, which closed on 23 February 2012, features the largest commercial bank tranche for a wind project in Mexico to date – and both its guaranteed and unguaranteed facilities have long tenors.

The financing supports what will be the largest single-phase wind farm in Latin America, and is likely to serve as a benchmark project in the region. It is being built in one of the strongest wind resources anywhere, on the narrow Isthmus of Tehuantepec in the Mexican state of Oaxaca. That isthmus divides the Pacific Ocean from the Gulf of Mexico, creating a wind resource so robust that plant’s capacity factors are vastly higher than many more celebrated wind regimes.

Yet despite the appeal of the Oaxaca wind resource, a relatively small number of developers are likely to follow the Ps10.93 billion ($841 million) Mareña to market with their own deals in the near term. Limited transmission capacity connects Oaxaca and the Mexican load centres, and new power purchase agreements in the area have been sparse. Social resistance to wind development to Oaxaca has emerged as a serious impediment, with the power to severely disrupt installations. Some residents have taken to shutting down roads at or to construction sites, including at Mareña, causing delays and necessitating assistance from different levels of government.

Financial close of Mareña also coincided with Fomento Económico Mexicano (FEMSA) and Macquarie Capital selling their 45% and 22.5% respective equity stakes to Mitsubishi and PGGM, the Dutch pension fund. Macquarie Mexican Infrastructure Fund retained its 32.5% interest in the project. Just 11 months earlier, FEMSA and the Macquarie entities bought the development rights for holding companies Energia Alterna Istmena and Energua Eolica Mareña from the Preneal Group, a Spanish developer. Macquarie and FEMSA, one of the largest Coca-Cola bottlers, began looking over Mareña in 2010 when Preneal was marketing equity stakes in the project, which was nearing the end of its development process.

The Mareña debt is divided between a Ps5.7 billion unguaranteed tranche and a Ps3.2 billion guaranteed tranche, both featuring tenors of 16 years and five months, and a 17-month grace period during construction. EKF, the Danish export credit agency, will provide a cover on the smaller tranche, which will start after construction is completed – targeted for this July – and then last for 14 years. EFK will bear fully currency risk on that tranche.

BBVA Bancomer, Banorte, Banobras, HSBC and Santander were lead arrangers on the Mareña financing. Crédit Agricole and the Inter-American Development Bank (IADB) participated in the roughly $250 million unguaranteed tranche, with Nafinsa in the guaranteed piece. EKF and the IADB joined the financing in the fourth quarter of 2011, late in the financing cycle, and the IADB committed Ps848.9 million. The financing also includes a Ps1.6 billion three-year value added tax facility, to be repaid with the proceeds of a government refund at the end of construction. Banorte, HSBC and Santander provided the VAT facility.

Mareña does not rely on subsidies because Mexico does not offer such sweeteners to promote renewables development, though some benefits exist in the country’s tax regime. So, the project’s 20-year self-supply contract was the primary basis for the financing. The facility will sell power to FEMSA and Cervecería Cuauhtémoc Moctezuma, a Heineken-owned brewery, under that contract. Lenders, though, typically regard self-supply contracts as riskier, because the offtakers are often less well rated, and usually less well known, than the Mexican state-owned utility, Comisión Federal de Electricidad. That view explains, at least in part, the significance of the export credit agency cover on Mareña.

The EFK cover and the presence of the IADB also helped the sponsors reach a long tenor on Mareña. The sponsors did not want a mini-perm, which usually extends just seven years past completion of construction and exposes a borrower to refinancing risk. But since the start of the financial crisis in 2008, most project financings without guarantees, ECA covers or multilateral support have tended to be structured with mini-perms – especially deals involving European banks, which have higher funding costs.

Mareña will use 132 3MW Vestas V90 turbines. Vestas has agreed to a 10-year service and maintenance agreement for the turbines. The manufacturer is also Mareña’s engineering, procurement and construction contractor. 

Northern Capital Mareña Renovables Capital
STATUS
Closed 23 February 2012
SIZE
Ps10.93 billion ($841 million)
LOCATION
Oaxaca, Mexico
DESCRIPTION
396MW wind plant that has a 20-year self-supply offtake contract with Cervecería Cuauhtémoc Moctezuma and Fomento Económico Mexicano
SPONSORS
Macquarie Mexican Infrastructure Fund (32.5%), Mitsubishi (33.75%) and PGGM (33.75%)
DEBT
Ps8.9 billion ($684 million), split between Ps5.7 billion unguaranteed loan, Ps3.2 billion guaranteed loan, plus a Ps1.6 billion VAT facility
LENDERS
BBVA Bancomer, Banorte, Banobras, Credit Agricole, HSBC, Inter-American Development Bank, Nafinsa and Santander
GUARANTOR
EKF
FINANCIAL ADVISER
Macquarie Capital
SPONSORS’ LEGAL ADVISER
Chadbourne & Parke (Macquarie Mexican Infrastructure Fund), Hunton & Williams (Mitsubishi), Allen & Overy (PGGM), Mijares Angoitia Cortes y Fuentes (local)
LENDER LEGAL ADVISER
Clifford Chance (US), Galicia Abrogados (local)
SPONSOR INSURANCE ADVISER
Marsh
LENDER INSURANCE ADVISER
Willis
SPONSOR TECHNICAL ADVISER
Sacmag
LENDER TECHNICAL ADVISER
Alatec
MARKET ADVISER
Bates White
SPONSOR WIND ADVISER
AWS True Power
LENDER WIND ADVISER
Garrad Hassan
SPONSOR ENVIRONMENTAL ADVISER
QVGA
LENDER ENVIRONMENTAL ADVISER
ERM