I Squared consolidates in Peru

A year after private equity firm I Squared Capital completed the acquisition of a large renewable energy portfolio in Latin America, the fund tied up the final loose ends by refreshing the debt in place at the holdco level and on its newly consolidated Peruvian assets.

Back in 2017, I Squared entered talks with Israel's IC Power to purchase its Latin America subsidiary, Inkia Energy, in an effort to expand its presence in the region.

The owner of IC Power, Kenon Holdings − dual-listed in New York and Tel Aviv − had launched the sale process in July of that year, after a planned initial public offering of the company's shares was pulled in early 2017.

I Squared finally closed the $1.2 billion acquisition of Inkia Energy in 2018, through its ISQ Global Infrastructure Fund II.

With the deal, the firm added 3.4GW of capacity across nine countries in the region:

  • Bolivia
  • Chile
  • Dominican Republic
  • El Salvador
  • Guatemala
  • Jamaica
  • Nicaragua
  • Panama
  • Peru

The portfolio of projects included both diesel and gas-fired plants, as well as hydro assets in Peru and wind facilities in Nicaragua.

At the time, Adil Rahmathulla, partner at I Squared Capital, said the deal "reinforces I Squared Capital's commitment to infrastructure in Latin America."

Loose ends

However, I Squared did not have full ownership of all of the projects. In Peru, in particular, the firm had ended up with a 74.9% stake in three assets through two special purpose vehicles (SPVs).

They are:

  • Samay − owner of a diesel-fired power plant
  • Kallpa Generación − operator of a hydro asset as well as a gas-fired power complex

To complete the takeover of these assets, I Squared set out to buy the remaining 25.1% stake, which belonged to Energía del Pacífico − a vehicle established by Peruvian chemicals company Quimpac in 2011. Peruvian businessman Marcos Fishman Cotlear owns Quimpac.

I Squared paid $342 million to buy Quimpac's stakes through its subsidiary Nautilus Inkia Holdings, in a deal that closed in October 2018. By the end of 2018, I Squared had complete ownership of some of Peru's most significant power generation assets.

Energía del Pacífico's advisers on the sale included:

  • Shearman & Sterling − legal counsel, New York
  • Rebaza, Alcázar & De Las Casas Abogados − legal counsel, local
  • Estudio Grimaldo & Abogados − legal counsel, local

I Squared was represented by:

  • White & Case − legal counsel, New York
  • Rodrigo, Elias & Medrano − legal counsel, local

The acquisition was initially financed with a $200 million bridge loan, $100 million in equity and $42 million of cash on hand. The loan would have matured in March (2020) if it had not been refinanced.

The debt was issued through Nautilus Inkia Holdings, which holds a Ba3 rating from Moody's Investors Service and a BB rating from S&P Global Ratings.


After completing the acquisition of the Peruvian assets, I Squared had to replace the bridge loan with long-term debt at the holdco level. Through holding company Nautilus Energy Partners, the firm signed a $200 million five-year debt package with six banks and an insurance company. The holdco debt now matures on 19 December 2024.

The lenders were:

  • Credit Suisse (co-lead arranger)
  • JP Morgan Chase (co-lead arranger)
  • Scotiabank (co-lead arranger)
  • BTG Pactual
  • SMBC
  • Santander
  • BD Capital Partners

White & Case was Nautilus's legal counsel.

On the same day, Nautilus closed the refinancing of one of its two Peruvian SPVs − Samay, which operates a 632MW power plant in southern Peru.

SMBC and Scotiabank provided one-half each of the $330 million, seven-year miniperm which replaced a loan signed in 2014. The debt package is not expected to be syndicated.

The transactions extended the company's debt maturities "at a similar cost," and demonstrated "the group's sound relationship with banks," according to an S&P report.

The legal advisers on the refinancing were:

  • White & Case − borrowers' legal counsel, New York
  • Miranda & Amado − borrowers' legal counsel, Lima
  • Milbank − lenders' legal counsel, New York
  • Garrigues − lenders' legal counsel, Lima

Peruvian assets

The Samay and Kallpa assets have their origins in efforts in the late 2000s and early 2010s to strengthen power generation in southern Peru. The government launched tenders for projects through Peru's state agency to promote investment, Proinversión.

Samay won one of those tenders, in 2013, for its 632MW Puerto Bravo power plant, located in Mollendo, Arequipa. The 20-year power purchase agreement (PPA), inked on 20 January 2014, is based on capacity.

Puerto Bravo is a simple-cycle plant with four dual turbines, which can work with diesel and gas. The plant was intended to burn diesel only until a gas pipeline in the south − Gasoducto Sur − was ready to supply it with gas. However, that never happened. The 1,000km pipeline, which would have stretched from Quillabamba in Cuzco to the south of Arequipa, has still not been built.

"Samay could eventually become a combined cycle plant (approximately 350 MW more and an investment of $500 million), but it would require the supply of natural gas," says an Inkia representative in Lima.

The Puerto Bravo plant was initially financed with a $311 million, seven-year loan structured by HSBC, SMBC, and Bank of Tokyo-Mitsubishi UFJ (now MUFG) which closed in December 2014.

Engineering, procurement, and construction contractor Posco Engineering & Construction built the plant, while General Electric supplied the turbines.

Puerto Bravo started commercial operations on 26 May 2016, at which point the PPA kicked in. The contract still has 16 years left to run.

The other Peruvian asset in the Nautilus portfolio is Kallpa Generación, which operates:

Kallpa, founded in 2005 by Globeleq Americas, was acquired by IC Power in 2007 for $543 million, while Cerro del Águila was launched in 2011 to compete in Proinversión's hydro tenders.

The companies merged in 2017 to form Kallpa Generación, which has a Baa3 rating from Moody's. The rating agency wrote in a 10 May 2019 press release that the rating "reflects its plants satisfactory operational track-record, contracted operations and the benefits from its fleet energy-mix (hydro and thermal-fired plants)."

These assets also have power purchase agreements in place. Cerro del Águila has PPAs with Luz del Sur, Edelnor, and Edecañete, while Kallpa is contracted with the same three offtakers plus Hidrandina, Electosureste, Sociedad Minera Cerro Verde, Compañía Minera Ancatapaccay, Southern Peru Copper Corp and Inretail Properties Management.

Most of the PPAs are take-or-pay contracts, says a deal watcher.

(A version of this story first appeared on Power, Finance & Risk)

Asset SnapshotCerro del Aguila Hydropower Plant (525MW)

Est. Value:
USD 948.00m
Full Details

Asset SnapshotKallpa Thermoelectric Power Plant (870MW)

USD 700.00m
Full Details

Asset SnapshotSamay Cold-Reserve Thermoelectric Plant (632MW)

Full Details

Asset SnapshotLas Flores Combined-Cycle Power Plant (193MW)

Full Details

Transaction SnapshotKallpa Generacion and Samay 25% Acquisition Refinancing 2020

Financial Close:
$200.00m USD
Debt/Equity Ratio:
Full Details

Transaction SnapshotSamay Cold-Reserve Thermoelectric Plant (632MW) PPP Refinancing 2020

Financial Close:
$330.00m USD
Debt/Equity Ratio:
Concession Period:
20.01 years
Full Details