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Thursday, 17 January 2019

Americas Awards

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Americas Bank of the Year Natixis  Natixis was the stand-out bank in the Americas for 2018 largely due to its key role in the evolution of Latin American project finance. The bank was involved in a number of the major Latin American transactions, including Enel Green Power’s landmark solar portfolio financing in Mexico, the Cerro Dominador financing, and the first financing backing a major mine project since the re-emergence of the sector this year in Lundin Gold’s deal backing the Fruta del Norte project.

The bank also developed a number of interesting, novel, and new structures that were deployed for some of the financings, which involved full collaboration across platforms in the Americas, Europe and Asia, and across business lines including coverage, infrastructure, restructuring and workout, and syndications.

For Cerro Dominador, Natixis’s US$190m ticket included offering up a US$90m fixed-rate tranche structured for Natixis’ investment partners, and a floating tranche. The innovative fix/floating structure provides borrowers and institutional investors with different long-term pockets of liquidity.

The bank also deployed the structure for Global Infrastructure Partners and BOW Power’s US$175m refinancing of the debt backing the 370km Carhuaquero–Cajamarca Norte–Cáclic–Moyobamba transmission network in northern Peru. That deal features two tranches; a 29-year hybrid private placement and fixed-rate loan.

“The dual placement strategy of private placement and fixed-rate loan involving institutional investors through Natixis’ co-financing partnership has allowed us to tackle two different pockets of liquidity at very attractive terms,” said Aitor Alava, managing director, head of infrastructure finance, Latin America, at Natixis.

In the US, Natixis closed a unique transaction in Canal 3, a financing backing Stonepeak Infrastructure Partners’ acquisition of power assets from NRG Energy. Stonepeak acquired Canal 3, a 333MW simple-cycle unit along the Cape Cod Canal in Sandwich, Massachusetts. The project receives revenue from both capacity payments and merchant sales.

Closing the uniquely structured financing required tri-party negotiations between Natixis and both the original sponsor and the new project owner. The bank went beyond traditional project finance lenders to bring in fund managers and insurance companies during syndication.

Natixis was also active in Canada, closing a C$161.2m (US$120m) refinancing of the Northern Solar portfolio in Ontario. The transaction included a C$153m term loan and C$8.2m letter of credit. The four projects have a capacity of 34MW and sell their output under identical 20-year fixed-price power purchase agreements with the Independent Electricity System Operator (IESO) expiring in 2034.

North America Transportation Deal of the Year
Gordie Howe Bridge
Proponents of the Gordie Howe International Bridge were tested for years before the challenging project finally reached financial close in 2018, advancing a critical transportation link across the Detroit River. The long-awaited span will link Windsor, Ontario in Canada to Detroit in the US, representing a victory for public-private partnerships on both sides of the border.

The project stood out as a key transaction in 2018 project finance as it was able to surmount countless difficulties, including bi-national issues, foreign exchange risk, and tax reform and tariff concerns.

Gordie Howe was procured by the Windsor-Detroit Bridge Authority (WDBA), a not-for-profit Canadian Crown corporation that was created in 2012 for the procurement. WDBA’s status as a start-up entity also created a unique risk for the project, as it will not have its own source of revenues to support its payment obligation to the project company during construction and operation.

In July 2018, the WDBA selected the Bridging North America team as the preferred proponent to design, build, finance, operate and maintain the new cable-stayed bridge. The team includes ACS, Fluor, Aecom, Aecon, RBC, Carlos Fernandez Casado S.L/FHECOR Ingenieros Consultores, Moriyama and Teshima Architects, and Smith-Miller + Hawkinson Architects.

The private financing component includes C$163.5m of 3.644% Series A senior secured notes with a 19.6-year maturity and C$291m of 4.058% Series B senior secured notes with a 34.9-year maturity, as well as a short-term construction facility of C$587m.

HSBC and RBC led the bond offering and the construction loan. Caisse Desjardins du Quebec, TD, and Mizuho also served in lead roles on the loan component of the deal, which was priced all-in at 3.7% with a 6.2-year tenor. BNY acted as indenture and collateral trustee. The private partner will contribute C$93m of equity at the end of construction period, secured by letters of credit until that time.

The payment mechanism comprises C$2.7bn in monthly construction period payments, available only once 15% of the capital costs have been privately financed, along with a C$481m substantial completion payment, sized such that the post-construction long-term private financing remaining is at least 15% of the project capital costs.

Construction is expected to take six years. RBC Dominion Securities acted as financial adviser on the transaction. Blake, Cassels & Graydon served as consortium legal adviser, McCarthy Tetrault acted as lenders’ legal adviser, BTY Group was lenders’ technical adviser, AON Reed Stenhouse served as consortium insurance adviser, Intech Risk Management acted as lenders’ insurance adviser, KPMG was consortium accounting adviser, BDO Canada was lenders’ model auditor, and JCRA acted as risk adviser to the WDBA.

North America P3 Deal of the Year
Automated People Mover
As the centrepiece of the more than US$5bn Landside Access Modernization Program (LAMP) at Los Angeles International Airport (LAX), the US$2.5bn Automated People Mover (APM) is a complex and groundbreaking public-private partnership.

The private partner on the transaction is LAX Integrated Express Solutions (LINXS), made up of equity sponsors ACS/Iridium, Balfour Beatty Investments, Bombardier Transportation, Fluor Enterprises, and Hochtief PPP Solutions.

The project includes six stations along a 2.25-mile, elevated dual guideway, the APM operating system with 44 vehicles, and a 7,000 square metre maintenance and storage facility. The 30-year term of the P3 includes an approximately five-year design and construction period, followed by a 25-year operations and maintenance period.

The APM was notable as the first project procured by Los Angeles World Airports (LAWA), which also recently closed the consolidated rent-a-car (ConRAC) facility that is a second component of LAMP.

The project was bid during a period of significant turbulence and uncertainty regarding changes to the tax code and their impact on investments in public-private partnerships.

The Tax Cuts and Jobs Act of 2017 was signed into law near the end of the project’s procurement, materially increasing the equity members’ tax liability. Just days before the bid submission, LAWA asked bidders to implement the Act’s implications into their committed proposals.

The project’s financial ultimate structure includes equity contributions, a short-term bank facility and private activity bonds (PABs).

The issuance of approximately US$1.3bn of PABs was 6.7x oversubscribed, rated BBB+ by Fitch and issued by the California Municipal Finance Authority as conduit issuer.

Bank of America Merrill Lynch, Citigroup and Ramirez & Co. acted as underwriters, and Assured Guaranty insured certain maturities.

The US$1.16bn A tranche was priced starting at 2.51% for a 2023 maturity and increasing to 3.58% for a 2047 maturity. A US$25.4m B tranche was priced at 3.59% and will mature in 2048.

A US$269m short-term bank facility was provided by a club of five banks that included SMBC, TD, Mizuho, CIBC, and KDB. The loan served to bridge a portion of the milestone payments from LAWA during construction.

Total equity of US$102.7m is backed by letters of credit until the injection of equity at the end of the construction period.

LAWA will pay a series of milestone payments totalling approximately US$1bn during the construction period, and will pay performance-based availability payments to LINXS during
the operating period.

Upon completion, the APM will transport up to 10,000 people per hour and is expected to significantly reduce traffic congestion around the terminal loop and provide the first direct connection between the airport and LA’s regional transportation system.

White & Case acted as consortium legal adviser, Ashurst served as lenders legal adviser, Infrata was lenders’ technical adviser, Turner Surety and Insurance Brokerage and Marsh served as consortium insurance advisers, Intech Risk Management acted as lenders’ insurance adviser, Deloitte served as consortium tax and accounting adviser, Operis was lenders’ model auditor, and Nixon Peabody served as bond counsel.

North America Power Deal of the Year
Western Renewable Partners
In a year with plenty of repricings, recapitalisations, and standard single-asset renewables deals, Western Renewables Partners showed true innovation. The structure may have set a new precedent for acquisition financings by combining a project finance back-leverage loan with an equity margin loan, creating an option for sponsors looking to raise private, convertible financing to minimise financing costs and equity dilution.

The US$582.9m financing backed BlackRock and NextEra Energy Partners (NEP)’s acquisition of a portfolio of 11 operating wind and solar projects from NextEra Energy Resources. In a multi-part financing, NEP entered into a convertible equity portfolio financing with BlackRock through which it acquired a 59% equity interest in the joint venture in exchange for US$750m of total consideration to NEER.

The financing was 1.65x oversubscribed, bringing in a total of nine banks. MUFG led the transaction, with Citibank and Mizuho also in arranger roles, and CoBank, Commerzbank, DNB, KeyBank, Wells Fargo, and Zions Bank as participants. The transaction includes a US$500m term loan, a US$48.6m delayed draw term loan, a US$34.3m letter of credit, and a US$400m margin loan.

The structure was unique as it allowed the financing of an acquisition of equity interests with the security of a floor. The equity margin loan advances cash against public equity units received in the future to repay the project finance loan. The deal was structured to provide a low-cost equity-like product and create a low, initial effective coupon of roughly 2.5% per year through the non-pro rata allocation of cash for an initial three-year period.

The convertible equity portfolio financing is the first of its kind and features a unique buyout option. NEP will have the right to repurchase all the borrower’s equity interests in the joint venture beginning in the fourth year with a combination of cash and NEP common units for a fixed pre-tax return. The portfolio is geographically diversified across eight US states and all projects are fully operational.

Simpson Thacher & Bartlett acted as issuers’ counsel and Latham & Watkins served as underwriters’ counsel.

LatAm Renewables Deal of the Year
Cerro Dominador
Latin America’s love affair with renewable energy grows by the year and in 2018 EIG Global Energy’s financing of the 210MW Cerro Dominador solar project stood out with its intelligent structuring and exciting new technology. The facility will be Latin America’s first concentrated solar power (CSP) and photovoltaic project, combining a 110MW CSP tower and a 100MW photovoltaic project. With 17.5 hours of thermal storage capacity, Cerro Dominador will provide clean power 24 hours a day.

The debt financing was equally impressive and came in at US$758m. The project had experienced significant hurdles along its way from the early permitting stage to the eventual financing, not least of which was the insolvency and financial restructuring of the project’s original Spanish sponsor Abengoa, which had developed new proprietary technology for the project. The Spanish developer spent about US$200m before halting construction in early 2016 and in December of that year transferred its stake to EIG ahead of bankruptcy proceedings.

EIG then set out to land a financing to resume construction at the project and make sure it one day started producing power.

The stand-out feature of the deal is the multi-tranche structure. Given the size of the financing and the total US$1.4bn in capex, the sponsors had to tap a range of sources: the international market, the local market, and the institutional market.

The mandated lead arrangers and commercial lenders for the roughly US$640m, seven-year mini-perm financing include Societe Generale, Banco Santander, Natixis, Deutsche Bank, ABN AMRO, Banco BTG Pactual, and Commerzbank. Development banks Helaba, ICO, KfW IPEX, and CORFO took part in the deal.

As part of the deal, Natixis arranged a US$190m tranche, which included a US$90m fixed-rate tranche structured for Natixis’ investment partners and a floating tranche. Institutional investors on the deal included KB Insurance, Kyobo, and Brookfield.

Other notable aspects to the deal include the implementation of onshore/offshore EPC split, liability caps, technology risk and performance testing, total project failure remedies, the bonding/security package, complex IP issues and escrow arrangements, and ongoing contractor/technology provider insolvency risk.

Sponsors’ legal counsel was Milbank Tweed Hadley & McCloy and Morales y Besa. Lenders’ legal counsel was Clifford Chance and Barros y Errazuriz. The independent engineer was Sargent & Lundy Consulting. The environmental consultant was ERM. The power market consultant was Synex. The insurance consultant was Mandy McNeil.

LatAm Power Deal of the Year
Porto de Sergipe LNG-to-Power

Project sponsor Centrais Elétricas de Sergipe (CELSE), a joint venture between Golar Power and Ebrasil, closed a roughly US$1.5bn non-recourse project financing backing the 1.5GW Sergipe LNG-to-power project that tapped multiple corners of the market in a unique way to deliver a special project. The project financing rode two waves sweeping the region; increased institutional investor appetite for infrastructure and the facilitation of the natural gas power revolution.

Not only did it ride both waves, it was impressive in doing so. The deal provides an interesting blueprint for financing these facilities moving forward, with equity, project bonds, and term loans. The equity contribution of approximately US$400m was fully paid in and includes US$123m in cash reserve accounts that were pre-funded by the project sponsors.

The debt features a US$200m local currency equivalent, 15-year deal from the International Finance Corporation (IFC). It also features an IDB Invest financing across Brazilian Reals and US dollars, with a tenor of up to 15 years. The financing consists of three loans: one in the local currency for up to R$664m (US$189.5m) from IDB Invest, one in US dollars for US$38m, also from IDB Invest, and a loan of US$50m from the IDB-managed China Co-financing Fund for the Private Sector of the Americas.

The IDB Invest local currency loan represented the first time that the institution lent in Reals at an interest rate linked to the Brazilian inflation index (IPCA).

There is also a roughly R$3.2bn bond issue, which was initially sold as a R$3.37bn infrastructure debenture in Brazil under Rule 12 431, which was bought by a special purpose vehicle and repackaged as a 144A/Reg S deal in the US, allowing US dollar investors access to the asset on US markets.

The 14-year amortising bond issue with a nine-year weighted average life was underwritten entirely by Goldman Sachs, which served as global coordinator and bookrunner. GE Energy Financial Services facilitated the deal. The debentures were issued with coverage from SERV (Swiss Export Risk Insurance), the Swiss export credit agency.

Milbank Tweed Hadley & McCloy and Stocche Forbes advised sponsors. White & Case and Machado Meyer advised lenders. Mayer Brown and Shearman & Sterling had ancillary roles.

The project was 100% financed on commercial terms, including the largest infrastructure debenture issuance to-date in the Brazilian capital markets, in parallel with multilateral loans.

The deal marked an important evolution in the relevance of capital markets in supporting infrastructure in Latin America. The repackaged bond issue was able to match institutional investors to the asset and bring in the huge amount of capital needed. The project also tapped the growing LNG-to-power market that is emerging in the region and was the first private venture of this type in Brazil.

The project comprises an LNG terminal with a 170,000cm floating storage regasification unit (FSRU), a 6.5km natural gas pipeline, a 1,516MW combined-cycle gas turbine (CCGT) power plant, and a 33km electricity transmission line.

LatAm Mining Deal of the Year
Mina Justa
One of the major themes of the year has been the re-emergence of mining project finance in Latin America. Improved commodities pricing and a thirst for mine deals among investors have given rise to a spike in activity.

Sponsors Minsur (60%) and Empresas Copec (40%) through project company Marcobre, secured US$900m in debt financing for the development of the landmark US$1.8bn Mina Justa copper project. It was handily the biggest mining deal in the region and the second to close in the resurgence of the asset class. Minsur is the mining arm of Peru’s largest conglomerate, The Breca Group, and Empresas Copec is Chile’s largest natural resources conglomerate.

The US$900m in senior debt facilities are structured as 8.75-year fully amortising term loans with a final maturity of June 30 2027.

The transaction was a fast-paced, multi-party process. The US$900m deal was provided by a mix of commercial banks and export credit agencies under both ECA-covered and uncovered facilities. The ECAs helped bring a large capacity of capital to the table and mitigated project risk for the commercial lenders with respect to the guarantees.

Banks on the deal included Export Development Canada, Australia’s Export Finance And Insurance Corporation, KfW IPEX, Export-Import Bank of Korea, Credit Agricole, ING Capital, Natixis, SG Americas Securities, Societe Generale, Banco de Credito del Peru, and BBVA Banco Continental.

Credit Agricole served as documentation bank, ING was technical agent, environmental and social representative and modelling agent, Natixis was insurance and marketing agent, Societe Generale was secured party agent, Kexim agent, bank lender administrative agent, and UFK administrative agent, and BBVA was onshore collateral agent.

Milbank Tweed Hadley & McCloy was lender’s counsel. Sullivan and Cromwell acted as borrower’s counsel. Rothschild was Marcobre’s financial adviser. The independent engineers were Mining Plus and Chlumsky Armbrust and Meyer.

Minsur owned 100% of the project after its Cumbres Andinas unit paid Korea Resources and LS-Nikko US$90m for their 30% stake in project company Marcobre in 2016. Chile’s Copec then bought a 40% stake in Mina Justa from Minsur for US$168.5m in April. A notable two-year uptick in value.

The Mina Justa Project is located in Ica Province in Peru, about 500km or a six-hour drive from Lima. The project is expected to begin operating in 2020, targeting a production rate of about 100kt of copper per year.

The project involves a mid-sized open pit copper mine and two processing facilities, producing an average of ~286mlbs of copper (55% concentrate/45% cathode) over the 16-year initial mine life.

The financing was a major milestone for the Peruvian mining sector and it is expected that the transaction will lead the way for several other metals projects seeking financing in the region.

Americas Solar Deal of the Year
Enel Green Power Solar
Enel Green Power’s solar energy portfolio financing set a benchmark this year for the trend of pooling assets together to secure better deal terms in Latin America. This deal stood out for its ability to attract capital from multiple pools amid a backdrop of the proliferation of clean energy in Mexico and a sales process.

The Italian company closed a US$605.9m financing backing the development, construction, and operation of the 469MW Villanueva I, the 359MW Villanueva III, and the 260MW Don Jose solar facilities.

The deal is noteworthy as it was the first solar energy asset portfolio financing in Mexico, the first structured finance Green loan, and involved the largest renewable asset acquisition in the region. With a tenor of construction plus 18 years, the fully amortising term loan was also impressive for terms in the region.

MUFG, BBVA, CaixaBank, and Natixis were mandated lead arrangers and bookrunners on the deal. Bancomext, the Inter-American Development Bank (IDB), and the European Investment Bank (EIB) were lenders to the deal.

Norton Rose Fulbright represented the sponsor, while Shearman & Sterling represented lenders. The projects were awarded 20-year power purchase agreements with the Comisión Federal de Electricidad for clean energy certificates and 15-year PPAs for energy.

Given Mexico’s novel power sector framework, lenders delved into the complexities of CELs and energy markets and assessed the degree of contracted vs merchant sales to determine structural features such as targeted cash sweeps to mitigate risks deriving from contracted CELs/energy levels under the PPA.

Following the deal, Enel closed the sale of a majority 80% stake in a 1.8GW portfolio of renewable energy projects across Mexico to Caisse de dépot et placement du Québec (CDPQ) and CKD Infraestructura México under a build, sell, operate model.

The deal saw the two institutional investors buy 80% of the share capital of eight special purpose vehicles that own the eight plants in operation and under construction and included the three projects financed in this portfolio deal.

CDPQ and CKD IM paid US$1.4bn for the stakes, of which about US$200m was for a majority interest in the SPVs and US$1.2bn for related-party loans granted to the SPVs. Villanueva I will be the largest solar project in the Americas once complete.

To see the digital version of this yearbook, please click here .

To purchase printed copies or a PDF of this report, please email gloria.balbastro@refintitiv.com

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