Saturday, 18 January 2020

Americas Awards

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Bank of the Year – Citi - Citi was the stand-out bank in the Americas in 2019 based on the bank’s innovation in Latin America and progression into new asset classes, as well as its leadership role in some of the year’s most complex transactions.

Bank of the Year – Citi

Citi was the stand-out bank in the Americas in 2019 based on the bank’s innovation in Latin America and progression into new asset classes, as well as its leadership role in some of the year’s most complex transactions.

The bank’s Americas-based project finance activity extended to pipelines, including greenfield and brownfield transactions, as well as wind and solar, floating production storage and offloading (FPSO), airports, thermal power, and petrochemicals.

Citi’s innovative approach to financing was particularly exemplified in the deals it struck backing FPSOs. The bank led bond deals for the MV24 and Libra FPSOs, raising around US$1.5bn and helping lead an expected boom in FPSO deals in the region in the coming years.

Citi developed a novel ratings and market-positioning strategy for the debut of the asset class to the institutional 144A/Reg S markets for MV24. The bank also repositioned the FPSO asset-class to be seen by institutional markets as “essential infrastructure”, which benefits not only from an availability-based contract but more broadly from an underlying essentiality to the value of the field where it is deployed.

In the US, Citi was one of the leads on the NextEra/ KKR financing, which included the sale of an interest in a renewable asset pool being back-levered with a project finance structure stapled to an equity margin loan for the takeout.

The complex transaction effectively replaced the master limited partnership (MLP) as a means of funding sponsor growth and development. The bank also took part in one of the big stories of the year, LNG refinancing, with a lead role in Cameron LNG’s US$3.0bn 144a offering.

Citi led a structuring and distribution strategy designed to maximise demand across the widest investor universe possible by tailoring tenor and amortisation preferences to certain investors.

The bank was also seen in several of the more notable deals across Latin America. Citi led the structuring and financing of the first project financing of liquid storage facilities in Mexico through the Servitux deal, as well as the debut international issuance after a years-long hiatus for YPF Luz in Argentina and a rare high-yield project bond for Braskem Idesa’s petrochemical asset.

The bank also led the first Ecuadorian non-sovereign (or quasi-sovereign) issuer to come to market in more than 20 years in Quiport.

Power Deal of the Year – KKR/NextEra

The project financing done in connection with KKR’s US$900m convertible equity investment in NextEra Partners’ portfolio of solar and wind projects was the key renewables transaction for 2019. The complex, multi-layered deal featured an innovative structure, with a unique buyout option for NEP.

The transaction backed a 1.1GW portfolio of wind and solar assets in North Dakota, Illinois, Iowa, Minnesota, New Mexico, Nevada, Michigan, Arizona and Washington. The portfolio is fully contracted with a diverse group of 12 counterparties under long-term power purchase agreements with a weighted average remaining life of approximately 15 years.

To complete the transaction, NEP acquired six renewables sites from another NextEra subsidiary, NextEra Energy Resources. The company then contributed these assets, including three solar and three wind, and four other wind farms to the joint venture platform.

The deal offers NEP has certain rights to acquire KKR’s interest over time at pre-determined return levels between 3.5 and 7 years after the formation of the partnership. For the next four to six years, NEP will receive 95% of the cashflow from the assets, with KKR’s share more or less covering the debt service. KKR’s share of partnership cashflows increases to 99% in the event that call options are not exercised within certain milestones.

KKR funded its investment with a mix of new term loan financing and equity from its third Global Infrastructure Investors fund.

Citigroup, MUFG and Mizuho arranged the seven-year US$1.09bn financing, which includes a US$600m funded term loan and a US$157m delayed-draw term loan that will partially fund interest expenses during the six-year limited distribution period of the partnership.

A third component of the financing was a US$335m equity margin loan that will advance cash against the future receipt of NEP units.

The deal structure was designed in part to enable the portfolio of utility-scale wind and solar assets to bridge any cash distribution restrictions resulting from the ongoing PG&E bankruptcy.

Kirkland & Ellis and Skadden Arps acted as sponsors’ counsel and Latham & Watkins acted as lenders’ counsel.

P3 Deal of the Year – ConRAC

The Newark ConRAC transaction was a stand-out based on its use of a new source of revenue, its smooth and quick execution, and its innovation as the first project of its kind with demand risk that was financed in the bank market.

The deal financed a public parking facility for the Newark Liberty International Airport’s new Terminal 1 and brought all the airport’s rent-a-car companies under one roof and into a location that is expected to be convenient for travellers. The project will feature 2,925 public parking spaces and 3,380 rental car spaces.

The sponsor of the project is Conrac Solutions Capital, with equity provided by Related Fund Management and Fengate Asset Management. A consortium of banks led by MUFG, CIBC, National Bank of Canada, and AIG provided the debt financing, which included a US$310m construction term loan and US$43.9m in letter of credit facilities. MUFG also acted as hedge provider and administrative agent. Goldman Sachs acted as financial adviser.

The deal came together in less than three months and is expected to be used as a model for future transactions.

The project structure includes design, construction, financing, operations, maintenance, and lifecycle management throughout construction and a 35-year lease with the Port Authority of New York and New Jersey.

Under the new model, the private financing supplied by the equity partners will be repaid entirely through proceeds received from a customer facility charge applied to rental car transactions, which are collected on daily rental car transactions. Portions of the ConRAC will also be leased to rental car concessionaires to customise and operate customer service spaces, car washes, or other services.

The deal includes a fixed-price, date-certain, and fully bonded design and build contract for construction with a joint venture of Austin Commercial and VRH Construction. The public parking area is expected to be complete in 2021 and the ConRAC will be up and running in 2023.

Allen & Overy advised on the sponsor side and White & Case on the lenders’ side. Ashurst advised the Port Authority of New York and New Jersey.

North America Deal of the Year – Calcasieu Pass LNG

Venture Global’s Calcasieu Pass LNG was the first major project financing for modular LNG construction in the US, raising a total of US$5.8bn for the Louisiana export terminal.

Calcasieu Pass LNG is the largest project financing to have closed globally to-date in 2019. The project did not have a traditional EPC contract structure with one primary construction contractor, and it did not have a completion guaranty. The modular design is different from all but one of the projects constructed in the US to-date, and the other modular project did not have project financing at the asset level.

Venture Global put in place US$5.8bn of senior secured credit facilities to back the project, including a seven-year, US$5.5bn term loan, and a revolving credit facility. The financing received more than US$10bn in binding commitments from initial coordinating lead arrangers prior to syndication, representing oversubscription of almost 2x.

A total of 12 banks committed to the financing with US$800m underwriting tickets as initial coordinating lead arrangers (ICLAs), with the a 13th bank joining the syndicate as a coordinating lead arranger (CLA) with a US$500m ticket.

ICLAs included Santander, Bank of America, Goldman Sachs, ING, JP Morgan, Mizuho, Morgan Stanley, Natixis, Nomura, RBC, SMBC and Scotiabank. ICBC came in as the CLA.

Among the ICLA group, RBC and Morgan Stanley acted as syndication agents; Natixis and SMBC as documentation banks; BAML and Natixis as issuing banks; Natixis as facility administrative agent and Mizuho as collateral agent. All the ICLAs and CLAs acted as hedging banks providing an interest rate swap.

The project has a 10 million tonnes per annum (mtpa) nameplate capacity and also includes a 620MW inside-the-fence combined-cycle gas turbine (CCGT) power plant and the 24-mile TransCameron natural gas pipeline.

Its midscale liquefaction technology provided by GE’s Baker Hughes will be employed in blocks of two electrically- driven 0.626 mtpa trains in each block, with nine blocks for the entire facility and a total of 18 trains.

Gas will flow through acid gas removal and dehydration systems before it enters the liquefiers. The technology is expected to lead to lower upfront capital costs and enhanced availability, with operational redundancy to minimise for maintenance for outages.

Stonepeak Infrastructure Partners committed to invest US$1.3bn in equity in Calcasieu Pass ahead of the launch of financing.

Morgan Stanley served as financial advisor to Venture Global for the transaction. Latham & Watkins and Davis Polk served as counsel to the sponsor, and Skadden Arps Slate Meagher & Flom served as counsel to the lenders. Simpson Thacher served as legal counsel for Stonepeak. Kean Miller served as local counsel.

Mining Deal of the Year – Quebrada Blanca 2

The mining sector in Latin America is going through a boom period after a few quieter years on depressed commodity prices and lower demand from China. As a result, a number of huge deals are working their way through the market and this year the Teck-led consortium’s US$2.5bn project financing of the Quebrada Blanca Phase 2 (QB2) copper mine in northern Chile that was signed in May was the most impressive.

QB2 is a copper and molybdenum mining project that involves mining and processing approximately 1.26bn tonnes of sulphide ore, requiring construction of a 140ktpd copper concentrator and associated facilities: concentrate slurry pipeline, port with filtration plant and concentrate loading facilities, tailings management facility and tailings transport system, desalination plant and water pipeline and related infrastructure.

QB2 has 25 years of reserves from first production and is expected to be one of the 20 largest copper mines in the world.

The sponsors of the project are Teck Resources Ltd (60%), Sumitomo Metals and Mining/Sumitomo Corp (30%), and ENAMI (10%).

The innovative financing consisted of a mix of direct lending by export credit agencies, ECA-covered lending and a commercial bank facility.

The direct lending by ECAs amounted to US$1.95bn and included Japan Bank for International Cooperation (JBIC) committing US$900m, Export Development Canada (EDC) with US$660m, the Export-Import Bank of Korea (Kexim) lending US$240m, and UfK providing US$154.8m.

The ECA-covered tranche totalling US$305.2m featured Kexim lending US$160m and UfK lending US$145.2m.

The commercial banks involved took equal tickets in a US$240m tranche that included SMBC, Bank of Montreal, BNP Paribas, ING, Mizuho, and MUFG.

Sullivan & Cromwell represented the sponsors, while Milbank worked for the lenders.

The deal was the first major mining deal done in Chile in the past five years, one of the largest in the region for a while, and combined the different liquidity sources under a multi-tranche deal.

LatAm Deal of the Year – TAG Pipeline

When Jair Bolsonaro was elected President of Brazil, one of the chief goals of his administration was to reduce debt at government-owned entities via a massive divestment programme.

And when Petrobras sold 90% of its TAG Pipeline unit to ENGIE Brasil Energia, Engie, and Caisse de Dépôt et Placement du Québec (CDPQ) for US$8.6bn, the group put together one of the largest and most impressive project finance deals in the region in place backed by the scheme.

TAG is the largest natural gas transportation network owner in Brazil, with approximately 4,500km of gas pipeline infrastructure located along the coast of the Northeast and Southeast regions in addition to a stretch linking Urucu to the city of Manaus.

The network also has 12 gas compression stations (six proprietary and six subcontracted) and 91 delivery points. TAG represents 47% of the country’s entire gas infrastructure.

The dual-tranche deal was a particularly innovative way to finance the acquisition with project finance, brought together an impressive roster of lenders, and was executed alongside a competitive bidding process.

It may also provide a template for deals in the country moving forward, with another US$30bn in projects slated for privatisation in the coming few years.

Part of the assessment by Petrobras, which was being advised by Banco Santander Brasil, was the financial model of the purchasing group. It is the largest divestment in Petrobras’ asset sale programme.

The financing came across two tranches; a R$13bn (US$3.1bn), seven-year fully amortising facility and a US$2.4bn, eight-year mini-perm based on a 12-year underlying amortisation.

Mandated lead arrangers were Societe Generale, Credit Agricole, BNP Paribas, Mizuho, SMBC, MUFG, and ING. Brazilian banks Itaú BBA, Bradesco, and Banco do Brasil were  lenders. Intesa Sanpaolo and Banco Santander joined as mandated lead arrangers, while ABN AMRO has joined as an arranger, and Allianz and CM-CIC Investissement as lenders. 

The sponsors’ legal advisers were Jones Day and Stochhe Forbes. The lenders’ legal advisers were White & Case and Lobo de Rizzo.

The deal was Engie’s debut in the Brazilian gas sector and CPDQ’s maiden infrastructure deal in Brazil.

Transport Deal of the Year – Autopista al Mar 1

The 4G programme has been cruising along for a few years now and the financing of the Autopista al Mar 1 public-private partnership was a premiere example of what project finance can look like moving forward. A liquidity crunch in the local currency, a new President in Ivan Duque, and construction issues on some of the other roadways meant a rethink in how to get deals to close, which this group did with aplomb.

Amidst this backdrop, the sponsor group of Sacyr (37.5%), Strabag (37.5%), and Concay (25%) through project company Desarrollo Vial al Mar (Devimar) were able to lock in a roughly US$713m project financing across multiple tranches to maximise the dollar amount, provide attractive terms, and give a debut in the market to a number of players.

The funding of the project involved multiple currencies including the Colombian Peso, US Dollars, Colombia’s UVRs, and Euros across the entire roughly US$1bn needed including equity. It was structured to allow for a flexible amortization schedule to avoid problems related to a delay in construction, with a tenor of around 18 years.

As the majority of the project costs are denominated in Colombian Pesos, the project will use US Dollar/Peso non-deliverable forward hedges to convert the Dollar disbursements through construction into Pesos, eliminating the FX risk to the project during construction. The transaction was also structured to internalize the inherited liquidity risk of the 4G program by implementing a set of contingent reserve accounts, allowing the project to meet liquidity shortfalls if needed.

The package of non-recourse loans denominated in US Dollars and Colombian Pesos for a total of US$713m included a US$220m term loan provided by SMBC, Société Générale, and KfW as well as a Ps1.55trn (US$493m) term loan provided Financiera de Desarrollo Nacional (FDN), Spain’s ICO, IDB Invest, Corporacion Andina de Fomento (CAF), and BlackRock, across Pesos and UVRs.

It was the first project financing closed by Strabag, Sacryr and Concay in Colombia and it represented the largest mobilization of Colombian Pesos from non-Colombian financial institutions and a debut for KfW and Société Générale. The FDN played a key role in providing a Peso funding line.

SMBC was financial advisor, structuring bank, mandated lead arranger, hedge coordinator, and administrative agent. KfW provided an interest rate hedge and Société Générale was an FX and interest rate hedge provider. Paul Hastings and Godoy & Hoyos represented the sponsors, while Clifford Chance and Brigard & Urrutia provided lenders counsel. Mott McDonald was a technical advisor.

Mar 1 is a 176km toll road, part of the 4G road program established by the Colombian government, located in the state of Antioquia, northwestern part of Colombia. The road connects Medellin, Antioquia’s capital, with the municipalities of Santa Fe de Antioquia  and San Jerónimo.

The project consists of the design, construction, rehabilitation, operation, and maintenance of the existing road as well as the construction and operation of a 4.6km tunnel that upon completion will be the longest tunnels in Latin America.

Renewables Deal of the Year – Condor

Mainstream Renewable Power was the biggest winner in Chile’s largest ever technology-neutral electricity auction in 2016, taking 27% of the total allocated capacity of 3,366GWh beginning in 2021. The win kicked off a renewables portfolio financing that overcame obstacles and attracted impressive terms, making it the stand-out deal of the deal in the power and renewables space in Latin America in 2019.

Mainstream closed a US$580m debt financing backing the first phase of its wholly owned and fully contracted 1.3GW Andes Renovables wind and solar power generation platform, known as Condor, with a lengthy 20-year tenor and low coupon. Overall the Andes platform requires US$1.7bn.

CaixaBank, DNB, KfW IPEX-Bank, Natixis, SMBC, and Societe Generale were the senior lenders to the deal. A seventh bank, Banco Santander, provided a VAT facility.

The 571MW Cóndor portfolio comprises three wind schemes and one solar PV generation asset. They include the 157MW Tchamma wind project in Antofagasta, the 185MW Ceroo Tigre wind project in Antofagasta, the 84MW Alena wind project in Biobio, and the 145MW Rio Escondido solar project in Atacama.

The deal was completed after initial turbine provider Senvion was dropped on the back of its financial troubles and replaced by new vendors, while popular protests around the time of financial close added another layer of concern. But all told, the company was able to lock in super-attractive terms on a deal that was oversubscribed.

The financing is one of the largest done in the region this year and will help Chile achieve its goal of decarbonising the grid, a possible template globally. There will also be the chance for repeat business in the coming phases.

The new wind farms will be built by Sacyr Industrial and Elecnor, with Vestas, Nordex Acciona and Siemens Gamesa supplying the wind turbines.

Sterling & Wilson was selected to build the Río Escondido solar farm, while grid connection works will be carried out by Transelec, CGE, HMV and Siemens. All four main power transformers for the projects will be supplied by ABB.

The company utilised a novel trade finance facility to shore up its equity, with ABN AMRO, DNB, and HSBC contributing to that €200m throughout the year.

Milbank, Shearman & Sterling, Carey, Morales & Besa, and Philippi Prietocarrizosa Ferrero DU & Uría advised on the transaction.

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