Structured Financing Deal of the Year - GE & YPF
January 17, 2018 |
Two thermal plants not only raised financing in the Argentine market, they also paved the way for additional issuers
In a country that hadn’t seen any international project financing in 20 years, two thermal power plants broke the Argentine drought in June 2017.
The sponsors of the 107 MW Loma Campana II and the 267 MW Tucuman projects, which include YPF with a 66.7% stake and General Electric with a 33.3% stake, closed a $220 million five-year syndicated loan last summer.
Citing the significance to the Argentine project finance market, LatinFinance named the loan this year’s winner of the Structured Finance Deal of the Year.
“The deal will be a catalyst for banks to re-engage with Argentina as commercial banks and not only as intermediaries,” says Citi's Adrian Guzzoni.
Citi acted as the deal’s joint lead arranger, along with Credit Suisse and Export Development Canada (EDC). It was also bookrunner, swap provider, administrative agent, trustee, and account bank.
The sponsors’ leadership positions and financial profiles, and the loan’s conservative capital structure, meant the deal garnered a lot of interest from local and regional banks, according to Guzzoni.
“It was the right time to come back to the markets,” he adds.
Diego Rausei, GE’s southern cone head of project finance, also agrees the timing was just right. “Even before the sovereign came back to the international markets in early 2016, we were convinced the project financing was going to work and put all our efforts towards the goal,” he says.
For the American industrial conglomerate, the project was also notable for being its first direct equity investment in Argentina in many years, Rausei adds.
The transaction was structured to achieve a 70/30 leverage ratio. The scheduled debt repayment profile, based only on capacity payments, is meant to attain a minimum 1.5x debt service coverage ratio during the operating period.
As part of Argentina’s June 2016 capacity auction, YPF and GE were jointly awarded 10-year power purchase agreements by wholesale power market administrator CAMMESA for the two power plants. The contracts include dollar-denominated capacity payments and pass-through of variable costs.
The Loma de Campana II and Tucuman projects were expected to reach commercial operation by December 2017 and February 2018, respectively.
General Electric, the project’s engineering, procurement and construction contractor, will source gas turbines from its manufacturing arm.
The project has various alternatives for refinancing in the future, including the Rule 144A/Reg S bond market, as well as the international and local bank markets, Rausei says. LF