Financing Innovation of the Year: CELSE

Financing Innovation of the Year: CELSE

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Funding a large $1.7 billion project is rarely an easy task. That is even more so the case for a 1.5 GW LNG-to-power project slated to become Latin America’s largest thermoelectric plant, and whose cashflow is derived in Brazilian reais.

When it came to finance the Centrais Eletricas de Sergipe (CELSE), sponsors Golar Power and Ebrasil, a regional thermal plant operator, initially tried going the simpler route by hiring local banks to work on the deal, sources close to the deal have said.

After the banks had a tough time garnering sufficient commitment, the 50/50 joint venture decided to change strategies, hiring Goldman Sachs to act as the global coordinator and bookrunner on a potential capital market offering.

In order to raise the required capital in reais, Goldman Sachs not only had to appeal to different pockets of liquidity but also outsource some of the risk to bring down the cost of capital.

CELSE ended up issuing a 14-year BRL3.37 billion ($987 million) debenture that settled offshore through Swiss Insured Brazil Power Finance, a Luxembourg-based special purpose vehicle.

The placement included an insured 144A/Reg S portion, covering 95% of the total issuance, guaranteed by Swiss export credit agency SERV. The remaining BRL168.5-million portion was uninsured.

Fitch rated the debenture AA+ as a result of its insured structure, helping ensure a successful issuance.

The sponsors injected $400 million in equity into the company, including $123 million in cash reserve accounts. However, to round out the financing, Goldman Sachs and the sponsors had to appeal to alternative funding sources.

The IDB Invest provided a triple-tranche $282 million loan that comes with a tenor of up to 15 years, which was notable for being the first time IDB Invest has provided reais against Brazil's inflation indexed IPCA.

The financing included a BRL664 million portion and $38 million from its own funds, while $50 million came from the IDB Invest-managed China Co-Financing Fund for the Private Sector of the Americas.

Finally, the IFC rounded out the financing with a 15-year $200 million, the World Bank affiliate said in a separate company statement.