Infrastructure Financing of the Year-Central America: Fontus Hydro

SPONSOR: Glenfarne/EnfraGen LLC
LOCATION: Panama
FINANCING TYPE & SIZE: $100 million loan
BANKS: DNB, Société Générale
LAW FIRMS: Paul Hastings, Milbank, SIGMA, Hogan Lovells, ARIFA, Garrigues

Shortly after acquiring three hydroelectric power plants in Panama, carrying 30MW of installed capacity, Glenfarne’s Fontus Hydro quickly devised a refinancing strategy for the project.

“We went to a handful of relationship banks, educating them on the asset, the high quality nature and predictability of the market in Panama,” according to Brendan Duval, Managing Partner at Glenfarne Group.

The New York-based owner and operator of energy and infrastructure assets chose DNB and Société Générale, according to Duval.

The loan enabled Glenfarne to refinance local bonds tied to the projects and held by Banco General.

Glenfarne took advantage of the project’s strong fundamentals to opportunistically secure new capital for the project.

“These assets have a very long useful life – could be operational 100 years from now -- and the assets have a high quality operating history, supply to an interesting mix of merchant and contracted power clients and are located in an investment grade country that is a close ally to the US with very modern laws and regulations,” Duval says.

These Fontus Hydro assets are supported by contracted cash flows through 2029 via government-regulated power purchase agreements with Empresa de Distribución Eléctrica Metro – Oeste SA (EDEMET), Empresa de Distribución Eléctrica Chiriquí (EDECHI) and Elektra Noreste SA (ENSA).

The Panamanian market is attractive to power generators looking to sell in the spot market, as “it has a very clear and transparent mechanic which we like a lot, with good pricing signals and open access to all,” Duval says.