When Chile froze electricity tariffs in the wake of social unrest in 2019, the move brought temporary relief to households and businesses—but at a steep cost for the country’s generators. For four years, utilities were unable to freely adjust prices, even as the Covid-19 pandemic and the global energy shocks following Russia’s invasion of Ukraine drove costs higher.
To prevent the financial strain from overwhelming the sector, the government engineered a creative solution: securitizing future receivables and selling them as bonds to international investors. The mechanism, first deployed in 2020 with a $500 million issue, won a LatinFinance award at the time.
By October 2024, Chile returned with a new—and far larger—version of that playbook. Through a specially created vehicle, Chile Electricity Lux MPC II, the government placed a $1.4 billion issuance of senior secured bonds, followed six months later by a $562 million second tranche. In total, nearly $2 billion was raised, making this transaction the largest and final chapter in a three-deal series that closed out Chile’s electricity rate stabilization program.
Energy Minister Diego Pardow Lorenzo calls it “a transaction that allowed the market to navigate frozen tariffs during times of severe stress.” He notes that while the price freeze had become expensive, the program ultimately provided stability until market conditions returned—“and with this final deal, the system could be unwound.”
What set the 2024 transaction apart was not just its scale but its design. It was the second-largest quasi-sovereign or corporate issuance out of Chile in the past decade, and it mobilized resources across 291 generation companies—representing nearly 98% of the regulated market. By securing flat ratings with the sovereign despite a reduced government guarantee, the deal underlined how far Chile’s financial structuring had evolved since the earlier tariff stabilization issues.
The bonds were backed by securities created under the 2023 MPC Law, with support from IDB Invest, which committed $240 million of its own resources and mobilized more than $2.1 billion from private investors through its signature A/B-Bond structure. The securities carried a 30% sovereign first-loss guarantee and were designed to provide long-term financing with maturities unavailable in the local market.
The use of a Luxembourg-domiciled SPV gave investors legal certainty and international-standard governance, while a streamlined purchase facility made the process more transparent and efficient. Receivables sold by 26 generation companies were transformed into interest-bearing MPC Securities, giving utilities the liquidity to meet immediate obligations while preserving their ability to reinvest in cleaner energy projects.
Efficiency was also critical. A virtual global roadshow and clear market positioning allowed pricing inside initial guidance, with spreads tighter than previous transactions that had enjoyed full sovereign backing. Investors responded positively to the predictability of the cash flows, the credit enhancements, and the presence of multilaterals, which reinforced confidence.
“We sought diversification to mitigate the risk that a single geopolitical event could derail the entire deal,” Pardow explains. “This final placement closes the rate stabilization process.”
The impact of the deal went beyond market mechanics. It helped Chile gradually return to cost-reflective tariffs while cushioning one million low-income households with targeted subsidies. By restoring liquidity to more than 20 power producers—many of them renewables operators—the transaction ensured stability at a time when deferred payments had reached crisis levels. It also avoided heavier fiscal burdens by using a partial guarantee structure rather than direct state financing.
The transaction’s developmental benefits were equally significant. It created a replicable model for other Latin American markets grappling with tariff deficits, introduced innovative safeguards such as dematerialized, VAT-exempt securities, and embedded governance improvements into the management of Chile’s Tariff Stabilization Fund. For international investors, it demonstrated the depth and sophistication of Chile’s markets and the potential for structured solutions that align social objectives with private capital.
With the freeze lifted and the program completed, Chile’s energy sector is preparing for its next stage of modernization. Authorities are studying new structures—again with multilateral support—that could mitigate currency mismatches in long-term power contracts and fund future upgrades to the grid.
Pardow adds: “The Ministry is studying other kinds of deals to fund initiatives to upgrade Chile’s energy sector, especially in partnership with multilateral organizations such as IDB Invest.” He points to “incipient studies to create a mechanism, with the participation of multilaterals and financial markets, to diversify currency risks from long-term energy contracts.”
“That,” he concludes, “is the kind of initiative that we can discuss in the future.”
For now, Chile Electricity Lux MPC II stands as both a financial and policy landmark: a nearly $2 billion securitization that safeguarded the stability of the sector, shielded vulnerable households, and mobilized global private capital during one of the most turbulent periods in recent memory.
Bond of the Year
Chile Electricity Lux MPC II A/B Bond
$2.4 bn Project Bond: $240m A-Bond; $2.16 bn 144A/Reg S B-Bond
Issuer: Chile Electricity Lux MPC II
Sponsor: Republic of Chile
GenCos (Generators): Acciona Energía Chile Holdings; Aela Generación; AES Andes; Cerro Dominador CSP, Chungungo; Colbún; Cóndor Energía; Empresa Eléctrica Caren; Engie Energía Chile; Enel Generación Chile; Enel Green Power Chile; Eólica Monte Redondo; GM Holdings; Huemul Energía; Ibereólica Cabo Leones II; Norvind; Parque Eólico Cabo Leones I; PE Cabo Leones III; PV Salvador; San Juan; Santiago Solar; Sonnedix Cox Energy Chile; SPV P4; WPD Duqueco; WPD Malleco; WPD Negrete
Lead Structuring Bank and Purchaser of Record: IDB Invest
Joint Bookrunners: Goldman Sachs (sole global coordinator, structuring bank); Itaú BBA; J.P. Morgan
Counsel to Bookrunners: Clifford Chance; Guerrero Olivos
Counsel to GenCos: A&O Shearman; Claro & Cía; Kunstmann Spiess; Milbank; Morales & Besa; White & Case; Winston & Strawn
Agents and Account Banks: Citibank; Banco De Chile
All supporting financial institutions and law firms were transmitted to LatinFinance by the award category winners. For updates please email awards@latinfinance.com