Category: Chile

Chile’s Compania General de Electricidad (CGE) has secured $515m in credit to help fund the purchase of electricity distributor EMEL. The loan consists of a CLP76bn ($150m) tranche due 2008, a $212m tranche due in December and a $150m tranche due 2008. BBVA provided the debt. CGE agreed to buy 95.4% of EMEL for $660m. CGE claims that the Emel takeover will make it Chile’s largest electricity distributor by number of clients.

Bear Stearns has upgraded the stock of Endesa Chile to outperform from peer perform following a 12.9% increase in the “node” tariff to $104.05/MWh that will be applied beginning in November. Endesa sells approximately 50% of its total volume sales in Chile at regulated node tariffs, says Bear. Its year-end $50/ADR price target is under review as it incorporates this higher-than-expected tariff. “This node price, which was announced after the market close, was well above market expectations. The increase mainly reflects rising average free customer tariffs due to high winter spot prices on the back of poor rainfall and the lack of Argentine gas,” says Bear Stearns. It adds that the increase will benefit all Chilean generators and help cushion, to some extent, potentially declining margins in the second half fro bad hydrology last quarter.

Banco de Chile issued domestic bonds worth $155.3m Friday, according to Dow Jones, which cites a stock market filing. The bank placed the 4-year 10-month bond, denominated in the UF inflation-indexed currency unit, at a yield of 3.52%, says the newswire. It was rated AAA/AA+.

Defying the predictions of some external analysts for a 25bp rate rise, Chile’s central bank kept the key policy rate unchanged at 5.75% at last week’s meeting. The tone of the post-meeting statement was relatively hawkish, suggesting a possible upwards move in the near future. “The central bank needs to react convincingly in order to prevent the risk that higher contemporaneous inflation readings become entrenched by contaminating medium-term inflation expectations and/or wage settlements and other prices in the economy,” says Goldman Sachs. “However, we believe that there is no need to overreact, as the prices of perishables should at some point mean-revert once the weather patterns normalize and the pace of activity has moderated.”

UBS Pactual has upgraded Endesa Chile stock to neutral. “We view Endesa Chile as the main benefactor of what we expect will be renewed pricing momentum in 4Q07 due to its conservative contractual policy and access to typically less volatile resources,” says the shop. It raises 2008 and 2009 estimated Ebitda by 9% and 14%, respectively. “Although the outlook has improved, our target valuation implies only 17% potential upside to current levels. In addition, earnings are at risk of persistently poor hydrology in 2008,” UBS adds.

The IFC has partnered with DuocUC, a higher education institution in Chile, and Banco de Crédito e Inversiones, to establish Chile’s first private financing program targeting low-income students. The program is expected to originate loans totaling CLP27bn over several years. DuocUC will assume the first loss risk of the portfolio of student loans, while IFC and BCI will each cover up to CLP10.13bn of senior risk. BCI will assume the role of fund provider and administrator of the loan portfolio. The IFC is actively pursuing similar projects in other countries.

Suez Energy International and copper producer Codelco plan to build and co-own the GNL Mejillones LNG regasification terminal in the Antofagasta region of northern Chile. The $500m project should be operational by 2012, with an initial output of 5.5m cubic meters, enough to produce 1,100 megawatts of electricity. The terminal already signed contracts for the sale of natural gas with copper companies Codelco, BHP Billiton, Collahuasi and El Abra. The project aims at guaranteeing gas supply security in the north of Chile, which is still affected by restrictions from Argentina.

BancoEstado, the Chilean state-owned bank, has issued $230m equivalent in 5 and 20-year bonds on the local market. The bonds, denominated in UF, pay 3.38% on the short end and 3.85% on the long end. Demand was three times supply and institutional investors were significant buyers, said the borrower. BancoEstado self-led the deal.

Shareholders of Chilean power company AES Gener approved a capital increase for about $350m to finance the firm’s investment plan. Gener is also preparing a $400m bond offering to fund the five-year $2.4bn plan, which includes building several coal-fired and hydroelectric generators. It plans to carry out part of the capital increase later this year and the remainder in early 2008.

Suez Energy International has chosen Calyon to lead project financing for the 150MW Central Termoelectrica Andino coal-fired power plant in Northern Chile, according to a banker following the deal. The facility has a 21-year contract with copper producer Codelco to supply power to two of its mines.