Category: Peru

Peru’s central bank has tightened its monetary policy rate by 25bp to 2.00%, as expected. By the end of the year, Barclays forecasts the rate will increase to 3.00%. Morgan Stanley sees the rate ending the year at 3.25%. In June, the central bank increased its rate by 25bp to 1.75%.

Pluspetrol Lote 56, a unit of Peruvian oil company Pluspetrol, today will issue bonds denominated in USD and soles in 3 pieces. A first tranche for up to $30m will be due in 5 years, while Pluspetrol will also place up to $100m in a 10 year and a maximum of PES150m ($53m) at the same tenor. The second and third tranche combined may not surpass $100m, the company adds. While the first 2 tranches will have variable interest rates, the third will pay fixed rate. Credibolsa will lead the AAA rated issue, according to company information.

Peru’s central bank is expected to continue tightening rates today. Barclays expects a 25bp hike to 2.00% as annual inflation, at 1.64% in June, is on the low end of a 1.00%-3.00% target range. By the end of the year, Barclays forecasts the rate will increase to 3.00%. Morgan Stanley, which also expects a 25bp hike, sees Peru ending the year at 3.25%. In June, the central bank tightened by 25bp to 1.75%.

Pluspetrol Lote 56, a unit of Peruvian oil company Pluspetrol, is planning to issue bonds denominated in USD and soles in 3 pieces. A first tranche for up to $30m will be due in 5 years, while Pluspetrol will also place up to $100m in a 10 year and a maximum of PES150m ($53m) at the same tenor. The second and third tranche combined may not surpass $100m, the company adds. Credibolsa will lead, according to local press reports. The company did not return calls requesting confirmation.

Diversified mining company Xstrata is planning to invest $1.47bn to develop its Antapaccay copper mine in Peru. Construction is expected to begin in Q3 and operations are expected to be commissioned in H2 2012. Evolution Securities equity analyst Charles Kernot sees this as a positive move. He adds that the mine should be highly profitable thanks to low production costs, estimated at 90 cents per pound, assuming the price of copper stays at current levels. Copper closed at $3.02 per pound July 7. The company says that the project, together with the other major mines currently in construction or approaching the approval stage, will increase total annual copper production by 50% to almost 1.5m tons per year by the end of 2014. Peruvian authorities recently approved the project’s environmental and social impact study. The mine is expected to be operational for at least 20 years, Xstrata says.

Peru’s investment promotion agency, ProInversion, plans to move into full gear in July, offering in concession 6 projects prioritized for this year by president Garcia. Juan Suito, ProInversion’s technical director, says the agency will offer transmission lines, back-up energy plants, a hydro plant, 6 airports in the south and an old army barracks in one of Lima’s upscale districts in the coming weeks. “We have moved slowly to guarantee success, but we are confident that in the second half of the year we will meet our targets for 2010,” Suito tells LatinFinance. ProInversion forecasts that the projects will generate approximately $2.5bn this year. Of those set for concession in July, the largest investment would be in the 6 airports. The agency estimates a minimum investment at $226m. All of the country’s principal airports, with the exception of Cusco, will be privatized once the process is concluded. Instead of offering the existing Cusco airport, a separate concession process has been designed for the construction of a new airport. Suito says ProInversion is reviewing the 23 projects originally listed as priorities after additional work showed that several would not be sustainable without government subsidy, which is not an option. “Projects were prioritized with the idea that they would be self-sustainable and we have discovered in the process that several are not, so we have gone back to review these and decide how to move forward,” he adds. Among those under review is the Cajamarca-Bayovar railroad that would allow minerals produced in the highlands to be moved by rail to the cost. A feasibility study determined that the project, initially estimated to cost $1.5bn-$2.0bn, would actually require close to $6.0bn. In the same category are 2 sections of the Pan-American Highway, the country’s principal roadway that runs along the coast. ProInversion is preparing to redo feasibility studies for the northern section, from Piura to the border with Ecuador, and the so

Real estate and infrastructure stand out as attractive sectors for Peru’s local investors, according to panelists at last week’s LatinFinance Andean Investment Forum in Lima. They also want regulators to prioritize boosting secondary market liquidity. There is a large infrastructure gap in Peru, says Alejandro Perez-Reyes, CIO of Prima AFP. He adds that pension funds have cash to allocate, but the main hurdle is time spent building tailored investment vehicles. “It takes a long time for the process before [infrastructure funds] can raise money,” says Perez-Reyes. He sees health care as a growth area in Peru over the next few years, though the market lacks entities to invest in. Javier Freyre, CEO of InVita Seguros De Vida y pensiones, prefers infrastructure projects linked to inflation. He also highlights real estate, including direct investment in housing projects, as a strong growth area for the next few years. Both sectors are great for buy-and-hold investors, he says. However, more secondary market liquidity is needed to develop equities and local bonds. “We are willing to take a lot of risk in local currency, but there are some artificial barriers to entry by having a less liquid market,” says Danilo Simonelli, head of EM fixed-income at Ontario Teachers Pension Plan. He adds that Peru is a “success story” with strong growth in several sectors. Developing a repo market would be one useful tool, Simonelli notes. Jose Martinez, CIO at Rimac Seguros, agrees that allowing short sales and broadening availability of derivatives for institutional investors should help. Perez-Reyes says he would like to see AFPs be able to lend shares.

Peruvian conglomerate Grupo Gloria has ventured into Bolivia’s capital markets to raise $11.5m equivalent via a double A rated local issue. “In Bolivia there is a small but active pension fund market, and we were able to get attractive rates, says CFO Francis Pilkington. He adds that the issue could have been up to 50% larger. Gloria, which has dairy, sugar, ethanol and paper operations, placed BOB80.3m ($11.5m)in 4 tranches of between 4-7 years at an average yield of 2.66 %, says Pilkington. The deal was through Gloria’s Pil Andina food products unit. Proceeds will fund growth projects. BISA Bolsa managed the sale.

Inkia Energy, a unit of Israel Corporation, hopes to complete in coming weeks the financial architecture for the 400MW Cerro del Aguila hydroelectric plant in Peru’s southern highlands. Javier Garcia-Burgos, CEO in Peru, said the company is concluding financial analysis and should have definition in August on options to finance the $750m project, by far the largest undertaken by Inkia in Peru. “This project is too big for local banks,” Garcia-Burgos tells LatinFinance. “We are looking at international banks, development banks and eximbanks and hope to have definition in the coming weeks,” he adds. Inkia currently operates a thermal generating plant with 3 turbines in Chilca that produces 570MW. It is working on a combined cycle plant there that will add another 280MW in Q3 2012, putting the company among the top energy producers in Peru, according to the government. Inkia is looking at 2 additional projects in Peru, but Garcia-Burgos says it is too early to name them. Inkia is also active in the Bolivian, Dominican, Jamaican and Salvadoran markets, producing a combined 3,000MW. It operates a hydroelectric plant in Bolivia and thermal electric plants in the other markets. “We have focused primarily on Peru, where there have been opportunities, but we are actively looking to expand in other markets in the region,” Garcia-Burgos says. He was speaking on the sidelines of the 4th Andean Investment Forum in Lima last week. Tel Aviv-listed Israel holds 100% of Inkia, which has a portfolio of hydro, natural gas and other power plants located in LatAm. Approximately 64% of capacity is in Peru. In 2007, Israel acquired the LatAm energy portfolio of Globeleq for $543m.

Peruvian development bank Cofide is planning to place a new dollar bond as soon as the third quarter, CFO Carlos Linares tells LatinFinance. An RFP should be out for banks in the next 4-6 weeks, he explains, estimating a $200m-$300m deal at a 10-year maturity. Cofide, rated BBB minus by Fitch and S&P, is mainly raising funds for infrastructure lending. Cofide also expects to restart local issuance in PES under a $200m program in the second half of the year, with perhaps 5-10 year maturities. Global and Japanese market PES issues are also under consideration, he says. “We must start out with a dollar benchmark, to open up other markets, Linares says. Meanwhile, Cofide has closed a $135m 3-year loan priced at 125bp over Libor, less than the $185m it had originally sought. There are apparently some stragglers that could lift the total to $175m, but the deal was heard constrained by rising European cost of funds, and a 5-year was scrapped, says a banker close to the deal. Standard Chartered was bookrunner. Mizuho, Bank of Tokyo Mitsubishi and Sumitomo are heard among the participants.