Wind Bonds Cross Finish Line

Acciona’s Oaxaca II and IV units have priced $298m in 2031 notes, giving LatAm its first wind energy project bonds. The transaction that bankers and issuers hope can be a model for others had to widen pricing in order to convince investors wary of the deals’ novelty and small size. The issuer ended up paying a 7.25% yield, after giving 6.50%-area guidance earlier in its long roadshow. “It’s the first of its kind, new deal, structure and asset class out of EM and one would expect it to come at a premium that represents value to investors,” says an investor following the sale. The transactions, with $148m and $150m respective sizes, each priced at par with a 7.25% coupon. The price is seen offering at least 300bp premium to offtaker CFE. The deals with a 13-year average life had initially been expected at $164.5m and $167.5m, and were reduced due to the widened pricing. The sale was heard generating a modest order book, with participation from North America, Europe, Asia and LatAm. The issuer decided to go with two smaller transactions in place of a larger more liquid one likely at a tighter spread, according to sources familiar with the deal, based on a need for flexibility. Working in the project’s favor was their lack of construction risk, as well a strong track record for wind generation nearby, most notably the Eurus facility also developed by Acciona. Proceeds from the issuance will refinance the initial debt used to partially pay project construction, fully pay the remaining part of the EPC contract, cover financial expenses, and fund reserve accounts. BBVA, BNP, Credit Agricole, Santander and Societe General managed the transaction, rated BBB minus. Located in the Tehuantepec Isthmus in Oaxaca, considered one of the strongest wind locations in LatAm, the projects began operation in March and each generate 102 megawatts. Bankers hope the deal opens the door for more project bonds, noting there are additional wind energy candidates in the region.