Volatile commodity prices and inconsistent weather conditions made operations tough for AES Mexico Central America and Caribbean (AES MCAC). 

The company’s ambitious financing plans in 2015 came after a series of unexpected hurdles, including little rainfall the previous year and restrictions on a saturated transmission line.   

“It was like having a fire on one side of the house, but there was no bucket big enough to carry water from one side of the house to the other,” says Nicolas van Tienhoven, regional director of treasury and finance for AES MCAC. 

“Oil prices didn’t help either, so it was the perfect storm of everything we didn’t want happening at once.”  

The company overcame the obstacles, completing cross-border bond deals, liability management exercises and syndicated loans. Its handling of the challenges helped AES MCAC stand out in the Corporate with Best Capital Markets Strategy: Central America and Caribbean category.

AES MCAC drew on working capital facilities from local and international banks which worked with the company despite the tough conditions. 

After a solid first quarter last year, the company’s Panamanian unit AES Panamá anticipated an upcoming maturity with a liability management exercise. It bought back more than 70% of its 6.35% 2016 bond and issued a 6% $300 million 2022 bond at par around the same time. Panama’s Banco General and Deutsche Bank, the lead managers, tightened pricing after initial price thoughts were cited in the mid-6% range. 

“We issued the AES Panamá bond in a good market,” van Tienhoven says. “The order book was almost $1 billion and now they have traded nicely in the secondary market.

“To take out the 2016 maturing bond we had to do a consent solicitation, we needed 50% of noteholders to settle their notes and we got past the required amount easily,” he says. “Bond investors understood our story and most that tendered the bonds ended up coming in the new issue.”

Another bold move was a switch from bond to loan financing at AES Dominicana, the Dominican Republic arm of AES MCAC. Following the AES Panamá issue, AES Dominicana planned to call its 9.5% 2020 bond in November last year. 

Leveraging solid relationships with local and regional lenders, the company mandated Panamanian trade bank Bladex and Banco Popular Dominicana to execute a two-year term loan. The resulting $250 million deal enabled AES Dominicana to call its 9.5% 2020 bond. In doing so, it saved around $1 million in debt service costs, van Tienhoven says. 

“These [9.5% 2020 notes] had been issued five years ago when the company was in a different state and had a high coupon, so it was important to call them,” he says. “These local and regional banks in just four weeks put a term sheet together and syndicated the loan to 13 other banks and this allowed us to buy back the bonds.” 

The company pocketed two other transactions when it packaged $242 million of receivables from distribution companies in the Dominican Republic and within two weeks sold the entire amount to investors. Later in the year, it put in place a $115 million committed facility for AES Dominicana that was provided by Scotiabank. 

Looking ahead, van Tienhoven says the company’s growth and investments lie in gas and renewables. AES has a healthy project pipeline in all countries under MCAC’s watch, moving in a direction of cleaner, sustainable energy, and away from coal. LF