FERMACA

Increasing the use and competitiveness of gas-generated power is key to Mexico’s lauded energy reforms. With the expansion of the midstream network crucial to the plan, Mexico has auctioned 22 natural gas pipeline contracts formerly owned by state energy company Pemex in recent years, attracting a projected $12.2 billion in investment.

As the owner of existing pipeline infrastructure linking Durango all the way to Texas, Fermaca generated buoyant interest from financiers after it won two of the most important pipelines being mapped out.

The new pipelines will supply natural gas to power plants in four states owned by government utility Comisión Federal de Electricidad (CFE). The 444-kilometer La Laguna-Aguascalientes pipeline and the 379-kilometer Villa de Reyes-Aguascalientes-Guadalajara pipeline require more than $1 billion in combined investments.

Fermaca’s flexible financing of the two pipelines has earned the developer the award for Best Oil & Gas Financing.

Intent on having the pipelines in operation by 2018, Fermaca wasted no time after winning the contract in March 2016. The developer hired ING as the coordinating lead arranger, Mizuho as the administration agent and BNP Paribas and NordLB as the syndication banks.

It planned to finance both pipelines through a single loan, but ultimately Fermaca decided investors would respond more favorably to two smaller loans. And respond they did.

The banks structured similar $622 million and $435 million loans, both with an eight-year tenor. The smaller transaction for the Villa de Reyes-Aguascalientes-Guadalajara pipeline also received a $50 million VAT facility from Mexico’s national development bank Banobras.

The structure of the facilities indicate Fermaca has a capital markets takeout on its mind, attracting many investors who saw clarity and upside in the deals. The pricing for both loans started just below 200 basis points over Libor, with step-ups that raise the coupon another 100 basis points.

Within eight months, both pipelines had reached financial close, generating participation from many of Europe’s biggest banks including Intesa Sanpaolo, KfW, Natixis, Sabadell and Santander.

International interest from commercial and development banks alike culminated in Korea Development Bank (KDB) joining the Villa de Reyes-Aguascalientes-Guadalajara loan as a lender and co-manager. LF 

PROJECTS: La Laguna-Aguascalientes, Villa de Reyes-Aguascalientes-Guadalajara

SPONSOR: Fermaca

LOCATION: Mexico

FINANCING TYPE & SIZE: $1.06 billion mini-perm financing

BANKS: BNP Paribas, ING, Intesa Sanpaolo, KDB, KfW, Mizuho, Natixis, NordLB, Sabadell, Santander

LAW FIRMS: Galicia Abogados, Latham & Watkins, Milbank, Ritch Mueller