The potential for investments in Panama’s infrastructure sector has received a boost since the expanded Panama Canal opened in late June, sources told LatinFinance.
The canal expansion, designed to fit larger New Panamax vessels, creates investment opportunities for related infrastructure projects, particularly in the logistics sector, said a debt capital markets banker who worked on financing for the Panama Canal Authority (PCA).
“The more deals coming out of the country has a positive reinforcement on the rest of Panama’s prospective project financing needs,” he said. “There’s been over $5bn in investment into this infrastructure and it reinforces Panama as a logistics center.”
The PCA could open a tender for a new container port terminal and it is also considering a new transshipment terminal of automobiles, said a second source familiar with the agency’s plans. The authority has requested proposals from potential bidders, he said.
Liquefied natural gas transportation is another area set to benefit from the Panama Canal expansion. LNG exported from the US to Asia through the Panama Canal will reach its destination about two weeks earlier than it would under existing routes, decreasing freight costs.
However, low commodity prices will limit the potential for natural gas shipments in the short term, the banker said. An oversupply of natural gas, stemming from proposed production projects in Australia and the US, contrasts with lower demand from traditional LNG importers, such as South Korea and Japan, he said.
Funding plans for future projects have not been outlined, but the banker said DCM will likely provide the bulk of financing. Sovereign bonds from Panama or new issues from the PCA could help the country fund investments, he said.
PCA sold a $450m 20-year note in September last year to finance the construction of a bridge at the canal. Bank of America-Merrill Lynch priced the A2/A-/A bond at 220bp over US Treasuries for a yield of 5.09%.
Airport operator Aeropuerto Internacional de Tocumen (AITSA) sold a $575m cross-border bond in May this year to fund the expansion of the Tocumen International Airport. Citi priced the 20-year notes at par to yield 5.625%, after strong investor demand allowed the issuer to increase the size of the deal by $75m.