Raising funds for Latin America’s largest ongoing infrastructure project was never going to be easy, especially when global financial conditions were far from ideal.
Even so, Spanish construction group Acciona managed to close a pioneering non-recourse project financing via a mammoth loan from Brazil’s national development bank BNDES and an impressive list commercial bank guarantees to support the development of a critical metro line in the largest city in the southern hemisphere.
The ground-breaking structure to finance the construction of Line 6 of the São Paulo metro system – the first ever project where BNDES assumed non-recourse risk during construction – is the winner of the Infrastructure Financing of the Year – Brazil.
The innovative financial package consists of a 20-year, 6.9 billion reais loan from BNDES, which required that the concessionaire obtain 3.3 billion reais in financial guarantees to disburse the money. Traditionally BNDES demands full guarantees to provide such loans.
“This is the first time that BNDES provides funding under an international project finance standard,†says André De Angelo, Acciona’s country head in Brazil. “Our talks with BNDES started in 2019, always with a focus on looking for a flexible structure and to evolve towards an international standard for the financing of large-scale projects.â€
Eleven banks agreed to provide letters of credit as guarantees for 48% of the total cost of the loan. They were BNP Paribas (which also acted as financial advisor), Santander, JP Morgan, ICO, CAF, SMBC (US and Brazilian subsidiaries), Credit Agricole, Bradesco and ABC.
“The guarantees enabled a financial structure 100% in local currency for the project,†De Angelo says.
Before signing with BNDES, Acciona looked at other capital market and debt alternatives both in Brazil and global markets. But De Angelo notes that none of them offered better conditions than the development bank. The cost of the loan is inflation index IPCA plus 8.05% a year.
The total cost of the public-private partnership – the largest in Latin America, according to Sao Paulo’s state governor – is estimated at 18 billion reais ($3.68 billion). The government of São Paulo state is expected to invest 7.5 billion reais, with the remainder composed by equity apported by the shareholders.
The financial package also includes sustainability targets concerning subjects such as women empowerment, electric mobility, innovation and the training or workers. If Line 6 does not meet the targets, the final cost of the loan will be higher, De Angelo points out.
Sponsor: Acciona, Line 6 (Concessionária Linha Universidade (CLU)), and Société Générale
Banks: Banco ABC, BNDES (Lender), BNP Paribas, Bradesco, BTG Pactual, CAF, Credit Agricole, Instituto de Crédito Oficial, Intesa Sanpaolo, JP Morgan, Santander, SMBC, Votorantim
Law Firms: Herbert Smith, Machado Meyer, Mattos Filho, Mayer Brown, Perez Llorca, Veirano Advogados, White & Case
Financial Advisor: BNP Paribas
All supporting financial institutions and law firms were transmitted to LatinFinance by the award category winners. For updates please email awards@latinfinance.com
