When energy company Gas Natural Açú (GNA) considered its options for financing the construction of Latin America’s largest LNG-to-power project in Brazil, it opted for a 3.94 billion reais loan from state development bank BNDES, guaranteed by letters of credit from half a dozen commercial banks.
The innovative package, which wins the award for Power Financing of the Year, will help GNA build the greenfield thermoelectric plant, known as GNA II, with an eventual production capacity of more than 1,600 megawatts of energy a year, to be traded under a 25-year power purchase agreement awarded in a 2017 tender by the Brazilian government.
GNA II will share facilities, such as a floating storage regasification unit, pipelines and a port terminal, with GNA I, a project that has a different shareholding structure, but that is integrated in the same complex in São João da Barra, in the Rio de Janeiro state.
“It is the first time that a solar energy complex will share the same infrastructure in Brazil,” says Gustavo Zeno, GNA’s chief financial officer.
GNA II should start production in early 2025. According to Zeno, the LNG plant will employ an innovative combined cycle technology that will provide an efficiency rate of 62%. “It is one of the most modern equipment in the world,” he says.
All those ambitions will not come cheap, though, and GNA II raised 3.94 billion reais ($810 million) from BNDES to fund the construction work. The 24-year loan has a cost of 5.68% on top of the IPCA inflation index, including a backstop tranche that, according to Zeno, will give flexibility for any complementary debt that the project requires in the future.
The fully non-recourse loan – the largest financing ever raised locally in reais for thermal power plant in Brazil – was granted to a special investment vehicle owned by BP, Siemens and SPIC Brasil.
In December 2022, a first disbursement of 2.4 billion reais was made by BNDES, which made some strict demands before closing the deal. Among the most noticeable, GNA II had to obtain letters of credit from commercial banks as a guarantee, or backstop tranche, for the risk taken by BNDES.
“Banks showed much interest in being part of the project finance. Nine banks contacted, and we ended up working with six, which is a robust number. It took us around one year of negotiations to structure the contract,” says Mariana Pépes, the head of project finance at GNA.
Santander, lead arranger of the financing, provided letters of credit to the tune of 25% of the total value, while Bradesco, Itaú, Banco do Brasil and BTG Pactual forked out 16.7% each, and BNP Paribas, 9.92%.
When completed, the plants will generate enough energy to meet the needs of some 14 million households.