44
infrastructure
investor
may
2014
“This deal could be a door opener. It says
‘yes, it can be done’.”
“The first of its kind in Mexico and some
good sharing of risk.”
This was the deal that wasn’t supposed
to happen. As nominator Taylor Freres
said in its submission: “Implementing
such a project was long thought to be
impossible inMexico’s volatile political
and capital markets environment, in
particular given ongoing battles over
energy reform”.
The deal in question was Gen-
eradora Electrica San Rafael (GESR),
the first privately held, independently
financed hydroelectric facility in the
history of Mexico, one of the three
most important energy markets in the
Americas region.
Other aspects of the transaction
were unusual if not unique: it was
one of only a few energy projects in
Mexico to close and enter construction
last year; it was one of a small number
of Mexican energy projects to close
an off-take agreement withUS retailer
Walmart; and it struck a fixed-price,
fixed-delivery EPC [engineering, pro-
curement and construction] contract
with a large, global EPC provider in
the form of Acciona (very rare for a
small hydro project, and a significant
reducer of the risk profile).
The judges noted Taylor Freres’
wide-ranging contribution to the
deal, including: lead financial adviser
for the arrangement of capital; lead
technical adviser; owner’s engineer for
the negotiation of the EPC contract
and selection of turbine-generator
packages; and lead strategic adviser
to the sponsor.
On the financing front, the deal
boasted the creation of a hybrid equity
concept that was implemented in spite
of there being no legal mechanism for
preferred equity in Mexico.
What was admired more than any-
thing, however, was that this deal could
be an example for others to follow in
the future. Those who may previously
have looked at Mexico’s complex tax
and legal frameworks with extreme
trepidationmay well bemore inclined
to take a second look now that those
involved in GESR have looked at the
problems and come up with solutions.
As Taylor Freres said in its submis-
sion: “We believe that much of what
we accomplished on GESR will inure
to the benefit of countless sponsors to
come, in particular as Mexico’s private
energy sector continues to grow and
take shape.”
The judging panel agreed, noting
also that Taylor Freres had authored a
214-page report onMexico’s wholesale
electricity market which is used as a pri-
mary reference by CFE, the country’s
national electrical utility. This tome has
brought transparency to a previously
opaque market and helped arrive at a
more complete understanding of how
the market functions.
Actions speak louder than words –
but words also have their use.
n
Mexico is an energy market with huge potential.
Turning that potential into reality is a tough task,
but GESR shows what can be done
Writing the rule book
BANKING AWARDS FOR EXCELLENCE 2013
GENERADORA ELECTRICA SAN RAFAEL
Category:
Latin American energy
Winner:
Generadora Electrica San Rafael
Nominated by:
Taylor Freres Americas
(debt and institutional equity arranger;
lead financial, strategic and technical
adviser)
Other participants included:
Troy Energia
(sponsor); Nacional Financiera (senior
debt provider); Macquarie Mexico
Infrastructure Fund (institutional equity
provider); Galicia Abogados (legal
adviser to project and sponsor); Ernst
& Young Mancera (tax and auditing
services); HSBC (trust services); Acciona
(turnkey EPC provider)
Date of transaction:
30th July 2013
Size of transaction:
MX$1.1bn
(€62.4m; $86.4m)
Honourable mentions in this category:
Transportadora Callao
(nominated by
Natixis)
Chaglla hydroelectric project
(nominated
by Veirano Advogados)
WHAT THE
JUDGES SAID:
