LatAm project finance seen becoming more diverse

Latin America’s project finance segment is diversifying away from energy and oil and gas projects, although they will remain important.

"When I started my career in 2000 in the project finance area, the sector was very concentrated in operations related to the energy area. Now we are seeing a great diversification of operations, which tends to intensify in the coming years, largely because of the [Brazilian] concessions agenda in various infrastructure sectors … such as sanitation, highways, airports" Rogério Yamashita (pictured), head of Itaú BBA's infrastructure and logistics project finance area, told BNamericas. 

While four of the 10 largest project finance operations in terms of value between January and September were for FPSOs amid the development of large oil and gas reserves, two were for sanitation operations, according to data from Dealogic compiled for BNamericas.

But diversification is projected to continue, as the sanitation and highway segments become more interesting because of Brazil’s concessions agenda.

"Long-term contracts, of more than 30 years, for sanitation and highways concessions in Brazil involve large amounts of investment. Some project finance operations that are being finalized now are only part of the financing structure of these projects for the first years of the contract. More operations and even bigger ones should happen in the coming years," said Yamashita.

Another expansion frontier is the telecom sector, where demand for towers, datacenters and fiber optics networks will increase with the arrival of 5G and growing connectivity needs.

Overall, project finance operations in Latin America totaled US$22.7bn in the first nine months of the year, down from US$24.8bn a year ago. The reduction is attributed to auction delays resulting from the pandemic. 

Latin America’s top project finance operations

Tocumen airport 

Panama-based airport operator Aeropuerto Internacional de Tocumen raised US$1.86bn in August in an operation to finance a buyback of outstanding bonds.

FPSO Mero 3

Malaysian contractor MISC arranged a US$1.5bn financing for its Mero 3 FPSO in Brazil. 

Aegea (block 1)

Aegea Saneamento won block 1 of the sanitation concession contract in Rio de Janeiro state in April. Financing for block 1 comprises US$1.4bn. The block covers neighborhoods in the south of Rio de Janeiro city and 18 municipalities, serving 2.8mn people.

Aegea (block 4)

Aegea also obtained US$1.09bn to invest in block 4, covering the center and north of Rio de Janeiro city as well as Belford Roxo, Duque de Caxias, Japeri, Mesquita, Nilópolis, Nova Iguaçu, Queimados and São João de Meriti, set to benefit 7mn people. 

FPSO Prosperity

SBM Offshore has completed the project financing of FPSO Prosperity for US$1.05bn. The financing was secured by a consortium of 11 international banks. 

The FPSO will be spread moored in water depth of about 1,900m and will store around 2Mb (million barrels) of oil. The project is part of the Payara development, which is the third development within the Stabroek block, 200km offshore Guyana.