Energy dominates Brazilian local bond issues

Most infrastructure debentures issued last year in Brazil related to the energy segment, with state-run Petrobras undertaking the biggest operations.

Infrastructure debentures, which carry tax exemptions for investors, reached a record 33.8bn reais (US$7.68bn), up 56.2% from 2018, according to the latest economy ministry figures.

Of the total, debentures in the energy segment - electric power, oil, gas - comprised nearly 27.3bn reais, followed by logistics with 6bn reais.

“The energy segment has a constant demand, so historically, this sector dominates the volume of financing operations in capital markets, despite the challenging economic scenario,” Edson Ogawa, head of project finance at Banco Santander Brasil, a told BNamericas.

Infrastructure debentures were created in 2012 to encourage companies to tap the local debt market for financing.

Petrobras carried out three of the five largest debenture issues, through which it raised funds for oil and gas exploration. 

BNamericas takes a look at the five largest issues.

PETROBRAS

In January 2019, Petrobras raised 3.6bn reais with a debentures issue via three tranches. Itaú BBA, the investment arm of Itaú Unibanco, was the lead coordinator.

The second tranche was the biggest, raising 1.69bn reais.

These debentures mature in 2029 and the company will pay annual interest of 4.21% over the IPCA inflation index.

Petrobras is using part of the proceeds for exploration and analysis at the Florim, Northeast Tupi and Entorno de Iara blocks.

Another part will go to development and production of oil and natural gas in the Búzios, Itapú, Sépia and Atapu fields.

ELÉTRICA IVAÍ

In December, Elétrica Ivaí, a subsidiary of electric company Taesa, raised 1.65bn reais. Itaú BBA was lead coordinator. The debentures will due in 2043 and yield 5% over IPCA variation.

Ivaí is a special purpose company responsible for building certain transmission lines auctioned in April 2017, in which Taesa bid in a 50:50 partnership with Companhia de Transmissão de Energia Elétrica Paulista (ISA CTEEP).

A 1.9bn-real, 600km transmission line will be built in Paraná state and include three substations. Regulator Aneel set the startup deadline for August 2022.

PETROBRAS (1.53bn reais)

Last September, Petrobras concluded the issue of debentures in two tranches totaling 3bn reais.

One tranche, due in September 2029 and worth 1.53bn reais, became the third largest last year.

The company will pay an annual yield of 3.6% over inflation.

Proceeds will also go to development of the Florim, Northeast Tupi and Entorno de Iara blocks, along with oil and natural gas production at Búzios, Itapú, Sépia and Atapu.

Banco Santander Brasil was the lead coordinator.

CEMIG DISTRIBUÇÃO 

Cemig Distribuição issued in July 2019 debentures totaling 3.66bn reais.

A tranche worth 1.5bn reais, due in seven years and paying an annual yield of 4.1% over IPCA variation, was the fourth largest infrastructure issue. 

PETROBRAS (1.48bn reais)

One tranche of the debentures Petrobras issued in September totaled 1.48bn reais, which was the fifth largest issue of that year. Maturing in 2034, Petrobras will pay an annual yield of 3.9% over IPCA variation.