Comisión Federal de Electricidad (CFE) acquisitional financing | US$1.2bn | ||
Synopsis Financing of five gas-fired power stations, a 54 km gas pipeline and associated companies in Mexico by a consortium of Japanese financial institutions | |||
Firm | Client | Role | |
Allen & Overy [Lead lawyers: Aled Davies, Scott Neilson] | JBIC, Mizuho, SMBC | International counsel to lenders (Japan, NY, Madrid and Paris) | |
Ritch Mueller | JBIC, Mizuho, SMBC | Counsel to lenders (Mexican law) | |
MoFo | Mitsui & Co, Tokyo Gas | Counsel to group of companies (Japan, New York) | |
LVHS | Mitsui & Co, Tokyo Gas | Counsel of group of companies (Mexican law) | |
Strasburger | Collateral agent | Counsel to the collateral agent and the offshore depositary | |
Forastieri | Collateral agent | Counsel to the collateral agent and the offshore depositary | |
The US$1.2bn acquisitional financing of five gas power stations as well as a 54 kilometre gas pipeline for a group of associated companies in Mexico – all subsidiaries of Mitsui & Co and Tokyo Gas – is a sign of a resurgence in the Asia-Pacific project finance market and overseas acquisitions by Japanese utilities and trading companies.
“This was an extremely complex and novel financing structure,” said Allen & Overy’s lead partner Aled Davies. “It sought to preserve the commercial benefits of lending to a group of companies operating power stations and a pipeline under long-term contracts with CFE, the Mexican state power utility, and to ensure a problem relating to one project company in the group would not spread to impact on the others.”
The power stations have an aggregate generating capacity of 2,233MW and are contracted by the Mexican federal electricity commission, Comisión Federal de Electricidad (CFE), whose right to approve certain aspects of the transaction was a key driver behind the innovative and complex structure of the transaction.
The structure combined aspects of limited recourse financing to each operating company. If problems arose with one operating company, action can only be taken with respect to that company with no cross-collateralisation.
“We are continuing to see strategic M&A activity from Japanese corporations overseas and believe that this trend will continue. This project was of strategic importance to the sponsors in expanding their global power generation capacity,” Davies said.
According to senior associate Scott Neilson, the deal saw A&O implement a new financing structure that wrapped five operating power stations and a 54 kilometre pipeline into a “siloed" structure that the team created especially for this deal.
The borrower was MT Falcon Holdings Company – a special purpose entity established in Mexico and directly held by Mitsui and Tokyo Gas. The assets were purchased from Gas Natural, a major Spanish utility.
Allen & Overy won the mandate to act as lender’s counsel for this acquisition financing as consequence of its recent deal experience in acquisition and project financing in the power sector involving Japanese sponsors in the last 4 years.
The Allen & Overy Tokyo team also has a strong track record in LatAm project financing. Last year a team led by Aled and Scott closed the Manzanillo LNG Project financing in which Mitsui was also a sponsor.
The team has a strong relationship with JBIC, Mitsui, BTMU, Mizuho and SMBC.ALB
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