Latham & Watkins advised the financing sources in concurrent US$1.1 billion bank and bond transactions for Tierra Mojada, a newly constructed, state-of-the-art 874.5-megawatt natural gas-fired combined-cycle power generation facility located in the Mexican state of Jalisco. The project is owned and operated by Fisterra Energy, a Madrid-based portfolio company that specializes in energy infrastructure investments worldwide and is controlled by The Blackstone Group.
The transactions included a US$953 million Rule 144A / Regulation S offering of 5.75% project bonds due 2040 and a US$170 million letter of credit facility provided to satisfy certain credit support obligations of the project. The proceeds of the offering, the majority of which were on-lent to the operating company under a proceeds loan from the issuer, were used to repay the project’s construction loan and other financing arrangements, to fund debt service reserves and to make a distribution to the project sponsors.
The power generation facility, which achieved commercial operation shortly before the offering was consummated, benefits from long-term US dollar-denominated power purchase agreements with Mexican government and private-sector offtakers that account for a substantial portion of its projected output over the bonds’ 20-year life. It is strategically located near the city of Guadalajara, Mexico, which is expected to remain an energy-importing region for the foreseeable future due to continued growth in energy demand.
The Luxembourg issuer of the bonds and guarantors organized in the Netherlands and Mexico granted security interests in certain assets as collateral for the obligations, including substantially all of the assets of the operating company via a Mexican collateral trust. The bonds will be serviced in accordance with a fully sculpted amortization schedule with target debt balance cash sweeps from a debt service reserve account partially funded by the bond proceeds. The bonds received investment-grade ratings from Standard & Poor’s, Moody’s, and Fitch, and were listed on the Singapore Exchange.
Latham represented the initial purchasers in the project bond offering and the providers of the letter of credit facility with a deal team led by project finance partner Warren Lilien and capital markets partner Roderick Branch, with associates Daniel Chor, Jonathan Sarna, Greer Gaddie, and Costanza García. Tax partner Jiyeon Lee-Lim, with associate Sam Yang, advised on tax matters.