[China Co-Financing Fund] IDB administers $36 million loan from CHC to Fideicomiso Financiero Arias for Colonia Arias Wind Project

On 15 December 2015, the Inter-American Development Bank (IDB) signed a loan contract with Arias Financial Trust (Fideicomiso Financiero Arias) to finance the Colonia Arias Wind Farm Project, through which the IDB would provide 71,818,000 USD from its ordinary capital (Loan 34543/OC-UR-1, Loan 3453A/OC-UR-2), and the People's Bank of China would provide 35,909,000 USD (Loan 3453/CH-UR-1, 3453/CH-UR-2) via the China Co-Financing Fund for Latin America and the Caribbean (CHC). The IDB would administer an additional B loan of 17,959,000 USD, which would be provided by another commercial bank or financial institution (Loan 3453B/OC-UR-SP-BBAOMAB). The financing package administered by IDB for this project totaled 124,038,670 USD. The total project cost was 180 million USD, with the remaining financing expected to be provided as counterpart financing. The IDB approval date for this loan financing was 6 May 2015, and it refers to this project as "UR-L1103 : Colonia Arias Wind Project". The "PROSPECTO INFORMATIVO," published only a few days before the loan contract was signed, provided a sample loan contract that identifies loan terms that the final contract "will be substantially similar to." This document notes the loan will have two tranches, one of which (representing 75% of the total amount loaned) will have a fixed interest rate, and the other with a variable interest rate. The fixed interest rate was expected to be calculated with a fixed LIBOR rate determined three (3) business days prior to the date signature of the Loan Agreement, plus the following margins: 2.50% per year from the date of signature of the Loan Agreement until its second anniversary; 2.75% per year from the second anniversary to the sixth; 3% per year from the sixth anniversary to the tenth; 3.25% per year from the tenth anniversary until the fourteenth; and 3.40% from the fourteenth anniversary to the last Payment date. The variable interest rate for the funds coming from the China Co-Financing Fund and the IDB's A loan would have an interest rate based on the applicable LIBOR rate, plus the same margins specified above. It is unknown how much of the China Co-Financing Fund loan was in each tranche. According to "Fideicomiso Financiero Arias (en fase preoperativa) - Estados financieros correspondientes al ejercicio finalizado el 31 de diciembre de 2015...", the total loan amount additionally has a commitment fee of 0.75% per year on the undisbursed amount. All three loans will also have a 20 year maturity and 2 year grace period. For the purposes of this project, the average 6-Month LIBOR in December 2015 (the date of signing of the agreement) was 0.764%, so the interest rate with the initial 2.5% margin has been coded as 3.264%. The Colonia Arias Wind Farm has a 70 MW capacity and is part of a larger effort by the Government of Uruguay and the Administración Nacional de Usinas y Trasmisiones Eléctricas (UTE, National Administration of Power Plants and Electrical Transmissions in English) to develop 412 MW of wind farms that are fully or partially owned by UTE and, overall, reduce dependence on fossil fuels and hydraulic energy. The project includes not only the wind farm itself, including 35 wind turbines, but also a 26 km transmission line in the department of Flores. It is expected to produce 303.1 gigawatt-hours per year of electricity. The Arias Financial Trust, to which these loans were provided, was created by UTE on September 12, 2014, specifically for this project. In addition to receiving these loans via the trust, the project also received equity financing: 80% through an Initial Public Offering (IPO) in the Montevideo Stock Exchange and the remaining 20% from UTE itself. About 70% of the project is funded by the long-term loan and 30% is funded through equity. The total project cost was estimated to be about 179.7 million USD. The project also has a long-term Power Purchase Agreement (PPA) with UTE, in which all the energy produced will be sold to UTE for incorporation into the Uruguayan electrical grid. Gamesa Eólica SL y Gamesa Uruguay SRL were the contractors engineering and constructing the project, per the IDB environmental impact report. Construction began in June 2016, and the park was operational by the end of 2017, according to UTE's Memoria anual 2017. On February 5, 2016, the contractors' obligation to finish the project in 73 weeks (18.25 months, or just over 1.5 years) began, making the furthest expected end date August 12, 2017. According to the 2017 Memoria for Administración Nacional de Usinas y Trasmisiones Eléctricas, as of 12/31/2017, there is no pending balance.

Additional details

1. A copy of the full loan contract could be found. The "PROSPECTO INFORMATIVO" ahead of the Initial Public Offering gives an estimation of what the loan contract was expected to look like ("will be substantially similar to"), including loan terms and loan amounts. This estimate has been used for the transaction amount, especially insofar as it aligns with the IDB's estimated amount, although the Prospecto Informativo's estimate for the total loan amount (between all three loans) was 125.600.000 USD compared to the final 124,038,670 USD. 2. The all-in interest rate was coded based on the first margin provided (2.5%). Since LIBOR rate three days prior to the signing of the agreement is not available, interest rate calculation is based on the 6M LIBOR average for December 2015: 0.764% + 2.5% = 3.264%. 3. The China Co-Financing Fund was established on 14 January 2013 with a contribution of 2 billion USD by the People's Bank of China, and it is administered by the IDB. For more information, see umbrella project ID #86526.

Number of official sources

14

Number of total sources

16