Chapter 7

Samalayuca II, Mexico

Type of project

Power plant.

Country

Mexico.

Distinctive features

• First quasi-independent power producer (IPP) venture in Mexico, paving the way
  for future IPPs.


• First private-sector financing for the Inter-American Development Bank (IDB).


• Build-lease-transfer (BLT) project structure.


• Hybrid between project financing and structured on-balance-sheet financing, with
  equity holders earning equity rate of return during construction phase and subordi-
  nated-debt rate of return during lease phase.
  •Trust structure developed to provide lenders with protection not available with leas-
  es under then-current Mexican law.


• Political risk coverage from the Export-Import Bank of the United States (US
  Eximbank) and the IDB.


• Contract documents in Spanish, governed by Mexican law; financing documents in
  English, governed by New York law.

Description of financing

The US$650 million project cost was financed in 1996 as follows:

• US$132 million in sponsors’ equity;


• US$442 million as a commercial bank construction loan, with a term of 10 years,
  taken out by US Eximbank; and


• US$76.9 million in construction and term financing from the IDB.
  The financing was structured as a build-lease-transfer (BLT) under a Mexican busi-
  ness trust.