Security package
Senior lenders are secured by a lien on and security interest in the collateral, subject to the
priority of payment on the working capital facility loans. The collateral consists of real and
personal property owned by TermoEmcali and Leaseco, including equipment, receivables,
insurance, and other tangible and intangible assets; all of TermoEmcali’s and Leaseco’s
rights, title, and interest in the project contracts; equity obligations of the project sponsors; all
revenues of the borrower; all accounts established under the collateral agency agreement; and
all permits and other approvals of the project.
Emcali support package
In addition to the security package, Emcali’s obligations under the PPA are supported by a
letter of credit and a fiducia. The fiduciais a trust that grants TermoEmcali a priority interest
in a portion of Emcali’s operating cash collections in case Emcali defaults on its payment
obligations under the PPA. Emcali installed the fiduciaafter closing. Until the fiduciawas in
place, the letter of credit was oversized.
In the US$424 million Termobarranquilla power project, closed in November 1995, the
obligations of Corporación Eléctrica de la Costa Atlántica to pay for power were guaranteed
by Financiera Energetica Nacional SA, an official Colombian government financial institu-
tion used to finance the electricity sector, as part of an emergency programme to increase gen-
erating capacity. The letter of credit and the fiduciawere used in place of a government
guarantee in the TermoEmcali project.
The PPA required a letter of credit, equal to four months of capacity payments dur-
ing operations, issued by a creditworthy Colombian bank. A back-to-back letter of cred-
it was to be issued in favour of the lenders by an international bank with at least an ‘A’
credit rating.
Emcali’s customers pay their bills at designated banks. The fiduciacovers collection
accounts at those banks to the extent
necessary to provide TermoEmcali
access to two times average monthly
capacity and energy payments to the
project. If Emcali fails to maintain the
requisite amount of collateral in the
fiducia, it is required to pay an escalat-
ing premium that is added to the capaci-
ty payment. If Emcali defaults on its
PPA payment obligation, the fiduciaria
(trustee) has the right to use daily col-
lections in the designated collection
accounts. Exhibit 3.6 shows a sensitivi-
ty analysis of how the debt service cov-
erage ratio would be affected by adverse
factors such as delay in commercial
operations, reduction in capacity, an
increase in heat rate degradation or an
increase in operating costs.
TERMOEMCALI, COLOMBIAExhibit 3.6
Sensitivity analysis in respect of debt
service coverage ratio (DSCR)Sensitivity Average Minimum
case DSCR DSCR
Base case 1.62 1.54
0% dispatch 1.64 1.52
1-year delay in commercial
operation date 1.63 1.54
2% reduction in capacity 1.58 1.50
2% reduction in available capacity 1.58 1.50
1% increase in average heat
rate degradation 1.61 1.53
10% increase in operating costs 1.60 1.52
10 days per year on fuel oil 1.65 1.56
Source:Prospectus for project bonds.