Calyon and Banco BPI's electricity prepayment deal attracts banks

Mandated lead arrangers Calyon and Banco BPI have reached first close on their electricity prepayment facility being syndicated for electricity producer Hidroelectrica de Cahora Bassa (HCB) in Mozambique. The deal was funded in November 2007. A further seven banks have now joined the facility.

The deal was originally for US$800mn, but early on in the transaction the facility was redenominated into South African rand. This was due to the fact that the major offtaker on the facility is the South African power company Eskom.

The total transaction value now stands at R5.736bn. With the seven additional lenders joining the facility, a total of R2.6bn has now been sold down.

General syndication was launched in February, and a number of additional banks are in the process of finalising their commitments.

Calyon and Banco BPI signed and funded the deal in November 2007. Joining the two lead banks at that early stage was the Development Bank of Southern Africa (DBSA) who acted as a sub-underwriter.

The structure of the transaction involved the setting up of a special purpose vehicle (Renascer) to act as the borrower. The deal was then arranged as a classic structured commodity finance facility with some enhancements to reflect the unusual underlying commodity.

When structuring the deal, the arrangers had to adhere to the Mozambique government's wishes that the deal did not have recourse to itself, and would not require the support of multilaterals or the political risk insurance market.

It carries a tenor of 10 years, the longest tenor to date achieved on a structured commodity finance deal in Africa. The margin being paid is 190 basis points for the first two years, rising to 240bp in years 3-6, and then increasing to 280bp between years 7-10.

Considered a "one-off” deal, the financing is being raised for the Mozambique government to pay for its acquisition of a majority stake in HCB from the Portuguese government.

It is Mozambique's first big ticket commercial transaction to be closed without political risk insurance or the support of multilaterals. It is also thought to be the first cross-border electricity prepayment completed in Sub-Saharan Africa. The deal is additionally unique given the delicate diplomatic issue surrounding the ownership of HCB. Since Mozambique gained independence from Portugal in 1975, the electricity company has become a symbol of Mozambique's economic autonomy.