Considered to be the first major biodiesel project financing in Argentina, a US$27mn non-recourse facility arranged via WestLB is seen as a milestone transaction in the country’s nascent biofuels market.

The funds, raised in July 2007, are being used by special purpose vehicle Renova SA to support the construction of the first large-scale biodiesel project in Argentina. The total cost of the project is US$40mn and it is a joint venture between Vicentin, a major Argentine soybean crusher and Oleaginosa Moreno Hnos, a subsidiary of Glencore, the international trading house.

“This was the first large-scale biodiesel project in Argentina and we have a long-standing relationship with the sponsors, Vicentin and Glencore, so it was important for us to be the first bank there to support such a landmark development,” comments Damian Polla, director of structured and corporate finance, Latin America, at WestLB.

The project consists of refined soy oil plant with a capacity of 330,000 tons per year and 220,000 tons per year biodiesel plant. It is being constructed in San Lorenzo, Argentina. Equipment is being provided by Desmet Ballestra and Lurgi, major European suppliers to the biofuel industry.

Offtake contracts, matching the five-year tenor of the financing, have been signed with Glencore and other OECD buyers. Proceeds of the sales will go through an offshore collection account to service the debt.

The financing was further strengthened through WestLB ensuring there were secure feedstock supply contracts set up via the sponsors of the project that matched the tenor of the financing.

A key obstacle in structuring this deal was the regulatory risks in Argentina, as Polla remarks: “One of the challenges was to structure the deal around some of the regulations imposed by the Argentine central bank regarding the way tenors and collection under offtake contracts are arranged.”

There were also risks associated with fluctuating export taxes on agricultural products, oil and biodiesel. At the moment, there is an export tax differential between crude soy oil, the main feedstock, and biodiesel itself which gives a tax benefit for the production of biodiesel.

However, any changes in this can negatively affect the ability of the borrower to repay the debt.

At the beginning of 2007, the government increased taxes on soy bean exports in an effort to tackle inflation.

“How did we get comfortable with that risk

  • Argentina is a very competitive crude soy oil market by world standards, thanks to its infrastructure and access to raw material,” explains Polla. 

    “Therefore by working with a low-cost feedstock (which represents about 85% of the total cost of producing biodiesel) you ensure the produced biodiesel is also low-cost. As a result, the low-cost nature of the feedstock is one of the key mitigants to the risk of increased export taxes.”

    The deal has helped WestLB, as sole arranger on the transaction, to cement its relationship with the sponsors, and the bank has already received a mandate to finance the expansion of the original Renova project.

    Deal Information:



    Sponsors: Vicentin and Oleaginosa Moreno Hnos (a subsidiary of Glencore)
    Amount: US$27mn
    Sole mandated lead arranger: WestLB
    Tenor: Five years
    Law firms: Mayer Brown Rowe & Maw (lender’s counsel in US); Errecondo, Salaverri, Delatorre, Gonzalez & Burgio (lender’s counsel in Argentina); Fernandez Quiroga, Ayarragaray & Ocampo (borrower’s and sponsor’s counsel); Harari & Kabusacki (borrower’s and sponsor’s counsel)
    Date Signed: July 2007