Santo Antonio Hydroelectric Plant

Santo Antonio hydroelectric plant will on completion have a capacity of 3,150MW, using 44 bulb-type turbines at the plant on the River Madeira. It is being built in parallel with the 3GW Jirau hydroelectric plant, also on the Madeira.

The Santo Antonio hydropower project was the biggest deal in IJ's league tables for 2009 - and any US$5 billion deal making it to financial close in the credit crunch deserves closer inspection.

A creative combination of development and commercial bank lending - from both local and international banks - with a capital markets solution on the side, means this deal really was one of the most spectacular of last year.

The project

Santo Antonio hydroelectric plant will on completion have a capacity of 3,150MW, using 44 bulb-type turbines at the plant on the River Madeira. It is being built in parallel with the 3GW Jirau hydroelectric plant, also on the Madeira.

The right to build the plant was won by SAESA (Santo Antonio Energia), a consortium made up of:

  • Furnas, a state-owned power company - 39 per cent
  • Amazônia Energia II, a private equity fund owned by Banco Santander and Banco Banif - 20 per cent
  • Odebrecht Investment, Brazilian construction firm investment arm - 18 per cent
  • Andrade Gutierrez, a Brazilian construction firm - 12 per cent
  • Cemig, a state-owned power company - 10 per cent
  • Construtora Norberto Odebrecht, EPC contractor - 1 per cent

SEASA won the concession tender for the development, construction and operation of Santo Antônio in December 2007 and signed the concession contract in June 2008.

The project will sell 30 per cent of its output in the regulated market to Brazilian distribution energy companies over 35 years, and the remaining 70 per cent under 15-year bilateral contracts.

As well as taking part as a sponsor though a private equity fund, Banco Santander took on the role of financial advisor to the project company in what turned out to be the largest and most complex financial structure for an electricity generation project led by private enterprise in Brazil.

The financing

SAESA and Santander had the mammoth task of finding a total of R$13.2 billion (US$5.4bn) for the project, which ended up being funded on a 66:34 debt-to-equity ratio.

That meant a total of R$8.66 billion (US$3.57bn) to find in debt funding - meaning a diverse range of funders and financing instruments would need to be used.

Key to the project financing was the BNDES A/B loan structure, syndicated through a number of banks. The direct lending tranche saw BNDES loan the cash, but share risks with the commercial bank group; the B tranche saw funds lent by the commercial banks, but again risks were shared with BNDES.

The direct tranche was slightly larger than the indirect tranche, coming in at R$3,092,586,200 (US$1,276m). The indirect BNDES tranche was R$3,042,586,200 (US$1,255m). Both tranches have a 25-year tenor.

Both tranches were syndicated to four banks, with Santander taking a lead role by initially underwriting 50 per cent of the B loan. The other three banks, before further syndication, lined up as follows:

  • Banco do Brasil - 20 per cent
  • Banco Bradesco - 20 per cent
  • Unibanco - 10 per cent

More funding was found through a 25-year debenture issue to workers' fund FGTS, which subscribed to the tune of R$1.26 billion (US$520m).

Two more tranches joined the project financing, independent of BNDES. Banco da Amazônia lent R$503 million (US$208m) over 20 years, and Caixa Econômica Federal took a further R$760 million (US$314m) in a separate bond issue.

Both those banks went on to take part in a later syndication, which saw the original four banks, except Banco do Brasil, scale back their commitments.

Caixa Econômica took R$1 billion under the R$3,426 million BNDES B loan, with the eight-strong club ending up with the following tickets:

  • Banco Santander - R$350m
  • Banco do Brasil - R$558.6m
  • Banco Bradesco - R$340m
  • Unibanco - R$135m
  • Caixa Econômica Federal - R$1,000m
  • Banco do Nordeste do Brasil - R$389m
  • Banco da Amazônia - R$190m
  • BES Investimento do Brasil - R$80m

The A and B loans were priced at BNDES' special rate, TJLP, plus 50bp basic rate, plus 50bp intermediation fee (on the B loan only), plus a risk spread starting at 200bp, falling to 150bp after licensing, and later to 100bp. TJLP currently stands at 625bp.

Subsequent to financial close, Santander went on to sell half of its equity participation in the Amazônia Energia II fund to FGTS, giving the workers' fund an almost 5 per cent equity interest in the project.


Such a complex project financing was a triumph for the sponsors and their financial advisor Santander, as well as BNDES and a wealth of other stakeholders in the project.

The project closed shortly before its sister project, Jirau, which benefited from yet more BNDES funding, and did not use the capital markets structure used by Jirau.

Santo Antonio gets a special mention for bringing in FGTS, a new partner in infrastructure financing of the type Brazil is going to need more in the coming years.

As the country gears up for continued economic growth, alongside the World Cup and Olympics it is due to host this decade, more and more deals will have to seek funding from new avenues - though BNDES will surely remain the key player.