Latin Lawyer reference Project Finance 2020
Carlos Arata Delgado
Rubio Leguía Normand
- How common is project finance in your jurisdiction? In what sectors is project financing most common?
Project finance emerged in Peru in the mid-1990s and has grown exponentially since then, due to the high mitigation of the risks the structure provides, being used in the vast majority of infrastructure and energy projects.
Project financing is commonly used to finance public and private projects, mostly in sectors such as infrastructure, energy, oil, gas, transport, mining and telecommunications sectors. However, as it allows developers to isolate risks for each project they are involve in; and for lenders it is a convenient method to mitigate risks of financing new projects, we have also worked on financing transactions (using project finance structures) on other sectors such as hotels, retail, logistics, etc.
- What kinds of institutions typically act as sponsors and lenders in your jurisdiction? Why?
As sponsors in the first stages of the project, we have seen local and international project developers, from very diverse countries, such as Brazil, Spain, Mexico, France, China and Korea, among others. On later stages, after commercial operations, we have seen the presence of financial sponsors (such as foreign pension or private equity funds). Besides Brazilian companies, the presence of developers from Latin American countries in Peru has been small, probably because of the size of the projects and the experience required to develop them. Spanish companies have been the more active in Peru, probably because there is no language barrier and the idiosyncrasy is more similar compared with other European or Asian countries.
Local and international banks, export credit agencies and multilaterals have participated as lenders for this kind of transaction, depending on the size, complexity and social impact.
As to Chinese companies, they have been very active the past couple of years, whether acquiring companies and projects or filing offers for private and public initiatives. However, unless they are working with non-Chinese partners, it has not been common for them to use project finance structures, turning instead to obtaining secured corporate loans from Chinese banks… MORE