Directory of Innovative Financing: Jamaica

Jamaica

Project Title: Rockfort Power Project

Country: Jamaica

Project Costs: $144 million

Sector: Power generation

Status: Closed in October, 1994; currently under construction and due to become operational in August, 1996

Sponsors: Jamaica Private Power Co. (a consortium of International Energy Partners, Hydra-Co., and US Energy Co.) with Commonwealth Development Corp., UtilCo and Energy Investors Funds as limited partners.

Customer: 20-year power purchase agreement with Jamaican Public Service Co. based on initial RFP bid price of 6.91 cents/KwH. Certain tariff components will be indexed to reflect changes in inflation, currency value, and changes in costs that are outside the sponsor's control.

Financing Package: 70/30 debt-equity ratio, with debt financed through a combination of bond issues backed up by letters of credit and multilateral loans.

Innovation: Debt component includes $81 million in five-year bonds from the Puerto Rico-based Caribbean Basin Project Development Authority (CARIFA) to be rolled over into $81 million in combined long-term Inter-American Development Bank/World Bank loans.

Brief: Jamaica's first independent power project, 60MW Rockfort is being built in response to a 1992 request for proposals the government issued to potential sponsors. JPPC was selected in January, 1993 on the basis of its innovative approach to raising debt, which was not available from commercial sources because of Jamaica's country risk perceptions and debt burden. The sponsors are financing construction through 5-year 6.2% tax-exempt CARIFA bonds that will be rolled over upon maturity into 17-year IDB/World Bank loans that will be channeled through the National Investment Bank of Jamaica.

The multilateral banks' involvement allowed JPPC to secure bond redemption guarantees from Bank of Tokyo, Deutsche Bank and NationsBank, which in turn allowed it to obtain the AA credit rating necessary to access the CARIFA program, which typically provides debt at 85% of LIBOR. The World Bank's Multilateral Investment Guarantee Agency (MIGA) is guaranteeing $50 million in sponsor equity against political risk factors such as foreign exchange inconvertibility, war, revolution and expropriation.

The largest private investment Jamaica has seen in the last decade, Rockfort will supply 10% of the nation's electricity needs upon completion.

Infrastructure and Financial Markets Division
Private Enterprise and Financial Markets Subdepartment
Sustainable Development Department
Inter-American Development Bank

Last updated: 02/26/07