Directory of Innovative Financing: Trinidad and Tobago

Trinidad and Tobago

Project Title: Refinancing of Power Generation Co.

Country: Trinidad and Tobago

Project Costs: $71 million

Sector: Power generation

Status: Rule 144A Eurobond placed in August, 1995.

Sponsors/Lead Manager: PowerGen, a newly formed entity that was created in December, 1994 when the government sold large stakes in its generation assets to two US strategic investors: Southern Electric International (39%) and Amoco (10%). CS First Boston advised in that transaction and was lead manager in the subsequent capital market refinancing.

Customer: Trinidad & Tobago Electricity Commission (TTEC), which has guaranteed fuel supply for the plant at no cost and is buying the electricity at a fixed price, 15-year power purchase agreement.

Financing Package: Five-year bullet financing with an 11% coupon priced at 475 bp over US Treasuries.

Innovation: This transaction marks the first non-recourse power project, financed for an emerging market issuer in the 144A market since early 1994, and the first of that kind to test any capital market since the Mexican peso crisis. At only 75 bp above the relevant Trinidad & Tobago sovereign, it was also seen as having the tightest spread of any project finance bond originating outside the US.

Brief: In 1991 state-owned T&TEC completed a study forecasting the expected generation required for Trinidad and Tobago up to the year 2010. Based on the results of the study, the least cost alternative was the installation of a 150-200MW combined cycle plant between 1993 and 1995 at an estimated cost of up to $120 million. With IFC assistance, the government then chose to privatize the power generation arm of T&TEC in order to raise enough financing to build that plant.

Two US strategic investors, SEI and Amoco, together paid about $107 for a controlling 49% stake in the newly privatized generating arm of T&TEC that was renamed PowerGen. SEI then chose to refinance its acquisition in the public bond markets, while Amoco chose to maintain its investment on its corporate balance sheet.

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

Last updated: 02/26/07