Latin America: Cobra-Mitsui finalizing USD 474m Chilean desalination plant loan

05 June 2018 - 12:00 am UTC

The SPV Caitan is close to signing a USD 474m syndicated loan with international lenders for construction of the Spence copper mine desalination plant in Chile.

Three sources said the SPV Caitan – comprising Spanish developer Cobra Group (50%) through its affiliate Tedagua, and Japanese trading house Mitsui & Co (50%) – are on the verge of signing a 17-year non-recourse term loan. The financing package also includes a USD 40m VAT facility and a USD 45m letter of credit.

Although details of the financing have been agreed, lenders are awaiting approval from Caitan and Australian miner BHP Billiton, grantor of the project.

Eleven international lenders are supporting the transaction as mandated lead arrangers: BBVA, Crédit Agricole, ING, Intesa Sanpaolo, Mizuho, MUFG, National Australia Bank, Nippon Life Insurance Company, Santander, SMBC and Sumitomo Mitsui Trust Bank.

BBVA and Santander are providing the VAT facility. BBVA is also acting as hedge provider, while Mizuho is serving as administrative agent.

The sponsors are backing the deal with cash flow expected from BHP Billiton (Moody’s A3; S&P A), which owns the Spence copper mine. BHP will pay USD 1.43bn for the supply of treated water to the mine, over the 20-year life of the concession contract signed with SPV Caitan.

The structure of the deal will include a guarantee provided by BHP Billiton that encompasses the entire life of the term loan.

In July 2017, BHP Billiton approved a USD 2.5bn investment for the upgrade of the Spence copper mine, the Spence Growth Option (SGO) project, to extend the life of the mine for more than 50 years. The upgrade requires a 1,000-liter per second desalination plant on the Mejillones Bay in the Antofagasta Region in northern Chile.

In October 2017, the Cobra/Mitsui joint venture signed a BOT contract with BHP Billiton for the desalination plant project, which includes a 154km water pipeline from the plant to the Spence mine site, and two 69kV electricity transmission lines. A 15km line will deliver power to the plant while a 50km line will connect to the pumping stations.

The project is slated to become operational in 2Q20, for an estimated total investment of USD 620m.

MUFG is financial advisor to the sponsors.

Milbank is the international legal counsel to the sponsors, while Barros & Errázuriz is the local legal counsel. Allen & Overy is the legal advisor to the lenders, while Garrigues serves as local legal advisor.

Cobra is a subsidiary of Spanish conglomerate ACS.

Mitsui said it would continue to pursue synergies with mining development projects in Chile, since it expects increased demand for water from the domestic copper mining industry.

 

Cobra