Huascacocha Water Transfer Project

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In January 2009, Brazilian firm OAS signed a 20-year BOT contract to design, build, finance, and operate the Huascacocha Water Transfer Project. The project was to increase water supply by damming Lake Huascacocha, carry water from there via waterways and tunnels to the water treatment facilities owned by Sedapal, the state-owned water utility in Lima, and a hydroelectric plant owned by Edegel. The Huascacocha project was to increase by 1.7-2m3/s the water supply to the potable water treatment plant of Huachipa, benefitting 2.4mn residents in Lima and neighboring port city Callao. OAS won the concession via a competitive tender in late 2008. The bidding criterion was the lowest unit cost to be paid by Sedapal for the transferring of water to the supply point. However, OAS was the only bidder that submitted final technical and financial offer. In May 2009 OAS mandated BNP Paribas, which had been among the banks that financed CRPAOs in the dollar market, on the IIRSA Tramo 5 project. The sponsor set up a Cayman Islands-registered issuing vehicle, called Huascacocha Finance Limited, which would use the proceeds of the financing to buy the RPICAOs, Peruvian Nuevo Soles-denominated index-linked obligations to make payments, as they are issued to the concessionaire by Sedapal. Until the proceeds are required to buy these RPICAOs they are kept on deposit at Citibank in Peru. The project cost was estimate to be Soles 339 million (US$119.8 million). The project reached financial closure through a S/.321 million ($113.4 million) local currency bond financing. Of the S/.321 million in index-linked bonds, S./212.32 million series funded immediately, while a second series of S./108 million is delayed draw and will fund in April 2011. That presented a debt/equity ratio of 95/5. The bonds were backed by payment certificates from the government (RPICAOs) for the construction of the facility, which the concessionaire would receive incrementally in exchange for works. The debt was backed by these certificates and ultimately by Peru's federal Ministry of Housing, Construction and Sanitation. Construction works were concluded in June 2012.