Bank guarantees funding for Brazil’s Energisa S.A.

The Inter-American Development Bank (IADB) has approved a partial credit guarantee to US$200 million for debt refinancing of one of Brazil’s oldest hydro-owning utilities.

The IADB credit covers principal plus part of the interest for Banco Itau’s local currency loan to refinance debt of Energisa S.A., holding company of the Cataguazes-Leopoldina Group. Energisa said the transaction is the first IADB initiative to ensure refinancing of debts in the Latin American market, assuming the currency risk in the borrower’s country.

�The refinancing will extend the tenor of Energisa’s existing debt from five to ten years,� IADB team leader Sylvia Larrea said April 25. �The operation will improve Energisa’s ability to service its debt and provide a debt structure more consistent with the long-term nature of its underlying assets.�

IADB said the deal will allow Energisa to free up funds for investing in its subsidiaries for improvements in their quality of service, reduction of energy losses, expansion and upgrade of distribution, and expansion of rural and urban electrification.

Founded in 1905, Cataguazes-Leopoldina has been active over the years in Brazilian hydropower development.

Restructuring mandated by Brazil’s new Electricity Sector Law required utilities to separate their generation functions from their transmission and distribution functions. As a result Cataguazes’ Energisa S.A. unit was transformed into a holding company controlling its distribution utilities, its thermal and hydro generating companies, and Cat-Leo Construcoes, the group’s hydro operation, maintenance, construction, and equipment company.

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