PROJECT FINANCE - White & Case advises on Matarani Port expansion

Transaction name: Matarani Port project development and financing
Value: $280 million
Parties: White & Case, Terminal International de Sur, Santa Sofia Puertos, SMBC, Mizuho, CACIB, Natixis

As copper production surges at Peru’s mines, global law firm White & Case has taken the lead as counsel to the borrower and sponsor, Terminal Interacional del Sur and Santa Sofia Puertos, respectively, in a $280 million financing package for the expansion of the Matarani Port in Arequipa, Peru. Global banks SMBC, Mizuho, CACIB, and Natixis provided 13-year tenor financing. Thanks to the project, the port is expected to have more than double its current capacity - handling more than 7.0 million MT per year - by 2017, with new facilities backed by ship-or-pay agreements with Peru’s mining firms.

In an exclusive interview with IFLR1000, White & Case’s lead partner in the transaction, Carlos Viana, described the significant “project-on-project risk” characterizing the undertaking, with neither Las Bambas nor Antapaccay – two copper concentrate mines situated near the port, and counterparties to two of the ship-or-pay agreements – fully developed. Another distinctive aspect involved management of the sale of the Las Bambas copper mine to MMG Ltd. of China. As part of the Glencore-Xstrata merger, China’s government required divestment by Xstrata of the Las Bambas mine, Viana noted.

“This all took place in the middle of our ongoing negotiations with the lenders and the borrower’s project document counterparties,” he said. "As a result we not only had to go back and renegotiate certain performance security issued under the ship-or-pay agreement, but we also had to come up with additional structures in order to be able to separate physical facilities required for the project in light of the fact that at the outset of the transaction, Glencore owned both the Las Bambas and Antapaccay mines.”

Yet another unusual feature of the project lies in the fact that the borrower is already operating an existing port, and deriving cash flow from that asset.

“The magnitude of the capex required in connection with the expansion project however was so large that the transaction was structured in such a way that most of the cash flow from the existing operations will also serve as collateral for the financing being provided in connection with the expansion project,” Viana added.

Assisting Viana were partners Sean Goldstein, Ray Simon, and Ian Cuillerier, counsel Tallat Hussain, and associates Thomas Pate, Nicolas Endre, Lauran Guijarro, Jodi Singer, and Kevin O'Neill.