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energy sector consolidation for continued M&A flow, Swenson does not expect any multibillion dollar deals in 2009. Conduit’s Latin Power III fund had invested almost $98 million as of December 31. Total capital raised for that vehicle was $393 million. “We will use up our capital in 2009,” Swenson adds. In December, Conduit completed the sale of the Libramiento natural gas compression plant and pipeline in Mexico to Canada’s InterGen for $89.2 million. The shop says it will earn about twice what it invested in Libramiento in 2005 through the December exit. In October, Conduit paid more than $50 million for a 50% stake in Brazil’s GLEP, a developer of hydropower projects. Partnering with Pemex International energy companies are not only looking at utilities and pipelines. “There are smaller exploration and production companies here in Mexico that could be acquired by some of the larger players from Norway, the US and Spain,” says Gilberto Escobedo, a partner at investment bank boutique Sedna-Serficor. He adds that energy reform recently approved in Mexico allows Pemex more flexibility to subcontract private companies, which in turn could spur M&A. “There is growing interest from companies that do not have operations in Mexico to acquire stakes in companies that have contracts with Pemex,” says Mauricio Candiani, another partner at SednaSerficor. These potential targets offer a wide variety of services to Pemex, including exploration, welding, transportation and offshore platforms, he adds. Candiani says companies that work with Pemex in the exploration of shallow waters will move to explore deeper waters and may want to enter a joint venture with another company that has experience in this. “Pemex already has experience in shallow water exploration and is expected to do more deep-water,” he says. Other targets could be companies that made sizable investments during the oil price boom but now need to generate funds for debt payments, he adds. Oil and gas opportunities extend beyond Mexico. “We are working with international oil and gas companies that are looking at Colombia, Brazil, Peru and even to a certain extent Argentina,” says Christian Langaard, a partner at private equity firm Euro-Latin Capital. “We also have numerous investors interested in biofuels in Colombia and Brazil. Biomass and other renewable energy projects in Brazil are also attracting attention,” he adds. Multinationals like Cargill, Monsanto, Shell and Noble are also said to be looking at ethanol, especially in Brazil, where many firms have come under liquidity pressure. Locals like Cosan and São Martinho could also be buyers says an investment banker who has done deals in this industry. NovaAmerica and SantelisaVale Bioenergia are among those said to be looking for a buyer. SantelisaVale took on 1.35 billion reais in March 2007 to finance a buyout by a group of controlling shareholders. In July 2007, Goldman Sachs purchased a 19% stake in Santelisa for 400 million reais, valuing the company at the time at some 2 billion reais. “The company is probably worth well over $1 billion today,” says a banker with knowledge of the assets, pointing to the company’s 20 million ton annual crushing capacity. “There are about 300 different groups that own companies related to sugar and ethanol in Brazil. There will be more consolidation and this will result in more efficient production and delivery,” adds the ethanol industry banker. Keeping it Latin Transactions led by LatAm energy companies should also continue. Colombia’s Ecopetrol is emerging as a major dealmaker in the region, with a $870 million war chest for acquisitions. In February, it joined Korea National Oil (KNOC) to acquire Offshore International Group (OIG), a Houston-based company whose main asset is Petro-Tech Peruana, for $900 million. Each buyer is acquiring a 50% stake. Ecopetrol and KNOC intend to double Petro-Tech’s production in three years. Petro-Tech produces 12,000 barrels of oil per day. A source close to the deal says there were no financial advisors involved in the cash transaction. Ecopetrol may soon strike a pact with Glencore in Colombia. Colombia’s ministry of mines and energy says Glencore will not be able to finance the modernization of the Cartagena refinery, of which it owns 51%, because of difficulties accessing financing. As a result the Colombian government may have to take over the asset and search for a new partner to get the modernization plan going. Glencore purchased its stake in the refinery through an auction for $656 million in 2006, according to the ministry. Brazil’s Petrobras had offered $595 million. Ecopetrol says an agreement has not been reached and that the two companies are evaluating alternatives. It claims the option of first refusal if Glencore decides to sell. A banker with knowledge of Ecopetrol says the company is also actively looking at acquisition opportunities in Asia and Africa. “They are in talks right now with potential targets. Ecopetrol has the cash and is making serious offers,” he says, declining to name targets. Meanwhile, wind power is also seeing its share of M&A. Brazil’s Cemig has acquired a 49% stake in three wind projects from Argentina’s Impsa. The deal is valued at $92.6 million and was paid for in cash, according to Dealogic, which adds that HSBC advised the acquirer. Cemig says that the entire output of the electricity to be generated by these wind farms will be sold to Eletrobras. Fernando Gentil, managing director at Darby Overseas, expects entrepreneurs to invest in wind power and that his shop has considered the sector. However, these projects require a significant long-term investment and are mostly start-ups, some of which are running out of cash. “I wouldn’t be surprised if some of the investors behind the start-ups decide to sell,” he says. And private equity is filling a financing gap left by most banks’ aversion to lending. “There are projects that have no access to financing and have turned to private equity investors to get funds,” says Salvador Escobedo, cleantech investment manager at Panama-based Grupo Ecos, a private equity shop. “However, even though this may spell opportunity for private equity funds, they are being very careful when selecting who to work with,” he adds. LF March/April 2009 LATINFINANCE 39

Latin Finance - March/April 2009

Table of Contents for the Digital Edition of Latin Finance - March/April 2009