Conduit earns 2.3x on first fund

Conduit Capital Partners, a firm that invests in Latin American infrastructure assets, has fully exited its first fund with the sale of three of its portfolio companies. Conduit’s Latin Power I closed on $100 million in 1993, and will return an estimated 2.3 times committed capital, and generate an internal rate of return of 10.8 percent.

Conduit sold two of Latin Power I’s portfolio companies and has agreed to sell a third. Dominican strategic investor Basic Energy has acquired diesel-fired generating facilities Jamaica Energy Partners for $92.5 million (€64 million), local Colombian investors paid $17.5 million for Colombian gas-fired thermal power facility Mamonal, and Duke Energy and Maple Resources have agreed to buy Conduit’s 13.2 percent stake in Peruvian natural gas facility Aguaytia.

The fund’s history is a tumultuous one. During its 14-year investment period, several regional economies, notably Argentina, Mexico and Uruguay, experienced severe economic crises. As a result of this type of instability throughout the region, private equity capital deployed for deals in Latin America dropped from $5 billion in 1998 to $630 million in 2004, according to data from the Latin America Venture Capital Association.

Economic conditions sent asset prices tumbling and forced Conduit to hold onto some assets longer than it intended. All three investments had long holding periods. Mamonal was one investment that saw “difficult periods”, Conduit partner Juan Paez said in a statement.

“Not only did Colombia go through a recession, but there were also regulatory changes and security concerns during this period,” Paez said.

The firm, which invests in infrastructure assets in Latin America, has now exited a total of five companies in the last three months. In October Conduit sold its stake in Colombian coal power plant Termotasajero to a Chilean investment fund, Colombian pension funds and a Colombian investment bank, for $173 million. Earlier this month, the firm sold its 70 percent stake in three hydroelectric power plants in western Mexico to Italian government-owned utility company Enel for $193 million.

Conduit’s second fund, Latin Power II, which closed on $157 million in 1998, holds just one remaining asset, and is poised to return more than 2.5 times committed capital as well. Conduit is currently investing its $393 million Latin Power III fund.