Conduit earns 4.9x on Mexican power plants

Conduit Capital Partners has sold three hydroelectric power plants in Mexico, the firm’s second successful exit this year from its 1999 vintage fund.

Scott Swensen

Conduit Capital Partners has sold its 70 percent stake in three hydroelectric power plants in western Mexico to Italian government-owned utility company Enel for $193 million (€132 million). The deal will generate a net internal rate of return of more than 40 percent for Conduit, as well as a return around 4.9 times the firm’s original equity investment.

The deal includes $156 million of equity and $37 million of project finance debt provided by the Mexican affiliate of Scotiabank, the Netherlands Development Finance Company and the Banco Nacional de Obras y Servicios Públicos.

“We’re obviously getting a premium price, which reflects the unique position of these plants as the only privately owned hydroelectric plants in Mexico,” Conduit chairman Scott Swensen told PEO.

Conduit began developing the plants as greenfield projects in 2001. They were built downstream from pre-existing irrigation dams, allowing them to generate electricity with low environmental impact while generating carbon reduction credits which are sold on the international market.

The acquisition is part of Enel’s larger plan to become a dominant renewable power company in Latin America. Enel said it is “seeking to seize the most promising opportunities in the sector, further expanding its presence in a continent with rapidly growing demand for energy”.

Enel has already acquired assets in Guatemala, El Salvador, Nicaragua, Costa Rica, Panama, Chile and Brazil.

New York-based Conduit targets the independent electric power and energy industry in Latin America. In October the firm 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. That sale earned Conduit a three times return on equity.

Conduit’s most recent fund, Latin Power III, closed on $393 million in August 2006.