Initial Public Offerings (IPOs) in Latin America are becoming ever-more important as a funding mechanism for the development of the region’s electricity and wider energy sectors, which are key to its continuing economic growth.
Brazil, for example, is one Latin America nation where IPOs have become an important tool in financing energy projects.
Most recently, Light Energia, a subsidiary of Brazilian company Light, requested permission from the Comision de Valores Mobiliarios de Brasil (CVM) to quote on the stock market.
Light Energia currently operates five hydropower plants with an estimated capacity of 853 MW. The plants are located in Rio de Janeiro, Sao Paulo and Minas Gerais states.
Meanwhile in Mexico, Cementos Mexicanos or CEMEX has confirmed its participation in a renewable energy fund that has been established to finance several wind power projects, and thereby capitalising on the country’s significant wind potential.
According to Diario Crítico, the fund is expected to bring in $300 million through a public offering of Capital Development Certificates on Mexico’s stock market.
The certificates were first introduced in 2009 as part of an initiative to help finance infrastructure projects in the country, and they continue to attract a lot of attention from retirement pensions, known as Afores.
CEMEX’s chief officer confirmed that the multinational would be providing the necessary technical support to the fund’s renewable energy activities and to every such project included in the fund.
This will include CEMEX managing and advising on the fund’s work and supplying a professional team trained in energy project implementation. In addition, the multinational will provide a network of contacts that can advise the fund during the negotiation processes needed to establish the wind farms.
Within the wider energy market, i.e. oil and gas, in Latin America, Argentina is also using IPOs as a way to generate project funding.
Earlier this year, Gas y Petroleo del Neuquen launched an IPO in Buenos Aires and subsequently on the New York and Toronto stock markets to help finance investment in one of the region’s major hydrocarbon deposits.
Vaca Muerta, which is located in Neuquen territory, is a vast hydrocarbon field containing large reserves of both unconventional oil and gas. It has been estimated that its exploitation will enable Argentina to double its hydrocarbon production within ten years.
In late October, work to drill the first shaft got underway. It is located in Aguada del Chanar Occidental. According to the Neuquen government, within the first 30 days the shaft will reach a depth of 2950 metres.
The extraction of unconventional hydrocarbons, however, is more complicated than with conventional resources, and therefore more expensive. Thus IPOs are gradually becoming recognised as an efficient way to raise funds to finance such high-CAPEX energy projects such as the one in Argentina.
IPOs are also being seen as an important way to fund the much-needed power generation capacity expansion and T&D infrastructure build in both Central and South America.
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