Latin America’s first non-recourse privately financed power project
Mamonal Power Plant Project
K&M served as project developer, technical consultant and owner’s engineer K&M developed this pioneering project on a Build-Own-Operate-Transfer (BOOT) basis and structured the transaction to achieve financial close within a period of only 7 months.
K&M worked with the government to develop and reorganize the commercial, regulatory, legal and securities framework to allow for private investment. The Mamonal plant sells electricity to both private industries and the national grid, thus the project structure required negotiation of a full range of issues related to market-oriented operation in the energy sector, including wholesale and retail tariff models and methodologies, fuel supply transportation and pricing, and spot market system. K&M developed risk mitigation arrangements, which included the implementation agreements, long-term lease agreement, and the sales agreements to private and public clients. K&M worked with the various government entities and local partners involved to negotiate the complete terms of the transaction including: fair tariff wheeling arrangements (the first in Colombia); EPC construction contract which included procurement procedures; Power Purchase Agreement (PPA); Security Package agreements; and non-recourse financial agreements.
Mamonal’s success was covered extensively in the trade media. It was recognized as “Deal of the Year” in 1994 by Project Finance International Yearbook and “One of the Ten Most Creative Deals” of 1993 by Infrastructure Finance. The contractual guarantees, risk allocation concepts and the incentive structure of the Mamonal transaction, as conceived and negotiated by K&M, are now being used as a model worldwide.