Dealmakers: Miguel Zaldivar and Gaston Fernandez
The Deals: Ecuador obtained a $260 million loan facility from the European Investment Bank to build a 14-mile metro line in Quito, the capital city’s first, and a $127 million financing protocol from France for a 6.7-mile line in Cuenca, the nation’s third-largest city.
France’s minister of foreign trade executed the Cuenca protocol Dec. 4; the EIB deal closed Nov. 28.
Details: The two Miami-based Hogan Lovells attorneys helped Ecuador and the state-owned Empresa Pública Municipal Metro de Quito negotiate and execute the $260 million loan facility for Quito’s first metro system from the European Investment Bank.
The loan facility will finance the construction of the 14-mile line, 15 stations and a maintenance depot as well as the acquisition and assembly of the rolling stock. The new line, expected to transport 360,000 people a day, is scheduled to start operating in 2017.
“This loan represents EIB’s first operation with the Republic of Ecuador, and we were honored to be able to utilize our global project finance experience to close what is viewed as a very strategic venture for both parties,” said Zaldivar, who led the deal team. “The metro line will help ease traffic congestion in the city while improving the efficiency of public transport and reducing fuel consumption.”
The planned line is part of a local and national plan in Ecuador to promote sustainable development and improve quality of life for residents. The project is expected to shorten the time it takes to cross Quito by 15 minutes and reduce greenhouse and pollutant emissions by 25 million tons per year.
The EIB granted the loan under its current lending mandate for Latin America and Asia, which enables it to support investment in development of the local private sector, the creation of social and economic facilities and climate change mitigation.
The project will be co-funded by other international financial institutions including the Inter-American Development Bank and the Corporación Andina de Fomento. Hogan Lovells is also advising on this multilateral co-financing arrangement as well as the drafting of engineering, procurement and construction contracts and equipment supply agreements.
A different Hogan Lovells team led by Zaldivar helped Ecuador negotiate the $127 million financing protocol for the Cuenca tram in the south-central Andean part of the nation. Under the protocol signed by Ecuadorean Finance Minister Patricio Rivera and French Foreign Trade Minister Nicole Bricq, France will extend a loan for the transportation project.
The loan has a 5½-year grace period with a 0 percent interest rate. It is conditioned on the participation of Alstom and other French companies.
“This project demonstrates Ecuador’s commitment to the modernization of public infrastructure and improvement of urban centers across the country,” Zaldivar said. “The tram line will ease traffic congestion in Ecuador’s third-largest city, where nearly 80 percent of the population resides within the urban center.”
Cuenca’s 6.7-mile tram line will be used by 110,000 to 120,000 people a day. It is scheduled for completion in 2015.
The total cost of the Cuenca project is estimated at $232 million to build the track and 20 stations and acquire 14 trams.
Construction of the rails and electric cables will take up to 14 months. Manufacturing the trams will be done in a second phase lasting up to 20 months.
China, Italy and Spain also were interested in lending money to Ecuador for the project.
Background: Zaldivar is global co-head of Hogan Lovells’ infrastructure and project finance practice and is a partner in the Miami office. Fernandez is a Miami associate.
Law firm partner Bruno Cantier and associates Maria Klass, Melissa Ordoñez and Benoit Thirion in Paris assisted on the Cuenca tram deal.