Conduit earns 3x return on Colombian power plant(4)

After a nearly decade-long holding period, New York-based Conduit Capital has successfully exited its stake in Colombia coal power plant Termotasajero.

Conduit Capital Partners has 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 (€123 million).

Scott Swensen

The exit sees Conduit delivering to its limited partners a three-times return on equity, according to a statement from the firm.

Conduit makes energy investments in Latin America. The firm initially purchased its 82 percent stake in the power plant through its Latin Power I and II funds, closed in 1998 and 1999, respectively. Several regional economies, notably Argentina and Uruguay, experienced economic crises soon after, sending asset prices tumbling and forcing Conduit to hold onto the asset longer than anticipated. During the holding period Conduit earned $80 million in distributions from the plant, covering its equity investment in the deal.

While Conduit owned Termotasajero, the firm upgraded and renovated the plant, installing modern control systems and ensuring that the plant complies with World Bank environmental standards.

“When we bought [the plant] it was in very bad shape,” Conduit chairman Scott Swensen told PrivateEquityOnline. “We put $20 million in capital back into it, and we totally replaced the back-end pollution control unit. That plant today looks like a brand new plant.”

The transaction represents two milestones for private equity in Colombia. It is the first instance of a local pension fund procuring an asset of such magnitude, Swensen said. Although two large strategic investors submitted very good bids, he said, the Colombian pension funds were more comfortable with the asset and bid even higher.

Exiting an investment through a sale to a local pension fund could become a common strategy for infrastructure players in Colombia, Swensen said, as the government continues to encourage them to invest in domestic assets.

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