Cash in the pipeline

Al though Condui t Capi tal Partners' Latin Power III fund is only a little more than half invested, the fund has realised its second exit with the sale of a natural gas compression plant and pipeline in Mexico to power generator InterGen for just over $89 million.

“There's a lot of opportunities now and we would like to use some of that return capital to make additional investments,” says Conduit partner Marc Frishman. The rest was distributed to LPs by the end of December, he adds. The fund closed on $392 million in July 2006. It is currently 57 percent committed with another 18 percent allocated to projects in development.

The Latin America-focused power infrastructure investor will earn approximately a 2x multiple after investing $31 million toward the development and operation of Libramiento natural gas compression facility and an associated 65-kilometre natural gas pipeline in Northern Mexico in 2005.

Conduit worked with minority partners Green Energy and Infrastructura Para Energia to build and operate the facility, which is located adjacent to InterGen's Compresion Bajio gas compression plant.

Libramiento has a 20-year, dollar-denominated off-take arrangement with Mexico's state-owned petroleum company Pemex, which Frishman says “was the key to the whole transaction”.

“The big incentive was having Pemex as the off-taker. By having a long-term contract, we could feel comfortable investing our equity,” Frishman says.

InterGen financed the purchase of Libramiento with a combination of InterGen equity and limited-recourse debt. In addition to its equity and that of its minority partners, Conduit constructed the facility with the help of financing from German bank NORD/LB.

The sale of Conduit's first gas pipeline transaction follows the fund's December 2007 sale of Jamaica Energy Partners, a diesel-fired power generator in Jamaica, for $92.5 million.