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Asian, European and local companies present proposals for financing the Chile-Asia cable

InvestChile - November,9,2020

The government has received around 20 financing proposals for the transoceanic cable. KPMG has managed negotiations with investors.

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There is great interest in financing the submarine fiber optic cable that will link the country with Asia-Pacific. Once the best route for the project had been defined as Chile-New Zealand-Australia, a plan was immediately launched to seek resources for funding for construction of the cable, which will have a length of more than 13,000 kilometers.

Around 20 financial institutions, including private banks, multilateral banks and investment funds from numerous countries, presented proposals to the government to participate as financiers of certain stretches of the transoceanic cable. According to the Undersecretariat for Telecommunications (SUBTEL), KPMG has managed negotiations with investors.

According to a list to which PULSO obtained access, the overseas and Chilean companies that submitted letters of intent to finance the transoceanic cable include Asian Infrastructure Investment Bank (AIIB), Japan Bank for International Cooperation (JBIC), Korea Bank Asset Management (KBAM), Sumitomo Mitsui Banking Corporation (SMBC), Mitsubishi UFJ Financial Group (MUFG) and Korea Development Bank (KDB).

Other well-known bodies that have expressed interest in financing the project are BNP Paribas, Development Bank of Latin America (CAF), Carlyle Group, BBVA, Bci, France’s Crédit Agricole group, JP Morgan, Exim Bank, Export Finance Australia (EFA) and the International Finance Corporation (IFC).

In September alone, SUBTEL received 17 proposals and more were subsequently submitted.

The Asian Infrastructure Investment Bank presented a financing proposal for US$100 million, Korea Bank Asset Management for US$160 million, Korea Development Bank for US$100 million and Mitsubishi UFJ Financial Group for between US$65 million and US$107 million. France’s Natixis offered financing for US$200 million, Carlyle Group for US$323 million and JP Morgan for US$320 million while the IFC presented a proposal for US$321 million and Exim Bank for US$323 million.

Undersecretary for Telecommunications Pamela Gidi stressed that “we received around 20 financing proposals from important international entities to fund our transoceanic cable project, which shows the great interest of the international private world in being part of this transformational project for the future of the region.” She added that “we have been leading this project for about two years and are very satisfied with the great interest this initiative has aroused, which shows it is a unique project of great importance in terms of international connectivity that will transform Chile into a new digital hub, leading the integration of South America with other continents that are leaders of the 4.0 economy.”

SUBTEL expects to complete the financing during 2021. In total, the cable’s construction will require an investment of US$388 million.

Once the financing stage has been completed, the consortium that will own the cable will be formed. It has already been decided that Chile will be represented by Desarrollo País. With the support of the Foreign Ministry, work is also taking place with the countries in the region that have shown interest to assess how they will participate in the project. It is also open to private companies and meetings with them are envisaged to look for a strategic partner.

In parallel, as a means of financing a significant part of the construction costs, the project will be looking for clients who are interested in acquiring capacity ahead of the cable’s operation. The consortium is expected to be formed during 2021.

Once the consortium has been established and the financing completed, the implementation phase of the project will begin. To this end, a tender will be called for the cable’s construction, which is expected to take between two and three years.

Source: Pulso

To find out more about investment in global services in Chile, read this article.

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Topics: Foreign Investment in Chile- global services- Submarine cable

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