Chile Coal Plant Bonds Rally as WEG Vows to Meet Commitments
(Bloomberg) -- Empresa Electrica Guacolda SA’s bonds jumped the most in more than a month after Grupo WEG said it will honor commitments previously made to creditors after it acquires AES Gener’s stake in the coal-fired power producer.
Guacolda’s $500 million of notes due in 2025 rose 3.4 cents on the dollar Friday to 80 cents, according to Trace trading data. Yields fell to 10.7%, a drop of about 200 basis points from highs hit this week.
WEG, a Santiago-based investment firm, signed a contract on Feb. 23 to buy the 50% stake from co-owner AES Gener, a Chilean energy giant that is selling as part of its plan to cut carbon emissions. Guacolda operates coal-burning power plants in the Atacama region in northern Chile.
The price of the company’s bonds had slumped amid concerns that the deal, which requires regulatory approval, would leave bondholders without assurances that WEG would honor certain financial commitments.
Read more: Chile coal plant debt falls to distressed on AES stake sale
However, in an email response to questions Friday, WEG said it will comply with previously signed commitments “including those relating to the bond issued at the time in the North American market.”
Once the sale is completed, WEG said it will also sign on to the Chilean government’s national de-carbonization agreement and work to develop the plant as the country goes through an energy transition process.
“These Guacolda bonds were structured as stand-alone with minimal restrictions on dividends, so that means that yes, the intentions of the new shareholders are what matters,” said Roger Horn, a senior strategist at SMBC Nikko Securities America in New York.
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