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Volcan advances competitive auction for hydroelectric non-core asset with three bidders

The competitive auction for Volcan Compania Minera’s (B+/B2) second non-core hydroelectric asset is advancing with three bidders, a source familiar and an analyst following the company said. It will seek no less than USD 50m in proceeds from the sale, they said.

The Peruvian silver miner already agreed on the sale of the first hydroelectric asset, but parties are still discussing the final pricing, estimated between USD 35m and USD 40m, the source familiar said. Scotiabank is managing the sale of the second noncore asset, as reported.

“The first hydroelectric plant has already been sold to one client – [Volcan] is arranging the final price,” the source familiar said. “[Regarding] the other asset, Scotiabank is contracted to do a tender with three potential [bidders].”

With expected proceeds from the non-core asset sales and capex adjustments, the Peruvian miner is expected to have enough to pay amortizations due next year, as reported.

Volcan faces approximately USD 100m in syndicated loan amortizations next year. The company has been working on a variety of measures to reach cash flow break-even by year end, including a much lower capex for a key exploration project.

Volcan owns two hydroelectric generation subsidiaries, according to its 1Q23 financial report. Hidroelectrica Huanchor  operates the 19.632 MW Huanchor and 1.2 MW Tamboraque plants, and Empresa de Generacion Electrica Rio Banos, which operates the 20 MW Rucuy plant.

The Peruvian miner had previously attempted to sell its portfolio of hydroelectric plants and transmission lines, in a process run by Banco de Credito del Peru (BCP) which the company ended in November 2021. French utility company Engie and Peruvian hydroelectric plant owner Celepsa, a subsidiary of industrial corporation UNACEM, had been interested in the assets.

A Volcan representative declined to comment.

The USD 365m 4.375% 2026 bond traded 11 August at 65.79, to yield 23%, according to MarketAxess.