In 1988 Banque Paribas was named Project Finance Adviser to Guy F. Atkinson, principal contractor for the construction of the Macagua II hydroelectric power project, sponsored by Venezuelan State electric power company, Electrificación del Caroní (EDELCA.)

The mandate from Paribas to KKY consisted in structuring financing for the project's local cost component.

Deal Anatomy PowerPoint

EDELCA issued Future Electric Power Bearer Bonds to a syndicate of international banks, in exchange for Republic of Venezuela dollar-denominated debt priced at market value.

EDELCA converted the Republic debt into local currency at face value under the Central Bank’s debt/equity conversion provisions, earning the difference between the debt's discounted acquisition price and its face conversion value.

The local currency proceeds were applied to the hydro project's local costs. The gain in the conversion value reduced the project's effective cost.

The bank syndicate sold the Future Electric Power Bearer Bonds to Japanese trading companies, stockholders in Venezuela's public sector aluminum smelters.

The Japanese trading companies swapped the Bearer Bonds for physical aluminum supplied by the Venezuelan aluminum smelters under long term contracts.

The Venezuelan aluminum smelters presented the Bearer Bonds to EDELCA for redemption through the delivery of electric power, the aluminum industry's primary raw material.