45779 - DFP Patria Infra

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Summary of Investment Information

Project Number

45779

Company Name

PATRIA INFRA CREDITO FIDC

Date SPI Disclosed

Sep 13, 2022

Country

Brazil

Region

Latin America and the Caribbean

Projected Board Date

Oct 20, 2022

Environmental Category

FI-1 - Significant

Status

Active

Last Updated Date

Jul 7, 2024

Department

Regional Industry INF LAC & EUR

Industry

Funds

Previous Events

Approved : Dec 22, 2022
Signed : Feb 22, 2023
Invested : Jul 1, 2024

Sector

Other Non-Private Equity Fund

Project Description

The envisioned project would entail an investment of up to US$150 million equivalent in BRL or up to 20% of the total commitments, as limited partner in a proposed infrastructure debt fund (the “Fund”) to be managed by Patria Investimentos, Ltda. (“Patria” or the “Manager”) and the mobilization of up to US$550 million from institutional investors.

The Fund is expected to be incorporated as a FIDC (Fundo de Investimento em Direitos Creditóorios) with several series of quotas to fit investors' restrictions, especially those regarding Environmental & Social (E&S) aspects (the “Fund”). The structuring of the project has not been concluded. Nothing in this document should be construed as an offer or distribution of any product or securities in Brazil, in particular of Fund quotas.

Patria is expected to invest the lower of 2% of committed capital or BRL120 million to the Fund, through junior quotas subordinated at redemption to other investors.

The proposed Fund shall have an unlimited term of duration, but the series of quotas to be held by IFC will have a 50-year term, with a redemption option at the 10th year.

The Fund is expected to have a target size of BRL3.5 to 6.0 billion, earmarked to finance infrastructure projects in the Energy, TMT, Transport & Logistics, and Water & Sanitation sub-sectors (“Eligible Sub-sectors”) in Brazil (the “Project”). The Project shall count with gender and climate tags.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	150.0

Development Impact

The most significant expected project-level outcome is the improved quality of finance for infrastructure corporates through the provision of an alternative source of long-term local currency funding for projects aimed at increasing quality of infrastructure in Brazil. Moreover, the Project is expected to include a focus on projects and companies with female participation. Beyond the Project, at the market level, IFC believes that the Project will contribute to deepen integration of infrastructure to capital markets by demonstrating viability of infra debentures to finance greenfield and brownfield infrastructure projects with more flexible terms under a non-recourse basis, as well as the catalytic role of debt funds to mobilize institutional investors and position infrastructure debt as an investible asset class.

IFC is expected to provide critical own account equity investment and to play the role of an anchor investor to mobilize institutional investors to reach financial closure and expected debt fund size. IFC participation in the debt fund will enable provision of long-term local currency non-recourse finance for infrastructure projects in Brazil. IFC’s presence as an anchor investor in the Fund provides comfort and ensures it will be managed and pursue an investment strategy in adherence to international standards and adequate risk mitigation. IFC participation will also be critical to increasing the capacity of the Fund manager to implement an ambitious strategy to close gender gaps in infrastructure corporates of Brazil.

E&S Category Rationale / Risks and Mitigation

The Project consists of an investment of US$150 million in the Fund focused on long-term senior debt for medium and large infrastructure projects in Brazil. Most transactions are expected to be of medium to high E&S risks. It is expected that the Fund portfolio will include a sizable number of Category A of sub-projects. Therefore, the Project has been categorized as FI-1 according to the IFC's Sustainability Policy. The Fund's pipeline includes both brownfield and greenfield sub-projects in diversified infra sub-sectors such as toll roads, airports terminals, sanitation, renewable power generation, transmission lines and telecom. Such infrastructure sub-projects are usually characterized by a significant footprint and may involve impacts on biodiversity, indigenous peoples, vulnerable communities, involuntary land acquisition and/or resettlement, community and occupational health and safety among others. The Project will not support coal related activities. As part of the Project, Patria will be required to screen and assess all sub-projects against the IFC Exclusion List, national E&S laws and IFC’s Performance Standards.

Although Patria is an existing client with a satisfactory environmental and social risk rating (ESRR 2), the existing project (#39271) targets lower E&S risk mid-size companies only. For this new project, as it focusses solely on infrastructure opportunities, Patria will be required to enhance its E&S Management System (ESMS) prior to commitment. The heightened procedures will entail retaining qualified external consultants to undertake E&S due diligences, including outline of action plans and monitoring provisions to be included in legal documentation, when applicable. For high-risk sub-projects the action plan implementation will be monitored by external consultants on a yearly basis. In the case of secondary market investments, in which Patria may have limited access to sub-projects’ information, the Fund Manager will be required to establish minimum conditions for assessments, including verifying publicly available information obtained from specialized market data providers and applying special filters such as excluded activities and consistency with the key objectives of the Performance Standards. Secondary market transactions will be limited to 20% of the Fund portfolio and will not include Category A sub-projects. In addition to the ESMS enhancement, Patria will be required to: i) submit the first three ESDDs and all Category A projects conducted to IFC review prior to investment; ii) provide training; and iii) submit to IFC periodic report. Finally, the Fund will also be required to establish an E&S monitoring committee to oversee the ESMS implementation.

S.no	Title	Anticipated Completion Date	Status
1	Upgrade Applicable Requirements	10/14/2022	Completed
2	Staff Training	01/12/2023	Completed

Contacts

For Inquiries About the Project, Contact

Patria Investments
João Carneiro
Director
+55 11 3039 9628
joao.carneiro@patria.com
Av. Cidade Jardim, 803, 9o andar 01453 000, São Paulo, Brasil
www.patria.com

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