Latin American Renewables Sector Enjoys Twin Funding Boost

Photo: EP

Latin America’s fast-expanding renewables sector received a twin-boost this week as two leading developers announced they had secured funding for giant wind farm projects in Chile and Mexico.

Mainstream Renewable Power announced yesterday that its Chilean joint venture Aela Energía has obtained $410m in project financing for two wind farms boasting 299MW of capacity.

The company, which is 60 per cent owned by investment firm Actis and 40 per cent owned by renewable energy developer Mainstream, said the deal brought the 170MW Sarco project and 129 Aurora projects to financial close.

Both projects are now on track to be completed in the second half of 2018 and together will provide power to the equivalent of 460,000 households.

The deal is the latest milestone in Mainstream’s push into the Chilean market, which saw it last year secure supply contracts for almost 1GW of wind energy capacity with bids that undercut fossil fuel power suppliers.

“We are delighted to have reached financial close on these two projects, which will deliver 300MW of wind power to Chile when they are completed,” said Bart Doyle, general manager of Mainstream Chile. “These projects were awarded through a competitive tendering process in which wind energy prices came in below fossil fuel prices, clearly demonstrating that renewable energy is cheaper than fossil fuel generation.”

The project financing will be provided by a group of multilateral and commercial banks including Inter-American Development Bank and its member affiliate Inter-American Investment Corporation (IADB-IIC), Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation, Korean Development Bank, Caixa, and KfW and Banco Santander as VAT lender.

The 18-year project financing arrangement will account for 70 per cent of the total financing for the projects, with equity partners providing the remaining 30 per cent.

The news came just a day after Cubico Sustainable Investments announced it has achieved financial close for the 250MW El Mezquite wind farm and the 350MW Solem solar PV project in Aguascalientes in Mexico.

The company said it had secured non-recourse project finance debt totalling $450m, with $220m to the El Mezquite project and $230m earmarked for Solem.

The two projects were each awarded power purchase agreements through Mexico’s second long-term electricity auction in September 2016.

Ricardo Diaz, head of Americas at Cubico, said the “ground-breaking milestone” made the company one of “a handful, from either the first or second auction in Mexico, that have been able to raise third party financing”.

“We now plan to continue consolidating our presence in the market supporting the government and selected local developers to achieve their clean energy ambitions in the country, as we are doing in the rest of the region,” he added.

The company said that alongside the debt financing Cubico and a number of minority partners will invest close to $200m of equity in the projects. The two sites are expected to be fully operational by the fourth quarter of 2018.

Osvaldo Rance, head of Mexico at Cubico, said the project provided “tangible proof of the bankability of the PPA awarded in the auction and the new legal framework that enabled us to raise competitive financing”.