LatinFinance - July 2013 - 42

Mexican renewables

Into the light
By Karen Schwartz

t the tip of the Baja California
Sur peninsular, La Paz is one of
the sunniest spots in Mexico.
It is also a location that calls out for a
large-scale solar power operation.
Aura Solar is set to be just that:
Mexico’s biggest ever photovoltaic
plant. It will produce 30 megawatts –
enough to supply 164,000 residents, or
roughly two-thirds of the town.
In May, local developer Gauss
Energía booked the necessary $75
million financing to get the Aura Solar
power generation project started on
the site: Nacional Financiera chipped
in $50 million and the International
Finance Corporation, $25 million.
“The Aura Solar project is in a
privileged position to tear down
barriers and myths around solar
development in Mexico,” says the
company’s CEO and president Héctor
Olea.
Regulations are in place to facilitate
solar energy growth, and the projects
have a short development cycle, giving
them an edge over wind counterparts. Winding up: Mexico’s renewable energy financing grows
“This is a win-win situation for sponsor
But as interest in renewable energy continues to grow and
and private energy off-takers, so new options are developed
laws are put in place to expand its reach, interest is growing
in the country and thus more competition is introduced in the
around hydro and solar power.
sector,” he says.
There is considerable potential for the sector to expand.
Wind projects are increasingly commonplace, with a number
Mexico’s government energy agency, Secretaría de Energía
under construction, in operation and more in the pipeline.
(SENER), and PwC, calculate that much of the country’s
Competition can even be fierce under the new self-supply
renewable resources, including rivers, wind, and geothermal, are
regime, where manufacturers sell directly to private companies
underused.
and transmission can be tough.
Mexico aims to have 35% of its electricity come from
Today, wind is a known quantity, Olea says. Plain vanilla
renewables by 2024. Geothermal is most successfully exploited:
deals are usually structured with equity of 25% to 30%, and the
the two agencies reckon the country is generating today around
rest senior or mezzanine debt.
10% of the 10,000 megawatts they believe it will have the
Normally, sponsors contribute with the full equity at the
capacity to generate in 2020. Wind is generating 5% of its 2020
start, and then at the end of the construction phase or start of
potential, mini-hydro 2%, biomass 1%, and solar photovoltaic,
operation seek to restructure, he says. Now, with changes to the
nothing.
investment rules for pension funds, these institutional accounts
Getting the financing in place for these new, often expensive,
are being considered as a potential source of equity or long term
technologies can be cumbersome. An example is the Piedra
funding.
Walmart Corporate

As wind power moves into the Mexican mainstream, solar and hydro
projects prep for their moment in the sun

42 LatinFinance

July 2013

LatinFinance - July 2013

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