LatinFinance - July 2013 - 44

Mexican renewables

Zopiloapan, which has 70 megawatts.
“The scenario in Mexico for the renewable sector is very
dynamic,” says Melchiotti.
“You can find renewable projects developed by small and
agile companies, both Mexican and not, by large utilities, by local
industrial groups, by banks and by other players. It is a diverse
and thriving landscape.”
Demand for energy in Mexico continues to grow rapidly, with
manufacturing in auto, steel and refining looking for increasing
amounts of power. Energy is a major component in their
operating costs, and volatility a major issue.
Large companies have addressed the issue with long-term
PPAs. This kind of hedging provides
energy price security for companies – the
price moves, but only via inflation. And
in some cases, they won’t start building
infrastructure until they find good terms for
filling their energy needs.

Bringing the banks

have been participating via club deals and syndications for the
most part, he says.

Solar soon

Despite progress on developing solar generation capacity,
Mexico still lacks projects that internationally would be
considered large-scale, says Mark Ramsey, senior managing
director and head of Latin America for Macquarie Capital, says.
“As the cost of photovoltaic cells falls, it will probably be a bigger
part of the conversation in years to come,” he says. “There are
very good sources of sun in Mexico, should it become viable.”
He says he is optimistic about alternative energy and its

To finance renewable projects, major
operators with global footprints are
bringing their relationship banks with them
as they move into the region. And while
Europe has been in crisis, Mexico has gotten
more involved as well. With PPAs in local
currency, state development banks and
national banks have entered the sector.
The 2010 Eurus wind farm project
developed by Acciona shows the breadth
of lenders willing to get involved. The
IFC participated with ten other lenders in
the $600 million wind farm project, with
Acciona providing the majority of the $225
million equity investment and the rest debt
financed.
Nieto Ituarte: ‘funding is developing’
The IFC contributed $71 million in
senior debt and a mezzanine tranche
with a 15-year term and, together with the IDB as co-arranger,
prospects. “It’s really just at the beginning,” he says.
syndicated $62 million of senior debt to BBVA Bancomer and
The Inter-American Development Bank (IDB) sponsors
Banco Espírito Santo.
five wind projects in Mexico, having first become involved in
A further $242 million of senior debt came from Banco
2009, says Jeff Easum, lead investment officer in structured and
Interamericano de Comercio Exterior, Instituto de Crédito Oficial corporate finance. It is now seeing solar projects at the door.
of Spain, DEG (the private sector financing arm of German
“We definitely expect 2013 to be a good year for getting
development bank KfW), Nacional Financiera, and French
mandates for solar projects,” he says. Easum estimates that the
development finance institution Proparco.
IDB has been approached on some 50 solar and wind projects
Enrique Nieto Ituarte, director of sustainable projects at
over the last year, as well with respect to a few hydros.
“Generally, in order to start evaluating a project, we need to
Nacional Financiera, says the institution has been involved with
renewable energy for the past four years, starting with wind and know that the structure is sound, that the players are strong both
financially and with respect to experience, and that there are no
now moving into hydro and solar. Wind is popular because the
technology is well-developed, he says, and the know-how behind environmental and social issues,” he says. The participation of
strategic investors is critical, he adds.
the project financing established.
“With solar, there’s an element we hadn’t seen so much with
“The funding, too, has been developing,” he says. “We have
first the development banks, then we have foreign banks, now we wind: there are so many players in a turbulent market, you have
to make sure the tech provider is going to be able to honor its
have a combination of Mexican foreign banks and development
guarantees if you need to call on them,” he says. LF
banks together financing different projects.” Commercial banks

44 LatinFinance

July 2013

LatinFinance - July 2013

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