Size, Structure Critical to RE Financing

The size and structure of renewable energy projects in LatAm remain critical to securing adequate project financing, according to bankers in the industry. Despite increasing opportunities in an electricity sector that is tracking GDP growth, investors remain discerning on the number and type of deals they are backing. “Projects are being financed on a selective basis and on a club basis,” says Emilio Fabbrizzi, senior vice president at Banco WestLB do Brasil in the Global Energy Group. “The role of MLAs is very important,” he adds, identifying multilateral IDB as being particularly active and aggressive in bringing in commercial banks to support renewable energy projects. Although bond investors remain unwilling to take on the construction risk inherent in financing uncompleted projects, Fabbrizzi says the bond market is instrumental for refinancing. “A lot of projects are getting to the stage where they can be refinanced,” he adds. Isaac Deutsche, general manager at the LatAm department of Sumitomo Mitsui, says the Mexican wind market is particularly attractive, as it has been able to make use of existing CFE power purchase agreements (PPAs). “The underlying structure is something the market is already very comfortable with,” he says. “The offtake [agreement] is very well known.” Having contracted purchase agreements is critical for projects to secure funding, he says. Size also remains an issue. Larger international lenders want to get involved in more sizeable deals, but many renewable energy projects are often small. “Big institutions want to do deals,” says John Paul Moscarella, senior managing director and principal at Emerging Energy & Environment. “We do have an issue with size. Scale remains a problem.” All three spoke at the LAC-CORE Renewable Energy Finance Briefing in New York.