IDB Invest expects to close a new funding deal in the first quarter of 2024 for solar energy projects in the Dominican Republic after arranging a landmark loan for the local arm of US power company AES, an official at the multilateral bank told LatinFinance.
The new financing is “a little bit smaller” than the AES package but is “still a very nice project,” said Elizabeth Robberechts, a lead investment officer at IDB Invest, in an interview. “There’s been quite a bit of interest in this sector and a lot of investment happening right now.”
The US-based lender, which is the private sector arm of the Inter-American Development Bank, said earlier this week that it arranged $368 million in financing for AES Dominicana to fund renewable energy projects in the Dominican Republic.
The financing will go towards five solar energy projects and one wind energy project in the country, Robberechts said.
“It’s the largest renewable energy financing in the history of the Caribbean,” she said.
“There are three projects that were already built and three greenfield projects that are going to be built,” Robberechts said, adding that a portion of the funds will be used to refinance the existing operations, and the rest will finance the new investments.
IDB Invest provided an A loan for $37 million from its own account and arranged a B loan for $331 million from 21 financial institutions, including JPMorgan, Bladex and Scotiabank, which also led the underwriting process as joint lead arrangers and bookrunners.
RISK-REWARD
“We priced [the loan] to market with the right adequate risk-rewards,” said Fabio Fagundes, division chief of financial products and services at IDB Invest, in the interview. “We went out there and reached out to more than 40 banks. The vast majority of them were very interested in the project.”
AES Dominicana requested the financing in July, seeking to borrow up to $435 million from IDB Invest and other investors.
According to Robberechts, the deal is designed to help open up new channels for financing the Dominican government’s program to transition away from fossil fuels.
“They really want to ramp up that level of renewable energy that they have in the matrix very quickly. There are number of projects that have been financed with development banks because they do think the sectoral risk is still considered to be meaningful and the umbrella does have quite a bit of value in this sector,” she said.
“Hopefully we’ll prove how well it’s working and then they won’t need us so much in the next round,” she added.