PV developer and Investor joint-ventures: A strategy for commercial success in Chile

Recently Mainstream Renewable Power announced a joint venture with Actis Investment meaning its financing needs for a large pipeline of projects will now be assured.

With little experience in Chile for renewables, this rare form of partnership could be the most viable but difficult means of getting projects into production.

Earlier in the month Mainstream Renewable Power announced a joint venture with the global investment firm Actis. The joint venture company in Chile, of which 40% will be owned by Mainstream and 60% by Actis, will purchase the projects developed by Mainstream at financial close. At present, Mainstream has over 600MW of wind and solar in development, the majority of which is destined for industrial off-takers such as mining companies.
Securing a buyer for these projects eliminates a lot of the concerns financiers will have. Debt and project financing should certainly be easier to come by and the level of due diligence that Actis will undertake also validates the viability of the project. This partnership also makes projects more attractive to off-takers who are attracted to the security of the scheme.
This relationship is very rare and a first in Chile, it is easy to see why it would be difficult to secure a partnership of this kind, especially. However, looking for capital and investment from international banking houses may be the only option for the time being. At present, of 24 banks in Chile, only 7 have experience in renewables and only 1 or 2 have any experience in solar PV. Thus, there is a gap in understanding and experience which, unless addressed could seriously hamper the involvement of local banks in financing solar.
Whilst international commercial banks are in Chile, and have the requisite experience they are also more cautious, waiting to see the results of plants financed by larger multilateral agencies such as the IFC and Inter-American Development Bank
However, with such a competitive market, and a global downturn on PV financing, commentators are bound to wonder which developers will get project financing. As Rodrigo Violic, Head of Deals at Banco BICE recently pointed out, the solvency and experience of developers is paramount in lowering risk. It is notable that both Mainstream Renewable Power and Solar Pack (which has received IFC loans) are both international companies, although are notin the top 10 of developers globally.
It is unlikely in the meantime that Chilean companies operating without support or partnerships with international companies will be seen as an attractive risk. Joint-ventures are win-win for both sides and essential in stimulating a profitable and sustainable domestic industry able to bring the price of PV down further.
PV Insider LATAM (10-11 September, Santiago, Chile) is an event to propel projects off paper and into production. In particular the event will also host roundtables on financing with participants from the Inter American Development Bank, Santander, Banco BICE, Astris Finance and Astrom TA to allow every delegate to have direct contact with solar investors, through scenario-based exercises.

For more information visit: www.pv-insider.com/chile2013

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