Multilaterals to ramp up renewable financing in Argentina
Fri, 23/09/2016 - 10:19

Development banks will play a crucial role in lifting Argentina's nascent renewable energy sector off the ground under probusiness President Mauricio Macri.

The government's RenovAr Ronda 1 renewable energy tender for 1GW of capacity was six times oversubscribed, a testament to investor confidence in Macri's market­friendly reforms.

Nonetheless, commercial banks will likely take a cautious approach to financing renewable projects under Macri, at least initially, which is where development banks like the InterAmerican Investment Corporation (IIC) and International Finance Corporation (IFC) come in.

"Traditionally, multilateral organizations operate when the perception of risk is different than the reality of risk," IIC CEO James Scriven told BNamericas on the sidelines of the Argentina Business and Investment Forum in Buenos Aires earlier this month.

Scriven said that Macri's resolution of a longstanding debt dispute with bondholders in the US and the lifting of currency controls have renewed IIC's appetite to lend in the country.

"We are open to take more risk than the private sector, and bringing in our expertise gives comfort to the private sector in a time when they're not ready to invest," he said.

Scriven said that IIC – the private sector lending arm of the Inter­American Development bank (IDB) – has set aside approximately US$200mn to finance projects that obtain PPAs in the RenovAr tender, which will conclude on October 12.

Additionally, IIC has pledged to finance the US$200mn, 100MW Manantiales Behr wind farm under development by national oil company YPF in Chubut province. The project will help YPF comply with renewable portfolio requirements for large power consumers under Argentina's renewable energy law 27,191.

The ability of project developers to obtain financing from commercial lenders will be crucial to the longterm success of renewables in Argentina, said Gian Franco Carassale, the lead investment officer for IIC's infrastructure and energy division.

"We are going to lead that process as we typically do when we finance renewable energy in the region," Carassale said.

IIC is the largest lender to renewable energy projects in Uruguay, where it has contributed to 274MW of capacity with another 215MW in the pipeline.

A fact sheet distributed to media at the Buenos Aires event states: "In Chile, the IIC now has three outstanding solar transactions valued at US$78mn that will contribute approximately 200MW."

Carassale said that while the first round of RenovAr is unlikely to fetch PPA prices below US$50/MWh like recent tenders in Chile, Peru and Mexico, he does think it will generate much lower prices than what would have been expected in Argentina six months ago.

"You have a combination of aspects that point to the success of this RenovAr process," said IFC's regional head of infrastructure for Latin America, Gabriel Goldschmidt.

The tender's oversubscription, Goldschmidt said, "is in and of itself ... a sign of success and a vote of confidence by the private sector."