BNamericas on the IFC and NADB solar loans
On 21 November 2019, BNamericas reported on US$200mn in IFC and North American Development Bank lending expected to help bring four IEnova solar parks with combined output of 376 MW online.
“The recently announced IFC/NADB financing is positive for renewable energy growth in Mexico,” Kijana Mack, Director at Mexico Energy Partners, told BNamericas. “The transaction shows the interest investors have for high quality renewable energy projects in countries with well-defined regulatory frameworks.”
Read the original report: BNamericas on the US$200mn IFC and NADB loans to Mexican solar.
What this meant for industrial buyers
The commercial significance of this transaction was not the money. It was the timing. CENACE had suspended the fourth long-term auction on 3 December 2018 and announced its cancellation on 1 February 2019, and no long-term auction had been held since. The channel that had produced Mexico's benchmark renewable prices, including the third auction's average of USD 20.57 per MWh bundled with one Certificado de Energía Limpia on 22 November 2017, was closed. The open question for any plant director evaluating an offsite solar PPA in late 2019 was whether large solar projects could still reach financial close without an auction contract behind them. Development finance institutions lending against 376 MW answered part of it.
The practical consequence was a change in diligence, not in price expectations. A supplier offering an offsite solar PPA in late 2019 was quoting against a project that had to be financed on merchant or bilateral offtake terms. The questions worth asking were whether the plant backing the offer had reached financial close, who the lenders were, what the commercial operation date was and what happened to the contract if that date slipped. For an onsite system the threshold was unchanged: distributed generation below 0.5 MW of generating capacity, interconnected under the SENER Manual de Interconexión (DOF, 15 December 2016) and CRE resolución RES/142/2017 (DOF, 7 March 2017), with no CRE generation permit. Above 1 MW of demand, registration as a Usuario Calificado with CRE opened contracting with a Suministrador de Servicios Calificados, and porteo decided delivered cost.
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Mexico Energy Partners can review an offsite solar PPA offer against the project's actual financing and permitting position, and compare it with an onsite system under the distributed generation threshold. The review needs the draft contract, 12 months of CFE billing and the site's tariff class.
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