INSIGHT |
PAVING THE WAY FOR FULL‑MERCHANT PROJECTS AND BILATERAL PPAs MARIAN AGUIRRE Energy Finance Vice President of Bancomext
The Triple-A status of the country’s biggest off-taker, CFE,
“We published a series of manuals and safeguards that
has aided the success of the auctions because the thin
outline step-by-step measures to comply with the Equator
margins for projects match the equally thin development
Principles,” she says, adding that across all projects,
risk. In contrast, Mexico’s renewable merchant projects and
Bancomext undertakes full monitoring activities, from
bilateral PPAs continue to showcase high risk levels with
environmental impact assessments to the Ministry of
equally high returns, says Marian Aguirre, Energy Finance
Energy’s evaluations. “We remain deeply involved in
Vice President of Bancomext. “Warranties are normally
processes and focus on continuous follow-up throughout
included in a trust as part of the financial structure of a
the project’s phases and useful life,” she continues. “Limiting
bilateral PPA,” she says. “We must analyze how we can
monitoring activities exclusively to public indigenous
access those warranties for structure to be strengthened
consultations and environmental management is a short-
and ensure project bankability. We are working closely on
sighted approach we discourage and avoid.”
this specific issue with qualified suppliers.” Such follow-up processes are deeply embedded in Development banking institutions like Bancomext need to
Bancomext’s safeguards as they provide a solid level of
understand the inherent mechanisms of qualified suppliers
certainty from a project execution standpoint. “This represents
in the WEM and their link to project finance, Aguirre adds.
a considerable amount of additional work for us and added
“The conception of Mexico’s new energy model places
complexity that relies on specialized social and environmental
the qualified supplier figure as a commercializing entity,
advisers to comply with our manuals and safeguards as early
the middleman between power producers and bilateral
as the request for proposal. But it provides a way to align with
PPAs with private off-takers. We are in talks with qualified
international standards,” says Aguirre.
suppliers with consolidated long-term PPA schemes to guarantee increased security by absorbing part of the
Bancomext is also taking a leadership role in the
merchant risk on the qualified suppliers’ end.”
improvement and success of the Clearing House, a private energy and power purchase mechanism introduced during
Bancomext has entered the fray on the merchant project
the third long-term electricity auction. “It is a critical
front and it is planning to keep including them in its
issue considering it works as a payment source for the
renewable energy investment portfolio. “Based on our
development of utility-scale renewable energy projects and
analysis, we are designing more conservative financing
heavily influences project risk,” Aguirre says.
criteria, including lower leverage levels and more conservative debt service coverage indexes,” Aguirre says.
Lending money to CFE, a productive enterprise of the state with specific credit-risk characteristics, is not the same as
The development bank also is determined to retain its
lending to a private company with an unclear track record.
leadership role in the long-term electricity auctions,
As a result, the Clearing House is piquing the interest of
both in projects under construction and future auctions.
private energy and power purchasers.
“Our participation in auction projects is predominant. Bancomext’s project finance foothold represents close to
To inject certainty over the Clearing House’s future
80 percent of the aggregate projects from the auctions,”
performance, Bancomext fosters interactions with
says Aguirre.
CENACE to incorporate improvements. “The key issue lies in understanding the implications of the private operator
To secure the viability of long-term electricity auction
figure and the inherent mechanisms between suppliers
projects, Bancomext has been working for several years
and purchasers to know which part represents our risk,”
on its environmental and social management unit (UGAS).
Aguirre says.
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