Pause in Development Following Versalles and TAI Solar FarmsBy Cas Biekmann | Wed, 02/03/2021 - 12:56
Q: What does Eosol’s portfolio look like?
A: In total, we will have 14 projects. Tai Durango I, the first project connected to the National Electricity System, started operations in 2014. Over the years, we expanded these projects with Tai Durango II, III, IV, V and VI. We also constructed Trinidad Solar I and II. This first package of projects consisted of 177MW in total. In 2018, Macquarie acquired 90 percent of the package, while we retained a 10 percent stake. Our first portfolio already sells 80 percent of its energy via PPAs. In the second package, we worked toward 155MW of capacity. This consists of an 80MW PV project, Versalles de las Cuatas I, II and III, as well as three other projects: TAI IV-Neo, TAI V-P10 and TAI-VP15. The three Versalles power plants are 27MW each, constructed near each other and were finalized in October 2020. TAI-V Neo is a 29MW power plant, considered the largest of the six. I hope it will be interconnected by early 2021. The other Tai power plants were scheduled to enter operation in early 2020. The second portfolio is completely in the company’s hands and sells to the spot market. For the financial restructuring of portfolio 2, we are discussing how to best make use of our qualified supply schemes. Since energy prices are low, we have signed two PPAs and hope to sign more in 1H21 to make them profitable.
These are our own projects. Eosol has also worked for Neoen in Pachamama, Fotowatio’s Villa de Ramos project, Acciona’s Puerto Libertad and many more. We have almost 2GW of solar in operation from third parties in Mexico. Our engineering, automation and control and O&M areas are quite busy, taking up most of the work through these projects. The 14 solar farms that make up our own portfolio represent 325MW of capacity but one of the large third-party projects already represents the same capacity.
Q: How has Eosol adapted to the government’s shifting priorities?
A: When we started construction for our new projects in 2019, we did not foresee the hostile climate between the government and private industry. It has been a complicated year. We had less work and saw projects canceled. However, I do not expect this will affect our chances to get new financing, which we have achieved successfully since 2011. On the other hand, the O&M area has seen its usual demand because these contracts are signed long before a project enters operation, even though delays affect this area as well. In 2021, we will see more of an impact because there will be fewer newer projects and we do not expect much growth, unless companies decide to switch their O&M approach. However, we will still operate the projects already in our portfolio, meaning that the area will not be as affected as engineering or project development will be. O&M can help the company to stay afloat. In any case, we have had to adapt our strategic plans twice this year, whereas we normally work with three-year plans.
Q: How have these changes influenced Eosol’s approach to financing?
A: Since 2011, we have been pioneers in Mexico’s solar sector and have gained experience in every aspect of the energy sector. Even before 2011, we worked on a small project for Chrysler in Saltillo, which allowed us to expand further in the sector. TAI I was built completely with our own equity. TAI II to V were constructed with a variety of external financing. We obtained financing from NAFIN after our original investors departed and that is when our 90 percent portfolio sale to Macquarie happened. Obtaining financing for the second round was not difficult. It was signed in December 2018, attached to a two-year period.
As a result, we have had to restructure the financing of our projects. The projects were supposed to be operating by March 2020 at the latest and our project financing was to end in June and December respectively. Normally, this meant we would have plenty of time. However, due to CENACE not interconnecting the project, we had to restructure and were successful in doing this. We never imagined that our project would be delayed by 10 months. Nonetheless, we now have until April 2021 to bring them online. The people building renewable projects in Mexico are experienced and do not run into long delays. The interconnection delays are not solely a result of the pandemic. It has been a difficult process due to a lack of support from CFE and CENACE. All our projects are financed by public banks such as NAFIN; our last six projects were financed by BANCOMEXT. This makes restructuring credit more complicated in comparison with public banks. Overall, this process has been more complicated than our first project in 2013.
Q: What is Eosol’s strategy for project development going forward?
A: We asked CENACE for a facilities study for two projects that have over 400MW in total, located in Guanajuato and Zacatecas. At the end of November, we presented the information. However, we have dampened our expectations when it comes to project development. This does not mean that we will not develop projects at all. We will launch projects with a long-term vision. We will take our time in the pre-stage before projects are ready to build and see if the situation changes in four years. By comparison and prior to the 2020 crisis, we would try to develop our projects as fast as possible. When it comes to actual development, we will likely not construct anything new before 2023. We will focus on staying debt-free in the meantime. However, without new energy projects, Mexico cannot grow, so we think it is important to spread this message. Thirty percent of Mexico’s energy production relies on obsolete technologies and demand continues to increase. The electricity system could collapse if this demand is not met. The transmission network needs to see major investment in this regard.
Eosol Energy is a Spanish energy company with a significant Mexican presence, owning and operating several PV projects. It is an operator and provides maintenance and engineering services.