The Dutch development bank FMO has arranged a US$127.5mn wind farm project financing in Honduras.
The DFI was joined on the deal by its German and French equivalents, DEG and Proparco, as well as the Opec Fund for International Development (Ofid) and the Interact Climate Change Facility (ICCF –a joint investment facility for financing climate change and climate efficiency projects in developing countries, backed by 12 European DFIs).
The project sponsor is Grupo Terra, a Honduran company, and the debt will fund the construction of the 50MW San Marcos wind project, near the Nicaraguan border.
Ton Nijensteen, FMO’s senior investment officer in Latin America, tells GTR that the finance has a 15-year tenor, and that while it would not be impossible to attract commercial debt for a project like this, it would be very difficult.
He explains: “For a transaction like this you would need 10 medium-sized or big banks, which would be a nightmare. They would provide you with no more than a seven-year tenor – it would become uneconomical on the sponsor side. Working with commercial banks from the region is not impossible, but not very likely.”
The wind farm is expected to be on-grid by 2015, with construction having already started. As part of the project, Grupo Terra will also build substations and interconnection lines, all of which will be hooked up to the Honduran grid.
Honduras doesn’t have any proven oil reserves and its crude imports have been rising exponentially (often at more than 30% a year). In 2010, oil was the single-largest import, accounting for 17% of the total portfolio.
The country has been making significant investment in its renewable energy sector, primarily in hydropower. But while the wind sector is more nascent and a less reliable source of power, US Exim has led the lenders on numerous projects in recent years.
The Cerro de Hula farm in Santa Ana (Central America’s largest), for instance has seen various tranches of US Exim financing, including a US$28.6mn direct loan last year for the import of turbines and a US$159mn loan for the same wind farm in 2010.