Banks and Investment Funds Now Interested in Financing Renewable Energy Projects

08-08-2017

JP Morgan Chase announced their new “green fund” of 2 billion USD for international renewable energy projects. News such as this is very encouraging to Argentina as it takes its first steps into this “green” arena. Local banks are slowly warming up to the field.

We are waiting for the supposed release of the tender requirements for the 2nd round of RenovAr, a string of public tenders for public projects related to clean energy that will contribute greatly to Argentina. In 2025, an electrical grid consisting of 20% renewables or “non-conventional energies” will be in place.

Within this framework, last week JP Morgan Chase—the largest financial institution in the US and with operations in more than 60 countries—announced the implementation of a fund destined for renewable energy projects that is bigger than any yet seen: 2 billions USD for the financing of projects that decrease our footprint on the environment.

According to their own calculations, this fund has the potential to impact 22,000 investors and clients around the world.

In a conversation with Strategic Energy, Mariano Lamothe, director of energy markets related to mining and infrastructure for the consulting company ABECEB, he posited that these types of financial tools are positive for Argentina given that our country is taking its first steps into the world of clean energy, while other markets are already saturated.

“Argentina is an interesting country because it is starting up in the field of renewables, which doesn’t only mean that we still have everything to do in relation to that field, but also that we can close on projects that are more affordable in other parts of the world,” observed the economist.

It is worth mentioning that financing is becoming a problematic factor for some of the 59 projects awarded by the National government in rounds 1.0 and 1.5 of RenovAr. The 2,423.5 MW of renewable energy awarded will require around 4 billion dollars of investment in order to undergo operation.

Some groups that won a tender and put forward financial schemes are not making it. “Regarding the information that we have received, there were some that required deep analysis of the technical aspects, rates, certifications, among other things,” noted Lamothe regarding the anxiety surrounding some of these projects.

Regardless, the economist commented that it won’t be a problem specific to Argentina some of these projects might not be realized or built: “On average, in the world, it just happens that some projects can’t find financing.”

Local Banks

Another side of the issue is the problems arising from these projects looking for Argentine credit. Local financial institutions decided not to loan on the terms needed by the projects: between 15 and 20 years.

Regardless, Lamothe found that many national banks are contemplating business in renewables with a newly-found appetite. Yet, at the same time, since it is an activity with such intense capital investment over long periods of time, many credit entities decided to stay on the sidelines.

The first financial institution to be participating in Round 2.0 will be the Argentine Investment and Foreign Trade Bank (BICE) with a sum of around 150 million USD. Banco Galicia will also participate with “green” lines of credit.

Autor
Guido Gubinelli
Fuente
Energía Estratégica