The countries of Latin America and the Caribbean are making strides in the implementation of the United Nations Sustainable Development Goals and the Paris Agreement on climate change. IDB Invest is helping Brazil to achieve some of these goals by increasing its capacity to generate clean energy.
IDB Invest provided a total loan guarantee for 315 million reales ($85 million) to support a solar energy project in Pirapora, in the state of Minas Gerais. The guarantee backed the issuance of long-term infrastructure debentures in the local market, replacing a short-term bridge financing tranche, including a bridge loan provided by IDB Invest for construction of a second phase of the Pirapora renewable energy complex.
The financial structure provides financial flexibility and the term required to make the project viable and profitable, given the limited financing available in local currency with similar terms. The financial close of the operation occurred in the weeks prior to the presidential elections in Brazil, during a period of significant volatility in the market. Nonetheless, the issue was over-subscribed by more than 200% and levels never seen before in interest rates on the issuance of comparable debentures were achieved.
The project also supports Brazil’s effort to diversify its energy matrix by reducing its dependence on variable hydropower generation, by providing approximately 357,000 MWh of clean photovoltaic solar energy in the first year of the project’s operation.
Increasing the capacity to generate clean energy
The Pirapora I project consists of the design, construction, commissioning and operation of five solar photovoltaic (PV) plants with a combined capacity of 191.5 MW, as well as a 10.3-kilometer high voltage transmission line (138kv) and other interconnection facilities (the Project) to be located in the municipality of Pirapora, State of Minas Gerais, Brazil.
The Inter-American Investment Corporation (IIC)’s participation in the Project will be through a short-term Bridge Loan facility denominated in Brazilian reales to provide funding for certain construction costs.