Re-financing renewable energy project through a bond issuance

Jacinta Solar Farm

The Uruguayan government planned to diversify its energy mix, reducing its heavy reliance on hydropower1 and imported fossil fuels during drought seasons
To achieve its goal, the government launched a 200MW solar PV program awarding power purchase agreements (PPAs) via UTE, the state-owned public utility of Uruguay
The Jacinta solar farm came online in 2015 and added 50MW of installed capacity to the Uruguayan power grid

After acquiring La Jacinta Solar Farm from Fotowatio Renewable Ventures in 2017, Invenergy sought to repay the outstanding construction debt on the project
However, the capital markets in Uruguay had traditionally been unable to provide loans with long tenors that met the needs of long-term infrastructure projects because of a lack of sufficient debt capacity
Thus, Invenergy turned to foreign capital markets to re-finance existing debt on the La Jacinta Solar Farm

Fotowatio had financed the project with an A/B loan2, which entailed IDB Invest (private sector arm of the Inter-American Development Bank) providing an A loan alongside a B Loan supplemented by the Canadian Climate Fund (C2F) for the construction of the project
In 2017, Invenergy re-financed the loan with an A- bond (to be undertaken by IDB Invest), and an issuance of a B-bond3, which was sold to a special purpose vehicle and then privately placed in the US market to institutional investors, with IDB Invest purchasing 5% of the B-Bond
The proceeds of the B-bond were then used to repay the original A and B Loans in their entirety

Administración Nacional de Usinas y Transmisiones Eléctricas (UTE) – State-owned utility, project owner and off- taker
Fotowatio Renewable Ventures BV (FRV) – Original project developer
IDB Invest – Private sector institution of the Inter-American Development Bank (IDB), provided A/B loans
Canada Climate Fund (C2F) and DNB – Provision of loans
Invenergy – Acquired project from FRV

The bond issuance raised c. USD 67.75M, enabling La Jacinta Solar Farm to continue providing 50MW of installed capacity to the Uruguayan energy mix
The A/B structure allowed loan tenors to extend beyond what commercial banks typically provided – the 25-year bond is one of the longest tenors for a project bond in Latin America
The project bond received an investment-grade rating (Baa3) as well as a green bond (GB) certification and assessment of GB2 (Very Good) from Moody’s

Participation by development institutions, such as IDB Invest, through the A/B parri-passu1 bond structure provides assurances2 to potential investors, increasing the attractiveness of investment and generating appetite for the bond issuance
The B-bond structure was made possible as the La Jacinta project earned its revenues via a dollar- denominated, 25 year agreement with Uruguay's state-owned utility company
However, the A/B bond structure may offer limited replicability because it requires the offtaker (the Uruguayan government) to bear significant long-term fiscal risk, which provided a 25 year take-or-pay PPA through UTE