Despite a challenging market, Canadian renewable energy company Innergex managed to structure a deal last year that included the largest ever project bond issued by a Latin American renewable company in the US private placement (USPP) market.
The $710 million green bond, which matures in 2036, was sold to USPP investors in August 2022, when global financial conditions had taken a turn for the worse. It was the largest renewable project bond out of Latin America last year.
Quebec-headquartered Innergex structured the deal following its acquisition of Aela, a Chilean wind power company, a deal which was completed in June 2022.
The acquisition, valued at $686 million, including the assumption of $383 million in existing debt, added three wind power plants to Innergex’s Chilean portfolio, which already featured hydroelectric and solar production units, as well as battery storage facilities.
The company then consolidated Aela’s assets with two hydroelectric and two solar power plants to create a special purpose vehicle that issued the green bond. It simultaneously secured a $73 million loan in the form of letter of credit facilities provided by Japanese bank SMBC, which structured the entire deal.
The transaction was a challenging one as it incorporated both Power Purchase Agreements (PPAs) and merchant contracts. Investors in renewable energy usually feel more comfortable with the former, notes Jaime Pino, managing director at Innergex in Chile.
“We had to explain to investors how this model worked in the context of the Chilean market,†he says.
The transaction nevertheless ended up with a significantly oversubscribed book despite volatile market conditions in June 2022, with a final group of seven high-quality project finance-focused investors, according to SMBC.
Pino says that the refinancing deal will help Innergex pursue its growth strategy in Chile. The company has acquired assets across the Chilean territory, ensuring the delivery of energy to clients even when some regions are affected by generation issues.
“Our strategy values the diversification of sources and a diversified geographical presence too,†Pino says.
Innergex aims to take advantage of Chile’s renewable energy potential while avoiding problems faced by companies that focus on a limited region or a single power source. The firm is also working on projects in the sectors of green hydrogen and power for desalination plants, Pino adds.
In recent months, some renewable energy firms in Chile have entered bankruptcy proceedings as they found themselves unable to fulfil their contractual obligations to clients.
Innergex, headquartered in Longueil, Québec, manages a 4.1 gigawatt portfolio of renewable assets in Canada, the US, France and Chile.
The company consolidated Aela into its existing portfolio of hydro (Duqueco and Lican) and solar (Salvador and San Andrés) assets, to become the largest independent player in the Chilean renewable sector, resulting in a portfolio of solar, wind, and hydropower renewable energy assets with a total installed capacity of 609 megawatts.
