Exclusive interview with Bart Turtelboom, CEO, Delphos

The advisory firm boss explains why the San Patricio solar plant deal in Guatemala shows how project finance can unlock Latin America’s renewable energy potential…

How will the San Patricio Solar PV Plant impact Guatemala?

Bart Turtelboom: For Guatemala, the San Patricio Solar PV Plant is a major step towards diversifying the country’s energy mix. Historically, Guatemala’s electricity production has been dominated by hydroelectric and coal generation, which accounted for 39% and 16% of the country’s electricity production in 2023. The introduction of a 66 MWp solar PV plant will significantly reduce C02 emissions and promote clean energy generation. This shift is essential for mitigating environmental impacts and addressing climate change.

How important was this project finance deal for MPC Energy Solutions?

BT: The significance is multifaceted. First and foremost, this is a landmark deal, the first-ever non-recourse senior debt project funding to be secured from Banco de America Central (BAC) in Guatemala. The capital will enable MPC Energy Solutions (MPCES) to construct the San Patricio 66 MWp solar PV plant, a very important electricity infrastructure project in Guatemala.

More importantly, the deal will enable MPC Energy Solutions to continue expanding its renewable energy portfolio in Central America. The San Patricio project, which is expected to start operation in mid-2025, will contribute to clean energy generation, helping to reduce C02 emissions whilst diversifying Guatemala’s energy mix, thus shifting the focus away from heavy reliance on dirty energy. Additionally, the project is expected to foster economic growth through job creation during its construction and operational phases.

I should also add that this deal showcases BAC’s readiness to support sustainable development in Central America, delivering social, economic, and environmental value. This aligns with the bank’s broader goal of achieving a Net Positive impact and encouraging other industries to follow suit.

This was BAC’ first-ever non-recourse senior debt project financing deal in Guatemala; what challenges did you overcome?

BT: It certainly wasn’t an easy feat to accomplish. Being the first non-recourse senior debt project financing in Guatemala from BAC meant that certain due processes had to be followed even as some conditions were met. In the same vein, some risk assessments were carried out. As a non-recourse finance deal, the project’s financial risks were primarily tied to the project’s assets and revenue rather than the borrowers’ balance sheets. This necessitated a rigorous risk assessment process to reassure BAC and other stakeholders of the project’s viability and risk mitigation strategies.

Why did BAC decide to back this project?

BT: BAC is deeply committed to promoting sustainable development and creating prosperity in Guatemala and the Central America & Panama Region. The San Patricio project aligns perfectly with BAC’s mission to support initiatives that deliver social, economic, and environmental value. This alignment was a major factor in their decision to support the project.

Also, the project’s potential to significantly reduce C02 emissions and diversify Guatemala’s energy mix was a compelling factor. With Guatemala’s electricity production historically dominated by hydroelectric and coal generation, the introduction of a 66 MWp solar PV plant represents a substantial shift towards cleaner, renewable energy sources.

As earlier mentioned, the San Patricio project is expected to enhance Guatemala’s energy infrastructure and contribute to economic growth by generating employment during both the construction and operational phases. This potential for job creation and economic stimulation played a significant role in BAC’s decision.

MPCES’s strong track record and credibility as well as the advisory expertise of Delphos were also crucial. BAC had confidence in MPCES’s ability to execute the project successfully, given their mission to provide clean and affordable energy in the region and their history of efficient project development. Delphos’ expertise in structuring competitive financing terms further reassured BAC.

How competitive were deal terms?

BT: I would like to say that it was good to see everybody’s cards on the table during the negotiations. What we need to focus on, however, is that this was a landmark deal for BAC and it was closed in under 12 months. what made it a successful deal was ultimately the efficiency and professionalism of the technical teams, the support from BAC, and the EPC’s effectiveness at securing the necessary permits needed to kickstart the project.

How profitable is the private power production business in Central America? And how does MPC Energy Solutions plan to recoup this significant investment?

BT: The private power production business in Central America has considerable potential for profitability, driven by several key factors. These include the region’s growing demand for electricity, favourable natural conditions for renewable energy, and supportive regulatory environments. Additionally, the push for sustainability and diversification of energy sources away from conventional fossil fuels creates opportunities for private power producers.

For MPC Energy Solutions (MPCES), profitability is important, and it will be pursued through a combination of strategic planning, efficient project execution, and leveraging financial and operational expertise.