Robust renewables markets in Brazil, innovative hybrid merchant finance in Chile, and strong state support in Uruguay provide project finance practitioners with excellent opportunities in all three jurisdictions, agreed panellists speaking at the Latin Lawyer 2nd Annual Regional Project Finance Summit held on 18 November in Washington, DC.

Brazil’s economy may not be as healthy as many investors would like, but its renewables markets are performing well. Despite market concerns over the real’s devaluation, the government successfully auctioned off 31 solar projects worth a combined 900 megawatts in October, which is illustrative of the keen interest in the country’s renewables sector. “Solar is the new thing in Brazil,” said Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados’s Pablo Sorj, who noted that October’s bidding round was a good size for the country’s first solar auction.

Brazil’s increasingly mature wind sector is also healthy and has started to out-compete biomass and hydroelectric power, which now suffer from higher land, construction and environmental costs. Sorj said industry players had snapped up 13 gigawatts worth of government contracts over the past two years, which have helped consolidate wind power’s position in the energy matrix, while costs have fallen as support industries become local.

Sorj admitted that financing from Brazil’s national development bank, BNDES, has been an important factor in the two industries’ growth, but he believes there is still room for commercial banks and their lawyers to get involved. “BNDES will not be able to finance all the sponsors that won this round of bids in October, so the early entrants into the market will need a different source of financing and this is a good opportunity for all of us,” said Sorj with reference to the recent solar energy tenders. The development bank is also encouraging the capital markets to play a bigger role in project finance and is likely to condition future financing on local debenture issuances.

In recent years, Uruguay’s government has made available very attractive incentives designed to fund its goal of becoming one of the world’s largest producers of wind energy. “We have a booming renewables industry,” said Gonzalo Secco of FERRERE (Uruguay). In Uruguay, the power transmission market is entirely controlled by UTE, the state utilities provider, which has implemented very competitive, low risk packages for sponsors and lenders. UTE’s power purchase agreements (PPAs) guarantee the purchase of all the power generated, require no minimum delivery and are priced in US dollars – all factors that have contributed to industry’s rapid growth. “The risk allocation sounds just like what I would write in a bankability checklist,” noted the panel’s moderator, Lori Ann Bean, partner at Clifford Chance LLP.