Chile to expand use of non-conventional renewable energy sources with IDB support

Arica 1 and Los Loros photovoltaic (PV) plants will eliminate an estimated 111,000 tons of greenhouse gas emissions annually

Chile will expand the use of renewable resources to substitute for fossil fuel generation to meet the energy needs of its mining industry with two loans from the Inter-American Development Bank (IDB) of $27.7 million for the Arica 1 project and $25.7 million for the Los Loros project. Both projects will sell energy to the spot markets.

“These Projects will contribute to diversifying the energy matrix in the country, which is presently heavily dependent on imported fossil fuels, through the incorporation of renewable energy that is fueled by the exceptional solar resource of Chile’s Atacama Desert,” said Jean-Marc Aboussouan, Chief of the Infrastructure Division of the IDB’s Structured and Corporate Finance Department.

Arica 1 Solar Photovoltaic Power Project

The project, developed by Sky Solar Group, will be sited 26 km northeast of the City of Arica; it will generate 44 MW of renewable energy and will supply electricity to reduce the reliance on fossil fuels in Chile’s northern electricity grid, Sistema Interconectado Norte Grande, where demand derives almost entirely from mining companies and other industrial users.

The project will bring significant private investment to Chile’s northernmost region, which is characterized by low rates of growth and investment. Arica 1 will eliminate an estimated 54,000 tons of greenhouse gas emissions annually.

The IDB financing package for the Arica 1 plant consists of loans to Arica Solar Generación 1, Ltda., controlled by Hong Kong-based Sky Solar Holdings, Ltd., of $27.7 million from the IDB’s ordinary capital, a loan of up to half the amount of the IDB loan ($13.9 million) from the China Fund for Latin America and the Caribbean (China Fund), and a loan of $8.5 million from the Clean Technology Fund.

Los Loros Photovoltaic Power Project

The Los Loros project is the first solar PV project financed by the Bank in the Sistema Interconectado Central (SIC) of the country. The project, located approximately 50 km southwest of the city of Copiapó, has been developed by Solairedirect Chile. Solairedirect of France will be the majority shareholder in the project. It will generate approximately 54 MW of renewable energy and will connect at the Los Loros node, serving the significant energy needs of the central region of the country, and especially the Santiago area.

The project will increase competition in Chile’s central electricity market, while helping to reduce the overall carbon footprint of the central electricity grid, with a reduction of 57,000 tons of greenhouse gas emissions annually.

The Bank’s financing for the Los Loros project includes loans to Solairedirect Generación V SpA of $25.7 million from the Bank’s ordinary capital, senior loans of $6 million from the Canadian Climate Fund for the Private Sector in the Americas (C2F) and $8 million from the China Co-financing Fund for Latin America and the Caribbean (China Fund), and a subordinated loan of $12 million, also from the C2F.

In both cases, IDB is bringing financing to the projects that would not otherwise be available from other financing sources. The participation of IDB with its own resources as well as resources from the CTF and C2F helps to enable lower-carbon and more climate-proof investment, creates flexibility in the structure of the transactions and helps to attract the participation of commercial banks for merchant solar PV projects in Chile.

The Canadian Climate Fund for the Private Sector in the Americas (C2F) and the China Fund are administered by the IDB.