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Renewable energy to power irrigation in the Atacama desert

With support from the IDB, Subsole will be the first company in Chile’s fruit industry to use solar photovoltaic energy

The Atacama desert is the driest place on earth and the region with the highest solar radiation on the planet. That’s where Subsole, one of the Chile’s largest locally owned exporters of table fruits, is planning its future growth, and it will use the power of solar energy and energy efficiency to achieve its goal.

With a $32 million loan and technical assistance from the Inter-American Development Bank (IDB), Subsole plans to increase output 60 percent over the next four years, mostly by expanding farming in the rich agricultural area of Copiapó valley, a region 800 kilometers north of Santiago that is surrounded by the Atacama desert.

In order to be able to boost output competitively, Subsole plans to build a 300 kWp (kilowatts-peak) solar photovoltaic plant in the valley to power its irrigation systems. The new plant, the first ever by a Chilean fruit producer, will allow the company to pump water from underground aquifers cheaply and sustainably in a region where a thriving mining industry competes fiercely for scarce electricity.

“The solar plant will allow us to reduce our carbon footprint while ensuring stable energy costs and better energy efficiency,’’ said Miguel Allamand, Subsole’s President, who founded the company 20 years ago. The company understands the powerful combination of quality and sustainability. It spends a substantial portion of its operating costs on transferring knowledge and technology to farmers.

With technical and financial support from the IDB, the company will conduct energy audits in six irrigation sites and three packaging and cold storage facilities. It also will carry out a pre-feasibility study to implement solar cooling technology, to improve irrigation and water storage methods, and to build energy-efficient storage and packaging facilities with state-of-the-art technology, such as frequency converters for water pumps and energy and water management systems.

The investment will allow Subsole to remain at the cutting edge of table fruit production in Chile. The Santiago-based company is known for its inclusive business model where growers share the benefits of the company’s development. It was among the first to implement a quality control certification program along its value chain, and it also pioneered benefits programs for workers that include free meals, transportation and housing -- actions that have particularly benefitted women from vulnerable low-income families.

“Subsole’s investment will enhance its sustainability practices and will have a significant impact along the entire supply chain, benefitting 275 small and medium-sized producers and creating more than 10,000 direct and indirect jobs, ultimately impacting approximately 82,000 beneficiaries along the supply chain,’’ said Paola Bazan, the project team leader for the IDB Structured and Corporate Finance Department. “The investment will ensure that sustainable and responsible corporate practices continue to support innovation, which is central to the IDB private sector strategy.”

Long-Term Capital

The IDB loan agreement was signed at Subsole’s headquarters in Santiago on Dec. 12th. The loan has a 10-year maturity and 30-month grace period on the repayment of principal, providing Subsole with the long-term funds to finance its expansion plan. Part of the loan will be used to finance the company’s capital expenditures through 2014 and the remaining will be used to refinance its local bank debt with local banks.

Besides the solar power plant and new facilities, the IDB loan will also help finance land transformation that will increase fresh fruit production, the expansion of cold storage and processing machinery and construction of facilities.Increased output will pave the way for the company to boost its exports by 42 percent in the next three years. Over the past decade, Subsole has increased table fruit exports by an average of 20 percent a year.

IDB Group Milestone

The loan represents an important milestone in the long-term relationship between the IDB Group and Subsole. In 2002, the company was the first Chilean fruit producer and exporter to receive financing from the Inter-American Investment Corporation ( IIC ), a member of the IDB Group. In 2008 the IIC made a second loan to a company of the Subsole group. The group also benefited from a diagnostic review process under FINPYME, a program that helps small and medium-size enterprises (SMEs) become more competitive and gain access to longer-term financing.

The IIC’s first loan, a $7 million facility fully repaid in 2008, enabled Subsole to finance the increase in output of thirteen of its small independent fruit suppliers. The second IIC loan to the Subsole group, which is still outstanding, was used to finance the construction of a cold storage and packing plant in Copiapó.

In 2009, the Multilateral Investment Fund ( MIF ), also a member of the IDB Group, acquired a $3.5 million stake in Sembrador Fund, a private equity fund founded by Subsole executives together with other Chilean investors with the objective of fostering innovation and improving competitiveness among small and medium-sized farmers in Chile.

The IIC specializes in lending to small and medium-sized enterprises,and the MIF is Latin America’s largest grant fund that supports microenterprise and small companies.

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