Lack of government support helps Mexican wind sector

MEXICO: While uncertainty over subsidies hampers wind development in Europe and North America, the lack of government support in Mexico is actually encouraging international investors to back projects in the country.

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At the end of April Renovalia Reserve, a $150 million joint venture between private equity firm First Reserve and developer Renovalia, announced it was buying two wind projects in Oaxaca with a combined generating capacity of 228MW.

One project, the Piedra Larga wind farm, has been operational since June 2012 with an installed capacity of 90MW, while a 137.5MW wind farm is under construction and expected to be fully operational in early 2014.

Piedra Larga has long-term financing already in place and similar financing is anticipated for the second wind farm. Revenues from the projects are from long-term, inflation-linked power purchase agreements (PPAs) with Mexican baking company Grupo Bimbo and another, unnamed "world-leading retailer". The agreement periods cover a 15-18 year period with 5-10 year additional extensions at the option of the off-takers.

First Reserve managing director John Barry, also a member of the Renovalia Reserve board of directors, told Windpower Monthly that the projects' long-term PPAs with "strong" off-takers, combined with Oaxaca's good wind resources, meant that the absence of subsidies was actually regarded as a strength by his firm.

"What we were attracted to with these Mexican projects was not just the strong wind resource and long-term PPAs, but the fact that these projects do not rely on government support, so there's less for the government to take away," said Barry.

He added that another key driver for Renovalia Reserve choosing Mexico as the place to make its first investment as a joint venture outside of Europe was the huge amount of wind data available for both project sites.

"The region the projects are in has very steady north-south wind flow," said Barry.

"When investing, you look at things like long-term data sets. For this investment we had 11 years worth, plus data from the US National Renewable Energy Laboratories (NREL) going back even further."

Oaxaca has average annual wind speeds of around 10 metres per second and is rated by the US Department of Energy in the highest-quality category worldwide in terms of wind-energy resource.

The Renovalia Reserve joint venture was formed in 2011 to own and operate a portfolio of wind farms in Europe and North America. As well as the two wind farms in Mexico, Renovalia Reserve owns and operates six onshore wind projects in Spain (244MW) and one (15MW) in Hungary. With the addition of the two assets in Mexico, Renovalia Reserve will have a total of 487MW of wind power capacity worldwide.

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