Financing your Solar Investment in Mexico
El financiamiento del proyectos fotovoltaicos
Volker Schwab, Senior Investment Manager, DEG Mexico Office México D.F., 10 November 2015
DEG Facts and Figures
DEG ›
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Established
1962
Employees 503
Company seat
Cologne
Shareholder
KfW Frankfurt
Equity EUR 2.1 billion
Balance sheet
EUR 5.3 billion New business EUR 1.5 billion
EUR 7.8 billion
Portfolio
KfW
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Ownership
Federal Republic of Germany (80%) and the federal states (20%) Rating AAA/Aaa, 3rd largest bank in Germany Balance sheet EUR 479billion World's Safest Bank 2014 according to “Global Finance” Magazine’s Ranking of the
World’s 50 Safest Banks
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DEG’s financial products
Expected return
Equity
Preferred equity
Convertible debt
Subordinated debt
Senior unsecured debt
Senior secured debt
Risk
Main requirements:
➢ Long-term Tenor
➢ Private Investment
➢ Investment in Developing or Emerging Markett
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Investor observations on the Mexican Solar PV market
› Solar PV with positive contribution to Mexican Energy Market, e.g.
› Diversification of energy sources.
› Addressing transmission bottlenecks.
› Synchronization of supply and demand.
› Distributed Generation: › Good business case.
› It’s happening, but mostly through individual, disperse projects.
› High transaction costs, difficulties in aggregation/standardization.
› Our focus here is on Utility Scale projects:
› Small Producer Model pursued by most developers in recent years did
not show big success, mainly due to volatile / unpredictable tariff.
› Wholesale Energy Market will need time to take off.
› Regulatory/psychological insecurity.
› Lack of bankable PPAs – energy auctions will bring new opportunities.
Cost disadvantages (esp. vis-à-vis other renewables) currently limit
the growth of utility-scale solar projects in Mexico. Over the coming
years, we expect these disadvantages to disappear.
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Sources of Financing in the Mexican Solar PV Market: Debt
› Debt sources
› Commercial versus development banks.
› Local versus international banks.
› Niche banks (e.g. Nadbank for Northern Mexico).
Issues to consider
› Usually, banks start to get interested at ready-to-build stage.
› Bankable PPA is THE most important factor.
› PPA currency and PPA tenor impacts universe of financiers.
› Risk-mitigation factors such as First-Tier modules, EPC-
turnkey from recognized supplier etc.
› Debt sizing done differently by each bank, but expect equity
requirement of 20-40%.
Bankable PPAs as main bottleneck for debt financing.
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Sources of Financing in the Mexican Solar PV Market: Equity
› Sources of equity
› Family and friends.
› Strategic investors (sector players, offtakers, equipment suppliers etc.).
› (Specialized) Private Equity funds.
› Local and international institutional investors (e.g. pension funds/ Afores/
Fibra E).
› Selected banks also have equity operations. › Yield Co’s.
Issues to consider
› Moment of investing.
› Time horizon/Exit (Developers versus Asset Holders/Operators).
› Corporate Governance.
› Size (single project versus portfolio of projects).
› Equity versus Mezzanine structures.
The more advanced-stage, sizeable and institutionalized a project,
the easier to obtain equity
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DEG’s investment focus
What we are looking for
› Long term investment projects with a developmental impact, e.g.
through climate protection.
› Companies with a track record in their industry or a strategic partner. › Companies with willingness to conform to international standards of
corporate governance.
› German relation (sponsor, equipment etc.) welcome, but not necessary.
› DEG financing usually starting at 10m USD.
› Solar in Mexico: Fixed price PPA in USD or MXN (offtakers not
necessarily AAA).
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German government and DEG grants
Amounts up to 200 TEUR, 50% cost sharing
Program
For whom?
German and
develoPPP.de European
corporates
Feasibility
Studies
Technical
Assistance
Use of funds?
Projects with a broader
development impact, e.g. training
centers for employees or suppliers,
community building etc
German and
European
corporates, up to
EUR 500 Mio. Sales
Co-Financing of external cost in
connection with feasibility studies
regarding investments in a DEG
partner country
Existing or potential
DEG clients
Social and environmental
measures; optimization of business
and production processes; risk
consultancy; training and
qualification
Climate
Existing or potential
Cooperations DEG clients
From whom?
Climate protection measures that
would otherwise not be
implemented, e.g. pilot plants,
introduction of innovative
technologies etc.
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Our Team in Mexico
Dr. Stefan Blum
Director Representative Office Mexico Stefan.Blum@deginvest.de
Tel.: 52 55 9172-9401
Eduardo Avendaño
Energy / Project Finance
Eduardo.AvendanoFranco@deginvest.de Tel.: 52 55 22 82-2946
Sergio Viso Equity & Mezzanine Corporates
Sergio.Viso@deginvest.de
Tel.: 52 55 2282-2948
Xochitl Melendez
Office Manager
Xochitl.Meldendez@deginvest.de
Tel.: 52 55 9172-9400
Johannes Goderbauer
Equity & Mezzanine Corporates
Johannes.Goderbauer@deginvest.de
Tel.: 52 55 9172-9403
Ernesto García
Loans Corporates
Ernesto.Garcia@deginvest.de
Tel.: 52 55 9138-0909
Volker Schwab
Energy / Project Finance
Volker.Schwab@deginvest.de Tel.: 52 55 9172-9402
DEG – Deutsche Investitions- und Entwicklungs-
gesellschaft mbH
Oficina de Representación México
Arquímedes #19 Piso 4, Bosque de Chapultepec, 11580, México D.F.
Phone +52 55 9172 9400 / Fax +52 55 9172 9404
www.deginvest.de
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Activities of KfW Group in Mexico
Objectives
Providing finance, advice, support
for development and climate
protection projects, in cooperation
with governments and state
institutions in developing and
emerging countries
Providing tailor-made long
term finance to support the
development of the
Private Sector in
Emerging Markets
Providing commercial long-term
finance to Mexican borrowers
in the interest of German and
European companies to
promote exports, FDIs to
Mexico, as well as strategic
imports to Germany
Economic
Sectors
Energy, Water, Urban mobilization,
Biodiversity and climate
Manufacturing & Services,
Infrastructure, Agribusiness,
Financial Services
Manufacturing Industries, Basic
Industries, Maritime Industries,
(Offshore Oil &Gas), Energy
Products
• Promotional loans • Development loans
• Grants and accompanying
measures
• Commercial long term loans
• Structured Finance
• Equity
• Export Finance (with/without
ECA)
• Corporate lending
• Project Finance • USD 464 million • 6 projects
• USD 381 million • 36 projects
• USD 407 million • 10 portfolio clients
Example
clients
Portfolio
More than 1.25 USD billion total KfW commitments in Mexico
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Why work with DEG?
Tailor-made Solutions
› Equity/debt structures crafted
according to project needs
› Currency flexibility (EUR,
USD, MXN)
Global Reach, Local
Presence
› Investment experience in +80
countries
› 10 years office presence, over
40 years experience in Mexico
“Seal of Quality”
› DEG represents the Federal
Republic of Germany
› Our involvement will enhance
your company/project profile
Long-term Approach
› Maturities matching your
business horizon (up to 20 years)
› Financial stability from a AAArated institution
Partnership
› Developmental approach,
beyond profit maximization
› Technical Assistance
programs
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