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Financing Colombia »Colombia's First Renewable Energy Auction is a Special Challenge

Colombia's first renewable power auction is scheduled for October 22, 2019. The government has revealed a PPA (Power Buy Settlement) and its mandate. There have been a number of vital modifications in public sale planning to include the February lesson and lots of necessary modifications to the draft settlement revealed final June.

The failure of the February public sale was accused of insufficient demand participation. auction buy-side requirements. The public sale will goal the demand target and the utmost worth that may stay unknown until the auction. Equally, the tactic of coordinating sales and buy bids, which aims to maximize the benefit to shoppers of every hourly unit, was not revealed until after the public sale.

Participation within the auction is voluntary. Nevertheless, will probably be fascinating to see how power merchants respond to obligatory power purchases underneath the National Improvement Plan, which states that traders should purchase between 8% and 10% of their power purchases beneath regular renewable long-term contracts.

The agreement might be prolonged to 15 years from 1 January 2022 and will help tasks to realize 70-80% debt adjustment from 40% to 50% otherwise achievable. As well as, there are contractual obligations for delays resulting from pressure majeure, if the customer and seller agree, the contract interval is extended for a maximum of 18 months when the contract ends without penalty. Within the absence of a reciprocal settlement, the provisions on arbitration between the events

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Francisco Sanclemente leads Bancapital with each traditional and renewable undertaking value determinations and debt settlement

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Francisco Sanclemente leads valuations and debt structuring for both typical and revolving tasks at Bancapital.

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Francisco Sanclemente leads Bancapital's evaluation and debt settlement of both conventional and renewable tasks

Merchants mainly take part in being registered underneath public regulation MW can participate (ie biomass, small hydropower production under 20 MW, wind, geothermal, photo voltaic and wave era) and turbines have to be registered with UPME (Colom bia Unidad de Planeación Minero-Energética) and UPME may have a favorable reference to the anticipated connection on December 31, 2023.

The low-cost connection idea will enormously influence the participation of wind tasks beneath improvement in La Guajira, that is to say, of the 52 tasks (eight.0 GW) to be developed, solely 12 (1.6 GW) can participate in the auction, while eight (1.eight GW) are subject to UPME analysis, another 16 (2.7 GW). and 16 have either been denied or waited by the developer. Sarcastically, as the auction stands in the present day, Renovatio and EDP's Undertaking Alpha, the only wind challenge that has reached a milestone for environmental protection in La Guajira, can’t participate within the auction.

Probably the most essential auction shows is the hourly block system, which has three clearly defined blocks (00:01 – 07:00, 07:01 – 17:00 and 17:01 – 00:00) designed to take note of the every day volatility of a era Renewable Energy Profile

Certified distributors can submit a number of bids that define mutually unique, mutually unique or concurrent provides. Vendors' quotes embrace a minimum number of 0.5 MWh power packages each hourly bought and the unregulated COP / MWh worth (Prices Charged by Market Individuals for Trust Payment): Tender winners who commit to provide power on request. The variety of packages and their worth are the identical for each block hour for each bid.

This opens up a drawback especially for photovoltaic turbines. Liquidity is executed hourly and the quantity of power dedicated is the identical every hour of the block. Because the plant's era potential, that is, the sun, is very totally different from 7am to midday, the generator has to determine: 1) It supplies the low finish power it could produce (7am) ​​for all block hours by selling the remaining on the spot market through the larger era hour. , or 2) if it needs to supply a greater amount of power for all hours of the block, risking a scarcity of low

Consumers can submit one or more quotes indicating the maximum quantity of power packages to be bought and the COP / MWh worth with out CERE. The required power packages can all belong to the identical or totally different hour component. Thus, traders have no idea when hours are blocking their provides. This causes planning difficulties for retailers.

Consumers can’t present extra power than their average every day business demand for 2018 revealed by UPME for every operator. Nor can sellers present extra power than the day by day power production supported by the venture, as measured by the capacity elements revealed by UPME.

Contract worth changes are based mostly solely on modifications within the Colombian producer worth index, although the government would flirt with US inflation and trade fee elements. Thus, the likelihood that tasks will receive cheaper USD-denominated loans is nearly dominated out

For ensures, they have to be liquid, unconditional and irrevocable. Accepted guarantees embrace bank guarantees and SBLCs (stand-by credits), the latter being the only acceptable various to non-Colombian banks. Momentary entities corresponding to Electricaribe may be topic to the cancellation of an irrevocable cost order from their trustee. The public sale warranty package deal consists of:

  1. Assure provided by both consumers and sellers, equal to 10% of the annual power provided to sellers and 5% of the power purchased by the customer multiplied by COP 135 per kilowatt hour. [19659016] Contractor's contractual obligation (together with well timed COD), equal to 30% of annual power, multiplied by its worth before power provide, and 20% thereafter.
  2. Buyer's equivalent cost assure of 30% of annual power multiplied by contract worth
  3. As well as, to facilitate the collection of contractual obligations by the parties after termination, every celebration shall subscribe to the counterparty.

If the Agreement is the duty of both celebration. A nice of 20% shall be payable to the contractor. Early redundancy events embrace three consecutive cost users, a mutual agreement, and over 180 days of drive majeure, two of that are challenging to get finance.

Future Challenges

First of all, there is a danger that the challenge would supply a disproportionate supply that might forestall the auction from proceeding in line with the standards of competitiveness. Keep in mind that within the February public sale, the Herfindahl-Hirschman Index (HHI), which is the square of the "market share" of all rivals, was clearly above the utmost allowed, which means that one particular person bidder submitted a bid of 85% and 90% of all mixed bids. As well as, the dominant market indicator of 88% confirmed that one venture was capable of take in 88% of complete demand.

Secondly, there is a danger that purchasers won’t take part abundantly as a result of participation is voluntary and obligatory power purchases beneath the nationwide improvement plan will not be enforceable and the deviations won’t be penalized.

Third, there is the danger that counterparty danger might forestall presents from some potential vendor suppliers. True, this time the vendor provides his worth assure understanding which consumers are certified to attend and their monetary statements. Nevertheless, they haven’t any say during which counterparty their bids can be matched with. In addition, there is more than 2 years between the auction and the graduation of the obligations, enough time for a vital change in the monetary place of the weaker consumers.

Fourth, because the most worth remains unknown until the auction, there is a danger that bids might exceed the maximum limits that would probably be eligible if the maximum worth was recognized beforehand. Nor do we know the dimensions of the auctioned demand target, which, if small, can show to be disastrous if all the things else works for various prices.

Lastly, the danger of transmission strains or substations not being delivered in time is not addressed. Based on UPME, the typical delay in supplying infrastructure in Colombia's two largest transmission networks (ISA and Grupo Energía Bogotá) is close to 1,000 days and falls. It remains to be clarified what would occur to the contract and the right way to substitute consumers and sellers in a probable event, particularly in La Guajira's wind tasks, a challenge that achieves the COD in time, however which has no connection to the availability of power. buyer. It is additionally unclear whether or not such an occasion is thought-about an awesome impediment, whereby the contract is terminated at an early stage after a 180-day delay, which would not be welcomed by the banks

Wind turbine Image by Steppinstars by Pixabay

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