Latin America: Chilean-Saudi solar-powered desalination project seeks investors

22 October 2018 - 12:00 am UTC

Chilean firm Trends Industrial is in talks with international companies interested in investing in its USD 500m solar-powered desalination project, CEO Rodrigo Silva told Inframation.

The company is seeking partners to form a special purpose vehicle (SPV), which would be controlled by Trends and other equity investors, Silva said. The project SPV is named Energías y Aguas del Pacífico (Enapac). 

Under the proposed financing arrangement, the SPV would finance 20% of initial investment, while local or foreign banks and financial institutions would finance the remaining 80%, a Trends spokesperson said.

The project has generated global interest from China, Germany, Spain, the US, and Canada, among other countries, while international investment funds have also expressed interest, the spokesperson said.

Another potential source of funding are ‘blue bonds’ issued by the World Bank, the spokesperson said, adding the bank recently approved a USD 3bn Sustainable Development Bond series, which focuses on conservation and sustainable use of water.

Talks with potential financiers have accelerated since Chile’s environmental authority, the Comisión de Evaluación Ambiental (CEA), approved the project’s environmental impact study on 26 September, Silva said. 

The study was submitted in July 2017.

“We have seen a lot of interest from many actors and so we are optimistic of advancing rapidly in every area, including financing,” he told Inframation in an email.

The project SPV signed a memorandum of understanding (MoU) with Saudi firm Almar Water Solutions in May 2018 to help with economic and technical aspects of the project in northern Chile’s Atacama Region. Almar Water Solutions is the global water infrastructure arm of Saudi firm Abdul Latif Jameel Energy & Environmental Services, which also owns solar developer Fotowatio Renewable Ventures (FRV). 

Other desalination projects in the region include the Cobra/Mitsui Mejillones Bay desalination plant, which received a USD 474m loan from 11 international lenders in June and Chilean state-owned mining company Codelco’s USD 1bn Radomiro Tomic desalination plant, which received environmental approval in March.

Enapac would be Chile’s first multi-client, solar-powered desalination plant.

“It’s new because this is a project with multiple offtakers and it is not dedicated to supplying a single project… [the project developers] would need to have multiple offtaker agreements for water supply,” said James Channing, an associate in the projects and infrastructure group at Santiago law firm Morales & Besa.

Unlike dedicated plants for mining projects, in this case it is the seller putting the project together, which could affect the financing arrangement, said Channing. “Everything that’s new will likely bring an added level of difficulty,” he said.

Demand for water is strong and getting stronger. Potential clients include mining companies operating in Atacama, such as Kinross Gold, Goldcorp, Barrick and Teck Resources, and Trends has signed letters of intent with some of these companies, the company’s spokesperson said.

“The response of the industrial sector to the project has been very positive, especially from the mining companies, and we have made progress in conversations with many of them,” said Silva.

Trends has not hired an external financial advisor, but its board includes consultants such as Spanish executive Borja Blanco, CEO of Aqua Advise, who serves on the board of the International Desalination Association (IDA), the spokesperson said.

The USD 500m investment in the first stage of the project includes the desalination plant, which will work through a sea water reverse osmosis process, a 100 MW photovoltaic plant, a water reservoir with capacity to hold up to 600,000m3, pipelines and transmission cables.

Additional works to connect customers to the plant, including pipelines to high-altitude mines, could require another USD 500m in investment.

The plant will have the capacity to produce 2,630 liters of water per second, which would make it the largest desalination plant in Latin America, the spokesperson said. 

The project’s operating license is for 30 years and, while mining companies are expected to purchase most of the plant’s capacity, it could end up having a mix of clients, Silva suggested.

In addition to mining companies, the approval of the environmental impact study has facilitated conversations with other potential offtakers, including agricultural companies, water utilities and even nearby solar energy projects that require water to clean their panels, the spokesperson said.

If all goes according to plan, construction of the plant could begin in the first half of 2019 and take around 24 months to be completed, with operations starting in 2021, the spokesperson said.

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