IDB Invest guarantees debentures for Brazilian solar project

IDB Invest has provided a total credit guarantee of R$315 million (US$84 million) to cover the debentures issuance for the financing of the construction and operation of phase II of the Pirapora solar complex, which is being developed and operated by EDF Renewables and Canadian Solar in Brazil, with a combined capacity of 191.5 MW.

The project will be the first large-scale solar photovoltaic (PV) project to be financed on a project finance basis in Brazil. It supports Brazil’s efforts to diversify its energy matrix to reduce reliance on variable hydro generation by providing approximately 357 MWh of clean solar PV energy during its first year of operation. The project contributes to Brazil’s goal to reduce greenhouse gas emissions by 43 percent by 2030 by eliminating approximately 3.3 million tons of CO2 during the life of the project.

Phase II consists of five solar-PV plants located in Pirapora, Minas Gerais, in Brazil.

IDB Invest participation will allow the project to secure 16-year financing, which is not available from commercial banks, through the issuance of the debentures guaranteed by the total credit guarantee. IDB Invest has identified the debenture market as a key source of funding of energy and infrastructure projects in Brazil. This market, among others, will be incentivized with the development of the B2 Infra debt fund, which is being structured by IDB Invest in coordination with BNDES. The settlement of the bonds took place on October 15th and raised more than two times the amount required. The issuance wrapped by IDB Invest’s total credit guarantee has been rated AAA (local) / A+ (international) by Fitch. The price and the tenor obtained by this issuance were a first of a kind in the Brazilian market.

This is the second time that IDB Invest has provided a guarantee in Reais for a renewable energy project as well as a guarantee of an infrastructure debenture in the local capital markets. By providing an international AAA guarantee, IDB Invest fosters the growth of capital markets in Brazil, which enables the mobilization of new sources of liquidity. IDB Invest’s total credit guarantee’s innovative nature and structure differ from the traditional short-term construction completion guarantees, the cost of which is ultimately paid by project sponsors.