(PRNewswire) GREENWICH, Conn., MADRID, and LONDON — The First Reserve Energy Infrastructure Fund (FREIF I) of First Reserve, the largest global private equity firm exclusively focused on energy, and Renovalia Energy, one of the largest renewable energy developers and Independent Power Producers, today announced the expansion of their Renovalia Reserve joint venture with the addition of two wind power plants in Southern Mexico. The investments diversify the Renovalia Reserve portfolio beyond Europe into North America and nearly double the power capacity of the wind farm assets worldwide. Financial details of the transaction were not disclosed.
“Adding wind power plants in Mexico to Renovalia Reserve’s portfolio is a natural extension of the company’s strategy,” said John Barry , Managing Director of First Reserve and member of the Board of Directors of Renovalia Reserve. “Growth in electricity demand is expected to continue to trend upward based on the pace of population and industrial and manufacturing growth, and the legal and regulatory framework signals stability and predictability of renewable energy policies for the region. These conditions provide a fertile environment against which we can apply our growth equity capital and strong operational model to provide predictable EBITDA and cash flow over the long term, with the principal short term variability being wind resource.”
The first 90 Megawatt (MW) farm in Mexico has been operational since June 2012. The second 137.5 MW farm is under construction and expected to be fully operational in early 2014. The 228 MW of the combined farms will be enough to power between 287,000 – 359,000 Mexican households annually (1).
The 90MW operation in Mexico has long-term financing already in place and similar financing is anticipated for the second wind farm. Revenues from the farms are from long-term, inflation-linked Power Purchase Agreements (PPAs) with strong counterparties – Grupo Bimbo and a world-leading retailer – and no reliance on government subsidies. The agreement periods cover a 15-18 year period with 5-10 year additional extensions at the option of the off-takers.
“Renovalia has been present in Mexico since 2007 through its affiliate Demex. The development of 228MWs of Mexican wind assets reflects the successful implementation of our international asset diversification strategy in countries with superior growth in GDP (Gross Domestic Product) and energy consumption, outstanding wind resource, and solid legal and political frameworks, such as Mexico. We are very impressed by the commitment shown by the Mexican Authorities in promoting the development of clean and competitive renewable energy,” said Jaime Galobart CEO of Renovalia Energy and Director of Renovalia Reserve. “We are delighted to continue sharing our expansion plans with such a solid partner as First Reserve.”
Wind Power in Mexico
The two wind power plants are located in Oaxaca, Mexico, a region with historically robust wind resource with average annual wind speeds of around 10 m/s (meters per second). In fact, the U.S. Department of Energy rates this region of Oaxaca in the highest quality category worldwide in terms of wind energy resource (2).
Experts predict that Mexico will need 45 GW of new electricity capacity within the next 15 years to meet future demand (3). In addition, the development of wind power is critical to meet government renewable targets. Mexico recently passed a carbon law which mandates 35 percent of energy to come from renewable sources by 2024 (4).
The Renovalia Reserve joint venture was formed in 2011 to own and operate a portfolio of wind farms in Europe and North America. In addition to the two wind farms in Mexico announced today, Renovalia Reserve owns and operates six onshore wind farm projects in Spain (244MW) and an additional farm (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.
About FREIF I and First Reserve
FREIF I is the inaugural infrastructure Fund for First Reserve, which closed in 2011 with $1.23 billion of committed capital. The Fund’s portfolio includes seven investments in the U.S., Europe and globally all of which are focused in the areas of Contracted Power, Contracted Midstream, and Regulated Transmission and Distribution.
First Reserve is the largest global private equity firm exclusively focused on energy. With 30 years of industry insight, investment expertise and operational excellence, the Firm has cultivated an enduring network of global relationships and raised more than USD $23 billion of aggregate capital since inception. Putting both to work, First Reserve has completed more than 450 transactions (including platform investments and add-on acquisitions) on six continents. Its portfolio companies operate in approximately 50 countries and span the energy spectrum, including resources, equipment and services, midstream / downstream and infrastructure. First Reserve has offices in Greenwich, CT; Houston; London and Hong Kong. Visit us at www.firstreserve.com for more information.
About Renovalia Energy
Renovalia Energy is one of the largest renewable energy Independent Power Producers, with close to 600MW of renewable power in operation or under construction (distributed among wind, solar photovoltaic, solar concentration and minihydro). Established 12 years ago, the company has strategically diversified itself technologically and geographically, allowing the company to become a worldwide reference in the renewable energy market. Renovalia owns and operates 10 wind farms and solar installations. It is currently building the second phase of one of Mexico’s largest wind farms, with a total power of 228MW. The company is present in Canada, US, Mexico, Chile, Spain, Italy, Hungary and Romania. As part of its portfolio diversification and growth strategy, the company is investing in the development and construction of new projects during 2013-2014 such as a 120MW fully licensed wind farm in Canada, and over 200MW of solar projects in Chile and Mexico. All of the company’s solar projects have been built and are maintained by its subsidiary Renovalia Ingeniería EPC, and together with its wind operations are monitored 24/7 by Renovalia´s proprietory control centre and software.
(1) http://data.worldbank.org/indicator/EG.USE.ELEC.KH.PC;http://www.alleganywindfarm.com/faq.htm#8 An average household in Mexico uses about 1,990 kilowatt-hours (kWh) of electricity each year. One megawatt of wind energy can generate between 2.4 million and 3 million kWh annually. Therefore, a megawatt of wind generates about as much electricity as 287,000 – 359,000 households use.
(2) National Renewable Energy Laboratory, US Department of Energy. Wind Energy Resource Atlas of Oaxaca August 2003 NREL/TP-500-34519.
(3) Bates White, LLC. Market and Regulatory Overview of the Electric Power Sector in Mexico prepared for First Reserve Energy Infrastructure Fund.