Total (PAR:TOTF.PA), Etrion Corporation (TSX:ETX)(OMX:ETX) and SunPower Corp. (NASDAQ:SPWR) announced today that financing has been secured for construction of the 70-megawatt-peak ("MWp") Salvador project ("Project Salvador") in the Atacama region of Chile. Project Salvador will be the world's largest solar power plant based on spot market electricity ("merchant") revenues.
PV Salvador, the project special purpose vehicle ("SPV"), recently signed a project finance facility agreement with the Overseas Private Investment Corporation ("OPIC"), the U.S. government's development finance institution, to finance 70% of the approximately US$200 million project cost through long-term, non-recourse project debt. The remaining 30% equity portion will be funded by Etrion, Total and the initial project developer, Solventus, based on their ownership interests of 70%, 20% and 10%, respectively.
Etrion has a US$42 million credit facility from its major shareholder, the Lundin family, to fund its equity commitment. Following initial payback of Etrion's equity investment of US$42 million, Etrion's ownership in Project Salvador will decrease from 70% to 50.01%. After 20 years of operations, Etrion's ownership will decrease to zero.
Marco A. Northland, Etrion's chief executive officer, commented: "We are excited to partner with Total, SunPower and Solventus on this landmark solar project that takes our business model beyond government subsidies. This is Etrion's first project to be financed and under construction in the Americas, and we look forward to working with the same partners on future projects. Project Salvador almost doubles our installed capacity and is expected to grow our cash flow by approximately 50%, transforming Etrion into a global solar power generation platform."
"We are pleased that OPIC has agreed to finance the plant and that we have launched construction of the Salvador project, which will benefit from our affiliate SunPower's record-breaking photovoltaic technology," said Bernard Clement, senior vice president business operations, Total New Energies. "As the largest solar merchant power plant in the world, this project will deliver advanced solar generation, operation technologies and management practices while creating a significant positive impact on local businesses and people."
Total's affiliate SunPower designed the project to use SunPower Oasis(TM) Power Block technology. SunPower received notice to proceed with construction this week, and it is expected to start construction of Project Salvador in January, with full commissioning achieved in early 2015. The majority of the installation is expected to begin commercial operation during 2014. Upon completion, Project Salvador will enter into a long-term, fixed-price operation and maintenance agreement with SunPower.
"This project represents an important milestone for the energy industry, proving that solar can provide wholesale power at prices competitive with conventional generation technologies," said Howard Wenger, president, regions of SunPower. "With our partners Etrion, Total and Solventus, we are leading the market in the region with the start of construction of this project that will deliver reliable, cost-effective solar power to Chile's utility grid."
Project Salvador will initially operate on a merchant basis where the electricity produced will be sold on the spot market and delivered to the Sistema Interconectado Central ("SIC") electricity network, with the ability to secure future power purchase agreements ("PPAs"). The solar power plant will be built on 133 hectares leased from the Chilean government through a long-term concession. The facility will connect through the power infrastructure of Corporacion Nacional del Cobre de Chile ("Codelco").
Once operational, Project Salvador is expected to produce approximately 200 gigawatt-hours of solar electricity per year, enough to supply electricity to approximately 80,000 households in Chile.
Chile has an investment grade rating and offers attractive investment opportunities for leading financial institutions to provide non-recourse project finance. Project Salvador will be financed by OPIC with a US dollar-denominated, non-recourse project loan that fully amortizes over the 19.5-year tenor. First drawdown of the project loan is expected by the end of December 2013.