Beyond project development: What’s next for Limes Renewable Energy in Chile

Italy's Limes Renewable Energy is looking to make the transition in Chile from project developer to independent power producer, or IPP.

Wheels are in motion. Limes has obtained permits for three projects: hybrid Pradera Larga (84MW solar, 90MW storage), and standalone storage systems BESS Huañil (200MW) and BESS Ganso (150MW).

Limes is now pursuing strategic partnerships.

To find out more and explore what opportunities Limes sees beyond Chile, BNamericas spoke with the company's Latin America chief, Martin Libra.

This is the first part of a two-part interview with Libra.

BNamericas: Can you tell us a little about the company, how it arrived in Chile? 

Libra: Limes started in about 2017, in Italy. And it really started as a pure developer. The business model was to develop projects from greenfield to ready-to-build and sell them to investors, to IPPs.

With that same model, Limes decided to expand and diversify its activities beyond the Italian market. Limes opened an office in Southeast Asia in 2018-19. And around that time the opportunity to initiate project development in Chile came up, as well.

BNamericas: Can you give us an overview of your strategy here?

Libra: We started developing projects here, focusing on the utility-scale segment. The PMGD [distributed generation, up to 9MW] segment at that moment was too crowded to build any meaningful pipeline with the small team that Limes had at that point. And the idea was to replicate the Italian model. So, we developed large-scale solar projects, primarily focusing on areas that were not restricted by the transmission system, like the north was. Even back then it was a known problem, the lack of transmission capacity. 

Therefore, we pursued some opportunities in the central area of Chile and went ahead with the idea of selling those projects. 

That's the strategy until pretty recently, I would say, until last year. Limes has realized the develop-and-sell model has its limits. To be competitive and to be able to harness more value from those projects in the pipeline, we need to go beyond just development. 

Therefore, the model of turning into an IPP, or what we call a hybrid IPP, was worked on, detailed, and we have a structured plan to bring Limes from a developer to an IPP. That's our main long-term goal. 

BNamericas: We see that you have projects with the all-important environmental license.

Libra: Limes has three projects close to the ready-to-build stage. Limes wants to go ahead with those projects and hopefully be able to sign [power-purchase agreement] PPAs and structure the revenue stack of those projects in a way that will make them bankable, and to then obtain the finance and bring them to COD. 

Whether Limes will do that individually or whether Limes will do that with a partner, co-sponsor, let's say, that is to be determined, probably, in the next several months.

BNamericas: That's very interesting. Can you provide us with a little more information? 

Libra: Transitioning from a developer model to an IPP model is always a challenge. The challenge now seems to be bigger than it was several years ago. 

You see some companies that have turned from developer into IPP. In Chile, some of them did it through PMGD projects, where the offtake was not something you had to be worried about. It was very democratic in that way: anybody could develop a project and connect it to the grid. You didn't have to have a particular profile as a sponsor for that. 

The reality, today, is that your profile as a sponsor is fundamental. Not every project’s PPA or revenue stack is bankable to the same degree. Being a strong sponsor is increasingly what allows you to obtain financing for certain projects. 

What Limes is focusing on right now is to make sure that, as a counterparty for the offtakers, we are credible enough, strong enough, and give enough guarantees so that the PPAs we bring are with the top offtakers and allow us to secure the financing within the parameters that we need and want. 

In Chile, the best PPAs and the most bankable PPAs typically are mining PPAs. Everybody knows that. The timing is not always right for a particular project. Most of the mining companies obtain or sign PPAs through auctions. Those auctions take months, up to a year. It is not always viable to spend that time and go through that process with a very uncertain result. 

There are some offtakers that you can approach and negotiate bilaterally with. We're focusing on those. However, there are not many. 

The particular challenge for Limes, at the moment, is to find the right match between the projects that we have in our pipeline and the timing needed for signing a PPA. And to make sure that the PPA is signed with one of the counterparties that will make the projects bankable. 

BNamericas: So, robust PPAs are key?

Libra: In simple terms, a solid PPA with a strong offtaker is what you need, ideally. However, those few bankable offtakers can choose from many different projects. 

We want to make sure that when the offtaker is at that stage, it decides to go ahead with Limes rather than some of the other competing projects.

BNamericas: We understand that you are also exploring potential partnerships. 

Libra: How we can compete is currently our focus and we have been exploring different partnerships in the market that would increase our ability to compete with the already-established IPPs. 

We approach these partnerships with that in mind. So, we want to maximize the benefit of the partnerships that we can have in the market, always looking for a win-win scenario. And while there are many possibilities, not all of them create the same synergies. 

We are analyzing which of the partnerships are going to be most beneficial for all the parties involved. And that's part of our business development strategy.

BNamericas: Martin, in a recent statement, Limes said it saw opportunities in the data center segment. Could you give us a little more color?

Libra: The data center segment has been featuring in discussions lately and has been positioning as one of the key growth segments. 

At the moment, we still find that industry to be in its very early stages and not deep enough in order to provide sufficient opportunities for many renewable energy projects. 

While offtakers from that segment can be highly attractive and strong enough to provide a bankable PPA contract, we see them more as a medium to long term opportunity that we cannot really bet on or structure any meaningful strategy around in the near term. 

For that, we're focusing on more established segments and segments that are deeper and where the demand is more predictable for us to target. 

BNamericas: Which project may move to the construction phase first?

Libra: So, as mentioned before, we currently have three projects that are very near ready to build. Two of them are standalone BESS projects and one of them is a hybrid project of solar plus BESS. So, which of those will be built first may depend on precisely the revenue and offtake strategy that we are pursuing. 

There are many scenarios and external factors that will determine which project allows us to structure the bankable package.  We may find the right offtake opportunity for the 200MW standalone BESS that we developed in the fourth region [Coquimbo region].

It may be the case that the hybrid project that we have in the fifth region [Valparaíso region] near Casablanca matches with the strong demand of Central Chile. 

So, it will really depend on the offtake and how well we manage our PPA origination and revenue strategy that will determine which project will get built first out of that advanced pipeline. 

(The original version of this content was written in English)