What is investment fund STOA looking at in LatAm?

A European investment fund specializing in infrastructure and energy projects, STOA recently signed a contract with Voltalia to acquire a 33% interest in the Solar Serra do Mel (SSM) 1 & 2 PV solar parks (320MW), in Brazil’s Rio Grande do Norte state. 

The projects are located between the municipalities of Areia Branca and Serra do Mel, where Voltalia has spent over a decade developing the Serra Branca cluster, a hybrid complex with six wind farms in operation and with the potential to reach up to 2.4GW of installed power capacity. 

BNamericas spoke with Mathieu Lebègue, head for Latin America at STOA, about the outlook in the region.

BNamericas: Why did STOA decide to become a shareholder of Serra do Mel solar parks?

Lebègue: Because they offer a unique combination of high levels of solar resources, attractive location in a cluster already having transmission facilities, as well as a diversified portfolio of offtake arrangements. 

We were also willing to pursue our partnership with Voltalia, the developer and future operator of these solar parks, with whom we already co-invested in a wind farm, and which has an impressive track record in Brazil. 

BNamericas: What's the status of the Serra do Mel 1 & 2 parks? Are they already operating? At full capacity? If not, when is the start-up date?

Lebègue: They're under construction and should start operating at the end of June.

BNamericas: And what's the total investment to be made in the project?

Lebègue: The total project costs amount to 1.3bn reais [US$270mn], with a significant investment still to be disbursed.

BNamericas: In what other projects in Brazil does the company hold interests?  

Lebègue: In December 2020, STOA was the first financial investor to become a shareholder of the concessionaire of the Sao Paulo Line No. 6 metro project, supporting its industrial partner, Acciona, to raise long-term financing on a non-recourse basis, a major innovation in the Brazilian market for an asset of this nature. 

BNamericas: How are the business prospects in the country going? How much does the company plan to grow and invest in Brazil?

Lebègue: We have an attractive pipeline of projects in various sectors such as public transportation, renewable energy and water and sanitation. The execution speed of our pipeline will depend on a number of factors, including the timing of STOA’s capital increase.  

BNamericas: Could the war in Ukraine impact your plans here?

Lebègue: Fortunately, for the time being, our shareholders, and therefore STOA’s funding, haven't been affected by the war in Ukraine. 

BNamericas: Is the company considering acquiring stakes – including majority stakes – in other projects here? What are the focuses in terms of energy sources and regions of the country?

Lebègue: STOA positions itself as a minority financial partner for industrial sponsors willing to share equity investment at the project level. We always rely on our industrial partner to build and operate the assets and therefore don't intend to take majority stakes. 

As a matter of fact, STOA’s offer has proven to be attractive for industrial sponsors across Latin America, as it combines an ability to take greenfield risks with a capacity to invest over the very long term. In contrast with closed-end equity funds, STOA is indeed an evergreen holding structure and may remain in the capital structure of a given project up until the end of a PPA [power purchase agreement] or concession contract. 

While STOA may invest in almost all LatAm countries, we’ve focused our business development efforts on the Brazilian, Colombian and Peruvian markets, as well as on some islands in the Caribbean, including the Dominican Republic, where STOA has recently closed an investment in a wind farm. 

BNamericas: How does the company see the impacts of an eventual change in government in Brazil after the October elections? Could this affect, for example, the process to open up the electric sector to private investment?

Lebègue: Generally, STOA is confident in the Brazilian legislative and regulatory framework. Whoever wins the election in October, for the time being we don't expect any change that could negatively affect our investments in Brazil.