Pattern project helps open up Chile

Breaking into foreign markets requires ingenuity. It is rare that deal structures will transfer simply from your home market into somewhere with a different culture and laws.

This is why the 115MW El Arrayan wind farm in Chile is worth a look. It is the largest wind project in this South American nation and officially opened last week. The project is 400km north of Santiago on the coast, and was developed by US firm Pattern Energy.

So far, so unexceptional. Yes, it is Pattern Energy’s first wind farm outside North America, but it is not the first overseas developer to enter this market. Enel Green Power has built the 90MW Talinay wind farm, which started operations in June 2013; and GDF Suez has also developed one. What makes this scheme so interesting?

The reason is that Chile is looking for ways to push down the cost of energy for domestic consumers and businesses; and the way Pattern has structured this deal will help it do so.

El Arrayan is 70% owned by Pattern and 30% by Antofagasta, which is a Chilean copper mining group that also has interests in sectors including transport and water distribution.

Around 70% of the power generated by the project will be sold to the Los Pelambres mine, in which Antofagasta is the controlling party, in a long-term fixed-for-floating hedge.

Los Pelambres is one of the largest copper reserves in Chile, and El Arrayan will provide around 20% of its total energy need. The benefit for Antofagasta is that it helps show that the mining industry in Chile can become greener; and the benefit for Pattern is it reduces the risk of selling all the power on the open market. It only needs to go to the open market to sell the remaining 30%.

The long-term energy purchase agreement meant Pattern was able to reduce the risk associated with the development and therefore get more favourable deals for financing it. It can now sell its energy at competitive prices because it was able to reduce those costs.

This is a model that is set to unlock further wind farms in Chile, and help the government to push down energy costs. The fact the official inauguration was attended by president Michelle Bachelet is a symbol of how significant the government regards the project.

For Bachelet, the scheme is a signal to foreign investors they they should invest in the country, which has a target of generating 45% of its energy from clean sources by 2025.

The government is also seeking to put in place policies to support the renewable energy sector. Last month, the Chilean energy ministry introduced legislation to overhaul the power auction system, in order to ensure that wind and solar companies can bid for long-term power purchase agreements.

That legislation should help to reduce the cost of energy -- and schemes structured like El Arrayan will also help that cause.

Breaking into foreign markets requires ingenuity. It is rare that deal structures will transfer simply from your home market into somewhere with a different culture and laws.

This is why the 115MW El Arrayan wind farm in Chile is worth a look. It is the largest wind project in this South American nation and officially opened last week. The project is 400km north of Santiago on the coast, and was developed by US firm Pattern Energy.

So far, so unexceptional. Yes, it is Pattern Energy’s first wind farm outside North America, but it is not the first overseas developer to enter this market. Enel Green Power has built the 90MW Talinay wind farm, which started operations in June 2013; and GDF Suez has also developed one. What makes this scheme so interesting?

The reason is that Chile is looking for ways to push down the cost of energy for domestic consumers and businesses; and the way Pattern has structured this deal will help it do so.

El Arrayan is 70% owned by Pattern and 30% by Antofagasta, which is a Chilean copper mining group that also has interests in sectors including transport and water distribution.

Around 70% of the power generated by the project will be sold to the Los Pelambres mine, in which Antofagasta is the controlling party, in a long-term fixed-for-floating hedge.

Los Pelambres is one of the largest copper reserves in Chile, and El Arrayan will provide around 20% of its total energy need. The benefit for Antofagasta is that it helps show that the mining industry in Chile can become greener; and the benefit for Pattern is it reduces the risk of selling all the power on the open market. It only needs to go to the open market to sell the remaining 30%.

The long-term energy purchase agreement meant Pattern was able to reduce the risk associated with the development and therefore get more favourable deals for financing it. It can now sell its energy at competitive prices because it was able to reduce those costs.

This is a model that is set to unlock further wind farms in Chile, and help the government to push down energy costs. The fact the official inauguration was attended by president Michelle Bachelet is a symbol of how significant the government regards the project.

For Bachelet, the scheme is a signal to foreign investors they they should invest in the country, which has a target of generating 45% of its energy from clean sources by 2025.

The government is also seeking to put in place policies to support the renewable energy sector. Last month, the Chilean energy ministry introduced legislation to overhaul the power auction system, in order to ensure that wind and solar companies can bid for long-term power purchase agreements.

That legislation should help to reduce the cost of energy -- and schemes structured like El Arrayan will also help that cause.

Breaking into foreign markets requires ingenuity. It is rare that deal structures will transfer simply from your home market into somewhere with a different culture and laws.

This is why the 115MW El Arrayan wind farm in Chile is worth a look. It is the largest wind project in this South American nation and officially opened last week. The project is 400km north of Santiago on the coast, and was developed by US firm Pattern Energy.

So far, so unexceptional. Yes, it is Pattern Energy’s first wind farm outside North America, but it is not the first overseas developer to enter this market. Enel Green Power has built the 90MW Talinay wind farm, which started operations in June 2013; and GDF Suez has also developed one. What makes this scheme so interesting?

The reason is that Chile is looking for ways to push down the cost of energy for domestic consumers and businesses; and the way Pattern has structured this deal will help it do so.

El Arrayan is 70% owned by Pattern and 30% by Antofagasta, which is a Chilean copper mining group that also has interests in sectors including transport and water distribution.

Around 70% of the power generated by the project will be sold to the Los Pelambres mine, in which Antofagasta is the controlling party, in a long-term fixed-for-floating hedge.

Los Pelambres is one of the largest copper reserves in Chile, and El Arrayan will provide around 20% of its total energy need. The benefit for Antofagasta is that it helps show that the mining industry in Chile can become greener; and the benefit for Pattern is it reduces the risk of selling all the power on the open market. It only needs to go to the open market to sell the remaining 30%.

The long-term energy purchase agreement meant Pattern was able to reduce the risk associated with the development and therefore get more favourable deals for financing it. It can now sell its energy at competitive prices because it was able to reduce those costs.

This is a model that is set to unlock further wind farms in Chile, and help the government to push down energy costs. The fact the official inauguration was attended by president Michelle Bachelet is a symbol of how significant the government regards the project.

For Bachelet, the scheme is a signal to foreign investors they they should invest in the country, which has a target of generating 45% of its energy from clean sources by 2025.

The government is also seeking to put in place policies to support the renewable energy sector. Last month, the Chilean energy ministry introduced legislation to overhaul the power auction system, in order to ensure that wind and solar companies can bid for long-term power purchase agreements.

That legislation should help to reduce the cost of energy -- and schemes structured like El Arrayan will also help that cause.