Funding for Central America's Largest Wind Farm

THE IFC (International Finance Corporation) has completed a $300 million financing package for constructing of Phase II and III of the largest wind farm in Central America.

Once operational, the Penonome wind power plant with 86 wind turbines and an installed capacity of 215 MW is expected to generate 448 GWh of energy annually, roughly equivalent to 5% of the country’s total energy demand.

The project, located about 150 kilometers from Panama City, is the largest grid-connected wind farm in Panama. It is expected to diversify the country’s energy matrix, ease the dependence on imported fossil fuels, lower energy prices, and contribute to a reduction in carbon emissions. UEP Penonome II will displace about 400,000 tons of CO2 per year, roughly equivalent to taking 84,000 cars off the road.

The financing package consists of a $80 million senior loan from the IFC’s own account, a $60 million senior loan from IFC’s Managed Co-Lending Portfolio Program, a new loan syndication platform that offers institutional investors the ability to passively participate in IFC’s future senior loan portfolio, and $144 million in IFC’s syndicated senior loans from other development finance institutions and Panamanian banks. In addition, IFC (part of the World Bank) will provide a $16 million subordinated loan from its own account.

Panama is one of the fastest growing economies in Latin America. However, investments in infrastructure investments, particularly to increase power generation, have lagged. The Panamanian government estimates that the country’s energy demand will increase by up to 8% annually. Rising demand will require investments of around $3 billion over the next decade to keep up with energy needs.

Panama is highly dependent on imported fossil fuels, which represent more than a third of the electricity generated. Another half of the country’s electricity is generated from hydropower plants, making the power sector vulnerable during the dry season. This can result in rationing of power and high electricity cost during droughts.  The project will help increase the energy generated from renewable sources dispatched into the grid and will complement Panama’s hydro based generation since wind resources happen to be significantly stronger during the dry season when hydro production is at its lowest.

Picture of Components of a horizontal axis wind turbine by Paul Anderson reproduced under CCL.

Wednesday 17th December 2014

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