LATIN AMERICA AND THE CARIBBEAN

Market developments 2016-2023

After a four-year hiatus, PFAN restarted operations in Latin America and the Caribbean in 2019. This launch under the UNIDO / REEEP hosting structure marked the return of PFAN and coincided with a resurgence of renewable energy and energy transition projects in the region, specifically in Central America, Mexico, Colombia and the Caribbean.

Pre-Covid-19, the supply and interest in climate change and clean energy projects was robust and growing, with PFAN LAC starting strong with high levels of participation and regional representation. This was stymied by the onset of the Covid-19 pandemic and the follow-on impacts, which significantly affected the pipeline of projects and the direct engagement of investor networks in the area. Many projects went on standby and struggled to get back on track, suffering lingering impacts of the supply chain, procurement complexities, due diligence and financing constraints. The industry active in the region shifted to asset management and securing financing through corporate instruments and away from the traditional future flow project finance. These impacts, in addition to policy changes in key countries such as Mexico, slowed activities throughout the entire region.

As of 2023, however, the movement towards energy transition and net zero policies in public and economic policy, as part of national objectives, driven by the net zero and carbon neutral commitments embedded in NDCs regionally, added to the industry’s return. In addition, the review and integration of green hydrogen initiatives, the intersection with green mobility infrastructure, the return of carbon markets and the explosion of special purpose funds focused on SDGs, climate and biodiversity became strong drivers impacting the industry.

PFAN’s activities

PFAN has continued to work with a group of projects and businesses despite many being delayed or not surviving the complex series of conditions in the market between 2020-2022. Our expert advisor network in the region has flexibly adapted to the evolving challenges and continues to provide support to new and existing projects in our pipeline and host investor roundtables, ensuring upcoming trends and existing difficulties are captured and shared. As the recovery took shape, the number of projects applying for PFAN support increased, and the pipeline began to reflect the trends highlighted above, following the regional trends towards energy transition.

PFAN’s service is highly valued by individual projects, businesses and the investor network. Until PFAN-LAC’s establishment, a dedicated project preparation facility (PPF) for this segment of projects was not a permanent presence in the region. The virtual advisory services and mentoring services, therefore, became of unique importance, as did our investor roundtables, designed to ensure stronger linkages between the parties – both the supply and demand sides of financing.

The market challenges have evolved in that the resources and technological availability are no longer significant issues in the region; rather, there is often a mismatch between the expectations of investors/financiers and the project developers/entrepreneurs. To that end, PFAN’s work focused significantly on strengthening commercial cases, governance, financial models, expectations and assumptions – dedicating much time to strengthening business cases while coaching and preparing entrepreneurs for their first meetings with potential partners/investors. The strength of the underlying project, as well as the matching ability PFAN has displayed in pairing potential investors with strengthened projects has been and will continue to be a key differentiator in the space.

For example, PFAN’s support of EarthSpark International has helped them to develop 22 town-sized, solar-hybrid, prepaid, 24-hour smart microgrids in Haiti’s southern departments, which will, once completed, add 5.84MW of generated capacity. In Haiti, where only 47% of the population has access to electricity, EarthSpark’s mini-grids are now the most reliable electricity source and will serve more than 80,000 people and nearly 500 medium and large businesses.

As per PFAN’s commitment to providing expertise based on a deep understanding of local conditions, our advisors are based in countries throughout the region, including Trinidad and Tobago, Mexico, Columbia and Barbados. They are highly skilled in a diverse range of topics, including development impact, hydropower, solar, energy efficiency and demand reduction, wind power, rural electrification and energy access. Through their dedication to providing PFAN services to projects and businesses in the PFAN-LAC pipeline, they have successfully helped 11 projects to mobilise USD 41 million in investment between 2020-2022.