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Funding of Cerro Bayo Project and Commencement of Construction
Rame, the independent power producer, is pleased to announce that it has agreed terms for a conditional $4.7 million funding facility for its Cerro Bayo off-grid wind project in Chile which the Company first announced on 1 July 2014. The Facility fully funds the estimated cost of the Project, the construction of which is due to be completed in Q4 2015.
Overview
· Anden Re Capital SpA, an investment group, is to provide US$4.7m Facility which covers the total estimated cost of the Project in exchange for a 75% equity interest in the Project at commercial operations date with Rame retaining a 25% equity interest
· Under the terms of the Facility, Anden Re will lend Rame US$1.2 million to fund its 25% portion of the equity commitment for the Project – first tranche has been released to secure the wind turbines for the Project and commence civil engineering works at the site
· Rame is acting as engineering, procurement and construction contractor on the Project
· Power Purchasing Agreement in place under which Rame is contracted to supply power to the isolated grid system of the Cerro Bayo mining project in Chile owned by TSX listed Mandalay Resources Limited – first power sales expected to be achieved in Q4 2015
· Terms being discussed with regards to establishing a broader relationship whereby Anden Re participates in the financing of Rame’s off-grid and smaller on-grid project portfolio
Tim Adams, CEO, commented, “We are delighted to have secured the funding for the Cerro Bayo project and to have now commenced construction. We are now firmly on a path to being able to showcase our ability to provide technically innovative and financially attractive energy solutions to our off-grid customers even against short term PPAs. Additionally, through close cooperation with our client we have ensured that the Project has been sensibly managed such that the delivery schedule remains realistic and the economics robust and intact.
“On this occasion, we have retained an equity interest at a commercially reasonable cost in this asset through the financing with Anden Re. Going forward, we would hope to maintain or recover a larger proportion of the equity in our projects. By the end of 2015, we will have completed as a minimum, both on-grid and off-grid wind projects and a rooftop solar project, all as an IPP. I look forward to giving updates on the delivery of the Cerro Bayo project which is of special technical and commercial interest and cements Rame as a market leader in short term off-grid PPAs.”
Background
On 1 July 2014, Rame announced that its wholly owned subsidiary, Seawind Holdings SpA, had signed a memorandum of understanding with Compañia Minera Cerro Bayo Limitada to supply power to the isolated electrical grid system of the Cerro Bayo mining project in Chile owned by Mandalay. On 17 October 2014, the Company announced that it had agreed a PPA with Cerro Bayo.
Under the terms of the PPA, Rame will provide power at an agreed price per MWh to Cerro Bayo for a minimum of five years from commencement of commercial operations and thereafter on a rolling one year contract at Cerro Bayo’s option. It was originally intended for the Project to be completed in Q2 of 2015, however, the challenges of fully optimising the integration of the wind farm which has been undertaken jointly with the Mandalay engineering team and the potential impact of winter on construction operations meant that the original timetable could not be met.
Consequently, Rame and Mandalay have agreed that it would be prudent to extend the commercial delivery date until Q4 2015 so that commissioning can take place in the Patagonian spring. As part of this extension, the PPA was extended so that the initial five year period for power sales will commence in Q4 2015 as well. All other commercial terms within the PPA remain unchanged.
Financing Facility
Rame and Seawind have entered into a conditional $4.7 million funding facility with Anden Re. Anden Re, with offices in Munich and Santiago, is a partnership set up by a highly experienced team of German financial professionals including Rolf Christof Dienst, Carsten Eckert and August von Joest specifically to invest in renewable energy projects in Chile.
The capital expenditure for the Project is expected to total $4.7 million. There will be no debt in place during the construction phase of the Project but it is envisaged that senior debt can be used to refinance the project post construction.
Under the terms of the Facility, Anden Re will lend Rame $1.2 million to fund its 25% portion of the equity commitment for the Project. Rame has already drawn down the first tranche of $600,000 from the loan. The interest rate on the loan is 10% per annum and it is repayable within 12 months of the first drawdown.
Subject to finalising corporate documents and contracts, Anden Re will invest $3.5 million of equity into the project in exchange for 75% of the equity. The parties have further agreed to move towards terms to govern a broader relationship whereby they may collaborate on the financing of Rame’s off-grid and smaller on-grid project portfolio.
Commencement of Construction
Rame has used the initial drawdown of $600,000 to secure the three number 600kW wind turbines for the Project, complete detailed engineering and to commence mobilisation for the civil works at site starting with the drilling of rock anchors for foundations. The turbines, which are undergoing a programme of optimisation to suit site and grid conditions should be ready for shipment to Chile from Denmark in July 2015.
