| Dear Limited Partner,
On March 27, 2019, MIP IV reached financial close on the first phase of its investment in Centauro Energia, a five-project 322 MW solar power generation platform in northern Mexico. At financial close, MIP IV invested $92 million to acquire a 90% equity interest in the first three operating projects (Portfolio I), including transaction costs. The remaining 10% equity interest is held by the developer of the projects, Eosol Invest Mexico Uno, S.L. (Eosol), a renewables developer and operator with significant experience in the solar sector in Mexico. Portfolio I has 176 MW of installed capacity, including one project that started operations in 2014 (the first utility-scale solar project built in Mexico’s National Interconnected System).
Portfolio I earns revenue through a combination of long-term contracted Power Purchase Agreements (PPAs) with end-users and energy suppliers, and by selling power into the Mexican wholesale energy market. Approximately 55% of expected Portfolio I output is currently contracted through PPAs with an average tenor of 14 years, reducing the risk profile for MIP IV’s investment. We note that certain PPAs are subject to lender consent (that we expect to receive in due course) and further contracting opportunities may arise during MIP IV’s ownership period. Approximately 90% of Portfolio I’s revenue is linked to U.S. Dollars either directly through PPAs or indirectly via Mexican wholesale power prices that are set primarily based on U.S. Dollar cost inputs, mitigating the impact of movements in the Mexican Peso – U.S. Dollar exchange rate over time.
The remaining two projects (Portfolio II) are currently under construction and will have 146 MW of installed capacity once commissioned. MIP IV expects to invest up to $53 million to acquire a 90% equity interest in these projects after they reach construction completion in late 2019. Eosol will hold the remaining 10% equity interest.
Centauro Energia is MIP IV’s fifth portfolio investment to reach financial close and, including Portfolio II, currently represents approximately 3% of MIP IV’s total capital commitments. This is the MIP platform’s first investment in Mexico and has been sourced by MIRA’s Mexico-based team, which has been investing in the Mexican infrastructure market since 2009. We believe that the investment represents a unique opportunity for MIP IV to access the renewables sector at an attractive risk-adjusted return compared to equivalent U.S. opportunities and look forward to providing further updates on the investment.
MIP IV’s $92 million investment at financial close was drawn from its fund-level working capital facility. We expect to call capital from Limited Partners this week to repay this amount.
Should you have any questions concerning these events or MIP IV’s investments, strategy or performance in the interim, please do not hesitate to contact us at mip.
Sincerely,
Macquarie Infrastructure Partners IV |
Recent Comments