Large Scale Digital: Iberian solar players bullish on financing outlook

COVID-19, or so analysts have told PV Tech in recent weeks, is set to put the brakes on Iberia’s PPA scene temporarily, while power prices recover. The pandemic’s shadow on deal negotiations was evident on the words of speaker Pablo Otín, CEO of developer Powertis.

“If the last two or three months we’d been very active, the last two weeks we’ve been very inactive,” Otín said. “We need to do price discovery as we don’t live in isolation – our PPA counterparties have bosses, they have explaining to do. If the transaction was not closed, they need some time for adjustment.”

For their part, JLL’s García noted that the downwards flight of PPA prices predates the pandemic – European curves were being squeezed pre-COVID by cheaper gas and other factors, he said – while Luis Gomes da Silva, head of renewables at Portuguese EPC Efacec, urged solar to get “creative” as it braces for new PPA negotiations.

“We have to work together with developers, starting early in the process to see how we’re going to optimise the project and reach the minimum capex to meet banks’ needs,” Gomes da Silva said. “I feel like we’ll be working together more creatively, in order to reach these levels of IRR that investors need – we’ll do it once again.”

Ibox Energy’s Camacho said the pandemic might open a window to defuse the “substantial bubble” he believes has loomed over solar in Spain, and Portugal too in some respects. Some players, he argued, have spent the past few years “artificially creating value” by holding onto assets in an environment such as Iberia, where the capacity to connect is constrained.

Fast forward to the post-COVID world, and investors who have “waited and seen” might witness an opportunity forming, Camacho said. “You’ll see lots of assets up for acquisition,” he predicted. “Some assets have been overvalued in the past few years – if you have a certain flattening of the speculative bubble, it is a good thing to clean that.”

The Large Scale Digital conversation turned to government auctions, and the stepstone they could become for Iberian solar to return to the momentum it was experiencing before COVID-19.

As with prior Solar Media events, the speaker consensus appeared to be that a new Spanish auction would be useful in restarting solar growth, provided that the country does not opt for design rules that facilitate the ultra-cheap solar tariffs seen in Portugal.

Sabadell’s Font said his personal views around a new Spanish auction were “mixed”, particularly if record-low tariffs become again the rule. “For me the key issue is that auction prices reflect the current market conditions and a realistic financial model,” he said. “Otherwise, if we get much lower prices than say a PPA, we could be distorting the market.”

Quizzed on this front, Ibox Energy’s Camacho said he was keen for the firm continue looking into the private market, and how to maximise value on that front. “There is a risk of consolidation with these auction prices we’ve seen in Portugal,” he said. “In Spain, there’s always the risk that the government gives and it takes away. We’ve seen that in Mexico this last couple of days.”