Spotlight: Mainstream Renewable Power’s Chile headaches

Irish energy firm Mainstream Renewable Power has been traveling along a bumpy road in Chile recently.

The company has faced construction and financial challenges, chief among them fallout stemming from what it describes in a statement as “distortions currently affecting the Chilean electricity market.”

Against this backdrop, Mainstream last week announced it had started judicial reorganization proceedings for units Huemul Energía and Condor Energía, part of its 1.4GW Andes Renovables wind and solar platform, which involves outlay of around US$1.8bn.

Such a move was expected in some quarters of the industry as pure play renewables companies, chiefly in the country’s north, grapple with price decoupling and curtailment related to transmission congestion and oversupply during solar hours. Two companies formally reported financial stress last year, with one later declared bankrupt. 

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For a recent BNamericas report, however, energy regulator CNE said that “we do not expect a substantial number of regulated supply contracts to face situations of insolvency.”

In Chile, Mainstream has 1.12GW in operation and 258MW in the construction phase: 109MW Antofagasta region wind farm Ckhúri and 149MW Los Ríos region wind farm Caman.

Both projects – which were awarded power-purchase agreements – have faced hurdles.

CAMAN

Last half, officials reported the Caman wind project construction site had suffered an arson attack, with the company blaming terrorist groups. Largely in parallel, subsidiary Copihue Energía requested to leave the short-term market, citing force majeure at Caman, including pandemic-related logistics issues. The firm, which asked authorities to execute a guarantee, said at the time it would seek to re-enter the market as soon as Caman started operations. 

CKHÚRI

And last week, another hurdle materialized, surrounding Mainstream’s other under-construction project: 109MW wind project Ckhúri. Subsidiary Huemul Energía said regulator CNE had approved a request to terminate early a supply contracted backed by Ckhúri after the discovery of archeological remains created construction delays. 

CONTRACTS

Mainstream launched in Chile in 2008 and was the biggest winner in the country’s technology-neutral electricity auction in 2016, taking 27% of the total allocated capacity. 

Projects are being built under three Andes Renovables portfolios: 571MW Cóndor, 630MW Huemal and 149MW Copihue. 

Condor, which constitutes the first phase, comprises wind projects Tchamma, Cerro Tigre and Alena – all in the operational phase.

Phase two corresponds to Huemul, formed by wind farms Ckhúri, Llanos del Viento and Puelche Sur, and solar parks Pampa Tigre and Valle Escondido. All are in the operational phase, except Ckhúri.

Phase three, 149MW Cophiue, comprises construction-phase Caman, the final stage in the build-out of Andes Renovables. 

In 2021, the company announced a new, 1GW hybrid renewable energy platform, Nazca Renovables, which comprises three portfolios. The first portfolio, Humboldt, involves installing wind (Entre Ríos project) and solar (Tata Inti project) capacity in the country’s central-south and northern zones, respectively. Authorities granted 311MW Entre Ríos and 75MW Tata Inti environmental licenses. 

JUDICIAL REORGANIZATION

On the judicial reorganization proceedings, Mainstream said: "The proceedings are part of a comprehensive mitigation strategy put forward by Mainstream to ensure the long-term viability of the Energía Companies as a consequence of a series of distortions currently affecting the Chilean electricity market, which have resulted in financial losses to renewable energy companies operating in the sector."

Mainstream added it was still betting on the country. “Mainstream is fully committed to Chile for the long-term and is focused on bringing forward its pipeline of wind and solar projects to support the government in its ambitious decarbonization program.”

Chile is aiming to fully retire its roughly 5GW fleet of coal-fired power stations by 2040 at the latest, which alone would require roughly 15GW of renewables and storage capacity. Chile has an associated goal of achieving net zero carbon emissions by 2050 and a bill is being debated to tighten 2030 renewables generation targets.

The government has announced measures to help alleviate financial stress on the part of renewables generators. Some stakeholders have said these need implementing urgently, citing the need to ensure the flow of financing for future projects.

Energy storage is touted as way to help mitigate congestion faster than transmission lines, which are typically more complex to get through the permitting process. Sector stakeholders are awaiting details of a planned government auction of renewables projects in the country's north. Chilean power firms already have storage projects underway.

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HYDROGEN

Mainstream also has green hydrogen – expected to become a major investment driver in Chile – on its radar. 

In 2021, investment company Aker Horizons and Mainstream signed a letter of intent to "explore the development of green hydrogen and low-cost ammonia production in Chile, combining Aker Clean Hydrogen’s hydrogen project development capabilities and Mainstream’s position as a leading renewable energy developer in the South American country."