Mexico – NAMA for Sugar Mills

Mexico has opened its electricity market to private producers only two years ago and is currently gathering first experiences with private power producers. At the same time Mexico has introduced a system of ‘renewable energy certificates’ (CEL) obligations on GHG emitting power generators. While many of Mexico's 51 sugar mills are excellently positioned to participate in this new market, grid connection is a main barrier. In contrast to solar power, for instance, the location of the sugar mills pre-determine the location of co-generation facilities, and their distance to the grid connection points in many cases makes the entire investment unviable. Currently, despite significant excess bagasse resources that are burnt as waste, only a few sugar mills produce power for the grid. The NSP, through financial engineering targeted at eliminating the financial grid connection barrier, will raise the 17 identified potentially viable co-generation investments to 43, while significantly increasing the overall investment probability.

The NSP will help establish a non-profit Grid Operating Facility (GOF) as a special purpose vehicle into which the NSP injects an equity grant of USD 15 million in parallel to a similar national (potentially also international) contribution, creating an equity base upon which loans are raised to finance grid connection investments. These are made financially viable by combining non-profit grid operation, extended loan maturity for grid investment and grouping of adjacent mills on shared connections. As costs are recovered through transmission fees further grid connections are established, gradually expanding coverage to 43 relevant (viable) sugar mill co-generation investments.