Etrion Announces Updates to Solar Projects In Japan and Chile

Etrion Chile
Etrion's Salvador (70 MW) solar park in Atacama region, Chile

Etrion Corporation, a solar independent producer, has announced updates to its solar photovoltaic projects in Chile and Japan.

Marco A. Northland, Etrion’s Chief Executive Officer, commented: “I am very pleased with the significant progress our Japanese team has achieved to date in construction and development. Etrion is one of the first foreign companies to gain traction in utility-scale solar power generation in Japan. Today, we have 34 MW under construction and more than 138 MW under development in Japan. I am confident we will meet our target with Hitachi High-Tech of delivering shovel-ready or under-construction projects in Japan totaling 100 MW by 2015 and 300 MW by 2017.”

Mr. Northland continued, “Chile is one of the most attractive solar markets in the world. Chile has very high solar irradiation, an investment grade credit rating, a deregulated electricity sector with contracts denominated in US dollars, significant energy demand from the mining sector and high wholesale electricity prices. This combination of factors makes Chile one of the first solar markets in the world to reach grid parity, where solar is competitive with traditional sources of power generation without the need for government subsidies.”

Chilean Project in Operation (70 MW)

As previously announced, Etrion completed construction of the 70 megawatt (“MW”) Salvador solar park in northern Chile (“Project Salvador”) in November 2014, several months ahead of schedule and under budget. Project Salvador is owned initially 70 percent by Etrion, 20 percent by Total S.A. (CAC: TOTF.PA) and 10 percent by a local developer. The solar park was built by SunPower Corporation (“SunPower”) (NASDAQ: SPWR) and has a long-term, fixed‐price operation and maintenance agreement with SunPower. In 2014, Project Salvador produced approximately 6.7 million kilowatt-hours (“kWh”) of electricity during commissioning and testing. Project Salvador is expected to enter full operational phase by February 2015.

Project Salvador will initially operate on a merchant basis where the electricity produced will be sold on the spot market and delivered to the Sistema Interconectado Central (“SIC”) electricity network. In order to secure a portion of the revenues, Project Salvador expects to sign a long-term power purchase agreement (“PPA”) with an investment grade off-taker in Q1-2015. Project Salvador recently signed a binding letter of intent with the off-taker to outline the commercial terms of the PPA for approximately 35 percent of Project Salvador’s production. The PPA is expected to be for 15 years starting January 1, 2016, at approximately US$0.10 per kWh indexed to the US Consumer Price Index (“CPI”).

Chilean Advanced Project Development Pipeline (99 MW)

Etrion has an advanced development project pipeline in Chile of four projects totaling 99 MW outlined below. These projects are owned 100 percent by Etrion and are expected to have all permits in place to be shovel-ready in Q1-2015.

The Aguas Blancas solar projects in the Antofagasta region include three sites, 2A, 2B and 2C, with a total capacity of 72 MW in the Sistema Interconectado del Norte Grande (“SING”) electricity network.

Aguas Blancas 2A is a 32 MW site with the land concession decree expected in Q1-2015. The environmental impact assessment has been received, the interconnection contract has been agreed and the mining rights have been secured.

Aguas Blancas 2B is a shovel-ready 24 MW site. The land concession decree has been signed, the environmental impact assessment has been received and the mining rights have been secured. The interconnection contract and the PPA with a mining company are under advanced negotiations.

Aguas Blancas 2C is a 16 MW site with the land concession decree signed. The environmental impact assessment has been received, the interconnection contract has been agreed and the mining rights have been secured.

Las Luces is a 27 MW solar project in the Atacama region with one site in the SIC electricity network. The land concession decree has been signed, the environmental impact assessment has been received, the interconnection contract is under advanced negotiations and the PPA negotiations have started.

Etrion should be in a position to start construction of these pipeline projects once the Company secures PPAs and the necessary non-recourse project financing. The projects are expected to be operational within twelve months from the date construction commences. More information about Etrion’s project pipeline is available in the updated corporate presentation available on the Company’s website at www.etrion.com.

Etrion plans to finance its projects under development through the most efficient combination of cash on hand, non-recourse project loans, corporate debt and/or equity financing.

Japanese Projects under Construction (34 MW)

As previously announced, Etrion started construction in Q4-2014 on 34 MW in Japan owned 87 percent by Etrion and 13 percent by Hitachi High-Technologies Corporation (“Hitachi High-Tech”) (TOKYO: 8036), a subsidiary of Hitachi, Ltd. The 9.3 MW Mito and the 24.7 MW Shizukuishi power plants are being built by Hitachi High-Tech and are expected to be operational in 2015 and 2016, respectively.

Mito is a 9.3 MW utility-scale solar photovoltaic (“PV”) power project including five sites under construction in the Ibaraki Prefecture of Japan. Construction began in October 2014, and the first drawdown on the non-recourse senior loan facility from Sumitomo Mitsui Trust Bank was executed in December 2014. In Q4-2014, the project company entered into two of the five planned 20-year power purchase agreements (“PPAs”) with Tokyo Electric Power Company (“TEPCO”) under which the project company will receive ¥40 per kilowatt-hour (“kWh”) produced (approximately US$0.33 per kWh). The remaining three PPAs are expected to be signed by March 2015. Construction is proceeding on schedule with the estimated connection dates for each site expected between May and August 2015, more than five months earlier than previously announced.

Shizukuishi is a 24.7 MW utility-scale solar PV power plant under construction on one site in the Iwate Prefecture of Japan. Construction-related works began in October 2014, and the first drawdown on the non-recourse senior loan facility from Sumitomo Mitsui Trust Bank was executed in September 2014. In Q3-2014, the project company entered into a 20-year PPA with Tohoku Electric Power Co., Inc. to receive ¥40 per kWh produced (approximately US$0.33 per kWh). Construction works are proceeding on schedule, and the project is expected to connect to the grid in July 2016, five months earlier than previously announced.

Japanese Advanced Project Development Pipeline (138 MW)

In 2012, Etrion and Hitachi High-Tech signed an agreement to develop a pipeline of solar assets in Japan. In addition to the 34 MW already under construction, the joint development team is reviewing a large pipeline of opportunities in different stages of development and in different stages of negotiation with third parties. The four most advanced projects total 138 MW and are outlined below. Etrion expects to own 70 to 85 percent in the Japanese projects, with Hitachi High-Tech and/or local development partners owning the remainder.

Japan Greenfield Project 1 is a 24 MW solar project in southern Japan with the Feed-in-Tariff (“FiT”) and land contract secured. The project is expected to be shovel-ready by Q1-2016.

Japan Brownfield Project 1 is a 50 MW solar project in southern Japan with the FiT secured, land contract secured and grid impact studies completed. Etrion has secured exclusivity with the developer, and the project is expected to be shovel-ready by Q4-2015.

Japan Brownfield Project 2 is a 50 MW solar project in southern Japan with the FiT secured, land contract secured and grid impact studies completed. Etrion has secured exclusivity with the developer, and the project is expected to be shovel-ready by Q4-2015.

Japan Brownfield Project 3 is a 14 MW solar project in southern Japan with the FiT secured, land contract secured and grid impact studies completed. The project is expected to be shovel-ready by Q4-2015.

These projects may be replaced by other projects within the next twelve months in order to accelerate construction or improve project economics. More information about Etrion’s project pipeline is available in the updated corporate presentation available on the Company’s website atwww.etrion.com.

Etrion plans to finance its projects under development through the most efficient combination of cash on hand, non-recourse project loans, corporate debt and/or equity financing.

On October 16, 2014, the Ministry of Economy, Trade and Industry (“METI”) in Japan set-up a working group to address concerns issued by certain utilities regarding grid congestion as a result of the large number of applications submitted from solar developers. The subcommittee reviewed the current METI approval process and provided recommendations for the FiT scheme for future projects, as well as measures to deal with grid capacity issues and curtailment. Management believes the development projects described above should not be affected by these recent proposals, which should provide greater clarity on the grid connection process for these and future projects.

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This post was prepared by Solar Thermal Magazine staff.