New push to ‘make things happen’ in renewables

Both the public and private sectors have been talking about the new opportunities in which to invest and a new government has come to power. What is your opinion regarding the foreign reception of Argentina's new message to the world?

The international reaction after the new Argentine government took office in December 2015 was very positive. There is much interest in Argentina, there are foreign companies coming to the country every day to analyze business opportunities.

However, foreign investors are still hesitant and slower than we would like them to be. The current situation can either behave as a virtuous circle or a vicious one. In order to help Argentina create its own virtuous cycle, we need—from the investors and the international market—much more than a good perception.

It has to be translated into tangible business. Those who decide to invest now will have better opportunities because they will be first in choosing their strategic local partners and will receive more collaboration from them. As always, the sooner the better.

We are at a very special moment, and those who do not adopt a wait-and-see attitude and seize the opportunity right now will have the best chance.

So companies who want to invest in Argentina need a local partner that will orient them and that knows the rules of the game. Why is Luft such a partner?

Exactly. The company that is willing to come to Argentina needs a local partner that understands the culture, the people, the procedures and the best way to do business in the country. They need to achieve social, economic and environmental local sustainability.

At the same time, Argentine companies need someone with international experience, because they bring their knowledge, investment and professional approach.

Argentina has some of the best solar and wind resources, but we still need to create value out of them. We have to prove that we are able to do so.

Luft Energía helps international companies to minimize their learning curve, to find the right local partners and the best renewable projects. And we help local companies to achieve the best financing for their projects and choose the best international companies.

We want to be a key player in renewables.

Argentina has always had solar and wind potential, so why has it taken so long for renewable energy to open up?

Argentina is one of the windiest and sunniest places in the world. But the country has always focused on oil and gas, where 86% of our energy resources come from. We used to have abundant oil and gas, and we still have great opportunities in non-conventional, as we have some of the largest reserves of shale oil and gas in the world, Vaca Muerta.

I think that the decline of the oil price, the COP21 in Paris and the fact that there is a law that was voted in Argentina in 2015, has helped to create consciousness of the importance of renewables. If there is one issue in this country that has approval from the people and the whole political spectrum is that we have to transform and diversify our energy matrix and grow the renewables. The law has set a target to increase the share of renewable energy to 20% in the energy mix by 2025.

The new government has made renewable energy one of his main priorities since taking office in December 2015.

Argentina was the first G20 country to ratify the COP21. Do you view the country as a potential model for the renewable sector worldwide?

We are running behind, when compared to other Latin American countries. But if we try hard, we can not only catch up but also end up leading the pack. With the political decision to put renewable energy in value I think Argentina can turn the page and become a renewable engine for the region.

The very aggressive goal, which is to generate 10,000MW in five years with clean energy, implies large investment requirements, development, infrastructure, technology and job opportunities.

The starting point was very positive. The first auction received six times more offers than what was expected.

Some say that renewables are great as a marketing strategy, but that the true answer lies in shale oil and gas. What is your opinion?

I think the country has an opportunity to create value from all its natural resources. This means that there is not a question of either/or when it comes to non-conventional and renewable sources.

It is not a matter of clashing with fossil-based energy! We need both to become a competitive and self-sufficient energy country.

What was Luft's experience in the first phase of Plan RenovAr?

Ours is a brand new company. At Luft Energía, our slogan is to make things happen, offering technical and financial solutions. We do not accept obstacles.

Our team comes from the financial and energy sectors. And although there is little experience in renewable energy in our country, with only 2.9% of the total energy production, we are expecting to implement project finance for the first time in many decades in Argentina, as it is the only way to be profitable with renewables (lowering the interest rates, having long-time debt and non-recourse guarantee).

We are also glad to be on the way to creating the first equity fund for renewables in Argentina.

What is your strategy for the second phase in May?

The success of RenovAr 1 was such that the government had to organize immediately what they called RenovAr 1,5. So, at the end of the first phase, the government awarded around almost 3000MW, which was not the original plan. Now the challenge is to finance all those projects and have them constructed in time.

There are some other challenges before the second RenovAr, to finalize the regulation for the private PPAs, self-generation, and improving transmission line infrastructure, etc.

We are working to be ready to offer a portfolio of projects that can be ready to bid for the second round.

Do you believe that Argentina is on track to achieve the goal of 20% renewable energy by 2025?

I am confident that we will achieve the goal. It depends on many factors. The capacity of financing the projects is crucial. Also the need to improve the infrastructure of the transmission lines, to have more capacity is the next priority. And we need to lower costs and be competitive.

This sector, as well as the company, is new to Argentina. You have encountered many challenges and successes in this first year in operation. What has been your most critical moment so far this year?

The most challenging part is obtaining project financing for Argentina and expanding the investment resources. Our focus was to look for alternatives to traditional investment in the country. We have worked deeply with the multilaterals, DFIs, etc.

OPIC, for example, deemed Argentina too wealthy to receive any financing, whereas US EximBank regarded the country not trustworthy. And the commercial banks were not able to lend on a project finance basis.

We think that after we implement the first project finance; doors will open more easily for us next time. We will be able just to replicate the experience.

The main challenges are not the natural resources—we have enough of those—nor developing the contracts with the landowners, which is quite easy, nor technical issues—we have the engineers and international advisors. What we need is financing with low interest rates and high returns for the investors to make the projects profitable and attractive.

You worked at YPF at a very critical period of transition. Now you have left and created your own company. What are you most proud of when it comes to Luft Energía and the way it promotes renewable energy?

Working at a corporation is a tough experience. And in a corporation that is partly owned by the state, were your main challenge is to align the interests of investors and the needs of the country, is double tough. It takes a lot of effort to move on, to change the culture, to make things happen.

Nevertheless, although I am happy to have my own company, and have all the flexibility and capacity to innovation, I miss the power of transformation you have with a big company behind you.

In spite of an adverse environment for investment at that time, we were able to attract international strategic investors, to grow the value in the stock exchange market, to create a new opportunity in Argentina with the huge Vaca Muerta shale formation in Patagonia. We worked hard to make the company economical, social and environmentally sustainable.

When I left YPF, I felt my new challenge was to move to renewable energy and make it happen. We are on the right path.

What would you tell YPF now?

I think that YPF, as the leader company of the country, can be the example, and diversify its own energy mix, pushing harder with renewables. They can generate their own power for their facilities to operate below the ground with the above-the-ground energy. There is good wind on top of Vaca Muerta! 

Interview by Nicolas Carver, follow him on Twitter at @WorldTempo