Mainstream Renewable Power’s mission is to lead and accelerate the transition to sustainable energy, or, in our founder Eddie O’Connor’s words “to rid the world of CO2 and save the planet.” We are a global pure-play Wind and Solar energy developer, with a total asset pipeline of 12.3GW in 13 countries on five continents. Our business model involves the early identification of greenfield sites in high growth markets (typically with high carbon intensity grids), which we then develop, build and operate.
Everything we do is about de-risking our projects – taking them from concept, to operational renewable generation plants. As we de-risk, we realise and optimise the value of our investments of time, expertise, capital, and, not least, passion.
Mainstream entered Chile in 2008 as our first international market, lured by world-class wind and solar resources, high power prices (at the time) and a national mandate for energy independence. We had significant successive success in the technology-neutral public procurement auctions of 2015 and 2016, winning 27%1 or 3,366GWh2 in the latter, displacing operational coal3. The incumbents declared our pricing too low, and that our projects would never be built.
However, backed by clubs of international commercial lenders, our team proved them wrong – closing two major portfolio project finance deals, Condor (570MW) in November 2019 and Huemul (630MW) in August 2020, for a total of US$1.25 billion4 and a further US$280 million in construction finance with AMP Capital5. These deals were closed in spite of hurdles such as the Senvion insolvency, which necessitated a complete technology replacement on three of four projects in Condor, the 2019 Chilean social unrest kicking off two weeks before Final Completion (FC) and, of course, a global pandemic!
Construction of the first nine (1.2GW) Wind and Solar projects is progressing very well, with the last of the ten projects in the “Andes Renovables” (AR) platform to follow in 2021. Once operational, AR will power 1/6th of Chilean homes, having contributed extensive FDI to the Chilean economy at a challenging time, permanently reduced the cost of power in the developing country6 and contributed significantly to its decarbonisation goals, securing its leadership role in the region.
The significant COVID-19 and related supply chain challenges facing our industry in 2020 were overcome by our team through the close management of our relationships with all stakeholders, who collaborated to mitigate delivery and financial risks. The insurance sector – with RSA leading on Condor and SwissRe and CV Starr on Huemul - have proven to be supportive partners, covering the residual Physical Damage, Nat Cat and Liability risks, and allowing our delivery teams to focus confidently on the business of realising this first of our huge ambitions in the region.
Delivering large scale renewables from greenfield through to operations, at value, is about managing the wide range of development and business risks that, with expertise, ingenuity, foresight and planning, are ultimately in our control. Mainstream is a genuinely mission and value-based organisation. If our mission is the Why - our passion, providing resilience and fortitude - our values are the How – not just a set of guiding principles, but deep-rooted qualities and standards which structure how everything is done, by everyone:
They are inherently designed to ensure we can tackle risk strategically. For example, our value of Respect means that we work closely with communities from Day 1 on any project, earning social license and developing strategic relationships from which local project champions/guardians emerge. Respect is hard earned; it’s a strategic investment, helping us mitigate a variety of social risks which for others are external, rather than internal and influenceable.
For example, security and security of access to remote projects in developing countries, some with particular social sensitivities around indigenous, or informal communities, are flagged as potential project risks early on, and managed out: Working Together, using Entrepreneurship and Innovation to create meaningful, valued, long-term initiatives, always with Integrity, and Respect; no Denial of Access cover is therefore required.
As a developer, we have high tolerance for risk, and confidence - precisely because of the tried and tested values, passion and systems we have established. Our track record has been validated by over US$3 billion in project finance, raised in the notoriously conservative international commercial lending markets of the last decade. But there is always residual risk, and genuine external risks whose impacts we need to mitigate. Now, as our business model evolves and a strengthening balance sheet allows us to retain increasing control through construction and operation, further emphasis is rightly placed on the role of insurance as the ultimate safety net to secure and maintain optimal value.
The new Group risk and insurance role, created in Q4 2020, is designed to work cross functionally across our global business, to secure optimal asset value. As Group Insurance Manager, I work with risk owners to assess residual risks, and help take informed decisions on their management to monitor, mitigate and transfer risk, contractually or through insurance.
This new function will establish a Centre of Excellence, rolling out learnings and best practice across the Mainstream Group as we build out our global pipeline, which currently spans 13 markets on 5 continents. It is facilitating knowledge capture and feedback loops to inform decisions throughout the project lifecycle, across functions and geographies. It is enriching market entry analysis, and ongoing market monitoring. The scope ranges from physical and technological risks onshore and offshore, to political, financial and credit risks, including leveraging surety capacity to help make our capital go further in a sector where bonds are increasingly demanded for grid capacity, land control and power supply bids, both public and private.
“Transition risk” is the opportunity that fuels the renewable energy sector – pardon the pun. As regards the physical risks of climate change – we can all see and feel the impact on the global (re)insurance sector through this worsening hard market. Overall though, as evidenced through TCFD disclosures, renewable assets are proving resilient to the physical risks of climate change when compared with thermal plants, whose yield is adversely affected by mean temperate change, and whose profitability is reduced by falling market prices as cheaper RE is built out. However, the increasing frequency and impact of acute Nat Cat events - floods, lightning, windstorm – emphasise the importance of technology design, plant engineering and business continuity planning for wind and solar generators. As Mainstream moves from low-Nat Cat zones in EMEA to seismic zones in LatAm and now on to APAC, and with huge-scale ambitions offshore, we are acutely aware of climate change-related physical risks to our assets, to our neighbouring communities, and the pressing need for resilience and adaptation. With a front row seat, as our met masts are battered by typhoons in the Philippines, or our neighbouring communities and their crops are devastated by drought or floods (while our sites remain unaffected), our mission is ever more tangible.
Our sector was created to address the root cause of this ultimate existential global threat. Escalating insurance operational expenditure, and the financial risks of climate change to insurance sector balance sheets, can, Mainstream believes, be stemmed through the strategic alignment of the renewable energy and insurance sectors; a risk-focused approach to collaboration and information. We call on leaders in the insurance sector to Work Together with us, for Innovation and Entrepreneurship to help us in our mission to accelerate the transition to sustainable energy, to “rid the world of CO2 and save the planet”. Sustainable value in our respective businesses - and the world - rely on it.
Lesley O’Connor is Group Insurance Manager at Mainstream Renewable Power. Lesley.OConnor@mainstreamrp.com
1 https://www.mainstreamrp.com/insights/mainstream-wins-7-government-contracts-in-chile-to-build-1gw-of-wind-energy-plants-worth-usd-1-65bn/ 2 https://www.bnamericas.com/en/news/mainstream-signs-final-ppas-from-2016-chile-auction 3 https://www.mainstreamrp.com/insights/renewables-outperform-fossil-fuels-in-chile-tender 4 https://www.prnewswire.com/news-releases/mainstream-renewable-power-closes-second-phase-of-cus1-8-billion-wind-and-solar-financing-deal-in-chile-301122099.html 5 https://renews.biz/63754/mainstream-secures-280m-chile-construction-finance/ 6 https://fr.reuters.com/article/energia-chile-licitacion-idESKCN10S1SY
