Italian Solar Assets
During 2015, Etrions 100%-owned 60-megawatt (MW) solar portfolio in Italy produced approximately 102.4 million kilowatt-hours (kWh) of electricity, 1.8% more than in 2014. Etrions Italian solar parks receive the weighted average feed-in-tariff (FiT) of approximately EUR 0.30 per kWh plus the spot price for each kWh of electricity produced. During 2015, the Italian spot price averaged EUR 0.05 per kWh.
Etrion previously announced the renegotiation of all its operations and maintenance (O&M) contracts in Italy. This initiative reduces expected O&M expenses for the 60 MW Italian solar portfolio by approximately US$1.6 million per year while securing a higher level of service.
Chilean Solar Assets
During 2015, Etrions 70%-owned 70 MW Salvador solar power plant in northern Chile (Project Salvador) produced approximately 162.9 million kWh of electricity, below expectations due to lower than expected solar irradiation and electricity curtailments applied to all generators in the area near Project Salvador to balance supply and demand due to network bottlenecks expected to be resolved in 2017.
Project Salvador began operations in January 2015 and approximately 65% of the electricity produced is currently sold on the spot market and delivered to the Sistema Interconectado Central (SIC) electricity network. As previously announced, Project Salvador executed a long-term power purchase agreement (PPA) with EE-ERNC-1, an investment grade off-taker. The PPA is for approximately 35% of Project Salvadors production for 15 years and started on January 1, 2016, at approximately US$0.10 per kWh. Project Salvador is seeking additional PPAs to secure its long-term revenues.
The spot prices in the SIC electricity network in Chile were unusually low during 2015 and particularly low in the second half of 2015 due to a combination of local grid congestion, increasing solar and wind electricity generation, strong hydro electricity production due to wet winter conditions, aggravated by el Nino, and low electricity demand because of depressed mining activity as a result of the collapse in commodity prices. The average spot price received by Project Salvador in 2015 was approximately US$0.05 per kWh. Spot prices are expected to stabilize to the long-term projections by 2017 when the Sistema Interconectado del Norte Grande (SING) and SIC electricity networks are scheduled to be connected and the SIC network expansion is expected to be completed.
Etrion recently amended the existing O&M contracts with Sunpower Corporation for Project Salvador. Under the new terms, which were effective October 1, 2015, Etrion has secured an annual fee reduction of approximately 35% and increased the level of service.
Japanese Solar Assets
During 2015, Etrions 87%-owned 9.3 MW Mito solar project in the Ibaraki Prefecture of Japan produced a total of approximately 5.5 million kWh of electricity, well above expectations. All five sites of the Mito cluster have been operational since August 2015. Under the Japanese FiT program, the Mito project has a 20-year PPA with Tokyo Electric Power Company (TEPCO) whereby the project receives ¥40 per kWh (currently equivalent to approximately US$0.34 per KWh) of electricity produced.
Etrions 87%-owned 24.7 MW Shizukuishi solar project is under construction on one site in the Iwate Prefecture of Japan. The Shizukuishi project is fully funded, on schedule and is expected to be operational by the third quarter of 2016. The Shizukuishi project has a 20-year PPA with the Tohoku Electric Power utility at ¥40 per kWh. Project construction is proceeding on budget.
Japanese Backlog
Etrions Japanese backlog of 76 MW (gross) of solar power projects in Japan is expected to be shovel-ready in the first half of 2016. Estimated total project costs of US$3.0 million per MW are expected to be funded with 10%-15% equity and 85%-90% non-recourse project debt. Etrions net project equity required is estimated to be approximately US$5.5 million in 2016 and US$5.2 million in 2017. Etrion plans to finance these requirements with a combination of unrestricted cash, distributions from existing operations and partial sale of projects, as required. The Company does not plan to issue any equity to fund this backlog.
