Canadian Solar is structuring a debt package with two commercial banks for a 95 MW solar project in Aguascalientes, Mexico.
The sponsor is expected to raise approximately $50 million in debt from two banks to finance the construction of the 95 MW Horus solar project, which is expected to cost around $85 million.
Sabadell and Intesa Sanpaolo are the two banks on the loan, which is expected to have a tenor of about 15 years.
Financial close is expected in either November or December, says a person close to the negotiations.
Canadian Solar signed a power purchase agreement with Cenace for the project as a result of the third power auction held in Mexico—the last before the new government canceled electricity procurements.
The contracts comprise a 15-year PPA and a 20-year agreement for clean energy certificates. The project is expected to reach commercial operations in mid-2020.
Given the uncertainty around Mexican plans for public power auctions, banks are starting to finance merchant projects. However, loan pricing on such deals reflects the higher risk. Projects that have PPAs with Cenace are closing at around 250 basis points over Libor, while on merchant projects, margins can go up to 350 bp.
(A version of this article first appeared on IJGlobal).