(MENAFN- ProactiveInvestors - UK) Getting the funding for large infrastructure projects is a problem for all small companies but Rame Energy (LON:RAME) is showing some dexterity in attracting partners for its portfolio.
The Chilefocused wind power group has just sold two more development projects in Chile 'off-plan' to Cayman Islandsbased utility group InterEnergy.
A contract for the sales of the 9Mw (megawatts) Punta Chome and 6Mw Raki Sur has already been signed with milestone payments up to at least 2.03mln.
The final payment becomes due when Punta Chome and Raki Sur reach "ready to build" status and construction begins.
InterEnergy recently acquired two other wind power projects in Chile developed by Rame Raki and Huajache and the companies have agreed terms for a service contract for these going forward.
Rame will also help develop InterEnergy's Chilean LNG (liquid gas)distributionbusiness.
What the broker says
House broker Cantor Fitzgerald suggests Rame Energy's relationship with InterEnergy appears to be more than a one-off.
'In our view such a relationship can allow Rame to do what it does best - namely to prospect plan and commission strong renewable energy projects in Chile.
'The payment structure in these deals should enable the company to recycle capital more quickly and to take advantage of further opportunities in the market.'
What the boss says
On InterEnergy:
TimAdams Rame's chief executive said he was delighted to be working more closely with InterEnergy.
'Having designed built and sold the Raki and Huajache projects we are ideally placed to operate and maintain them on behalf of InterEnergy.'
Why Chile?
Chile is renowned as the country of huge copper mines but powering these enormous open pits is proving ever more difficult.
Rame wants to provide a blueprint of how to build and run wind and other renewable sources of electricity.
Ruki/Huajache in July was the first project commissioned but Tim Adams Rame's chief executive wants 300Mw of generating assets in Latin America within the next three years.
It's possible as Cantor says Rame's presence in Chile should not be underestimated.
'Thebusinesscommunity and within it the renewable energy industry community is small and Rame has been able to build a strong reputation within this.'
It is viewed as a leading developer and has a healthy pipeline of projects.
As the industry in Chile matures Cantor expects demand from income seekers for operating renewable energy projects to increase in step with US pension funds leading the way.
Projects in Chile have not yet been of sufficient size to attract direct institutional investment says the broker but the 'yieldco' trend has continued to grow driven by North American investors.
Rame has so far been involved in almost a quarter of Chile's wind generation projects and before InterEnergy had set up project development deals with two finance partners Santander and German group Anden.
Santander is providing the funding for a portfolio of 133 Mw of wind farm projects.
For its funding the bank will take between 80-90% of a project once commissioned with Rame owning the remainder and also receiving construction and management fees.
Raki/Huajache was the first project completed under the Santander arrangement.
Longer term potential
It is the longer term potential that has Cantor more excited though. Chile faces a growing energy crisis.
Hydro-electricity has been hit by a long lasting drought while gas importsare limited by limited liquefied natural gas (LNG) import facilities.
Indeed one aspect of the InterEnergy deal is for Rame to help the Cayman company build a LNG distribution network in Chile.
Longer term Rame which has a solar operation as well as wind farm expertise may take larger equity stakes as more projects come on line.
That would be 'potentially game changing for Rame' suggests Cantor although it adds it would depend on the cost of the additional finance.
What's it worth?
Cantor sees sales rising from US$2.2mln last year to US$6.6mln by end 2017 which coincides with a move into the black.
Cantor Fitzgerald kept its target price at 24p or almost three times the current market price of 8.4p.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.