The national direct current transmission line project will begin its senior financing process, through which it hopes to secure funds for the development of its construction phase.
It faces challenges in terms of the amount, terms, and characteristics of green and sustainable financing. All this in an international financial context marked by greater volatility.
The Kimal-Lo Aguirre direct current transmission project, one of the most important energy infrastructure projects currently underway and a fundamental part of the country’s decarbonization plan, is entering a new decisive phase: the structuring of its senior financing, scheduled for the first half of this year.
In line with the project’s sustainable characteristics and its contribution to the country, the operation aims to raise capital under the green label, a rating that certifies compliance with international standards in environmental, social, and governance (ESG) sustainability. With a total investment of over US$2 billion, the financing will be aimed at covering most of the resource needs of the project’s construction phase, which will connect northern Chile, where power generation is concentrated, with the main consumption centers through a 1,346-kilometer HVDC line.
Aquiles Vargas, Administration and Finance Manager at Conexión, the company in charge of developing the project, explains that “the structuring of this financing represents a key milestone for the development of the transmission line, as it not only secures the resources for its construction, but also validates the project in the eyes of international markets in terms of Kimal-Lo Aguirre’s commitment to the highest ESG standards. Our goal is to consolidate a sustainable and replicable investment model capable of attracting global capital to critical infrastructure for Chile’s energy transition.”
According to Vargas, this process is supported by a robust financial structure and is based on a regulated business with stable revenues guaranteed by the Chilean government, determinable operating costs, and a predictable regulatory framework that promotes energy efficiency and the development of clean energy in the country, with extensive knowledge of this type of development on the part of its partners CSG, ISA Energía, and Transelec. Added to this is the successful experience of 2023, when in its initial phase the project obtained US$480 million in green loans, with certification from Sustainalytics and participation from HSBC Hong Kong and shareholders.
The transaction will be led by Conexión, with financial advice from Banco Santander, which includes a Chilean-Spanish team specializing in this type of transaction. The process involves the participation of global institutions, including banks, investment funds, insurance companies, and multilateral organizations with long-term dollar funding in North America, Europe, and Asia. In addition, there are plans to include a local currency tranche to cover immediate operational needs, such as VAT financing and local guarantees.
The importance of the Kimal-Lo Aguirre transmission line for Chile in its sustainable energy development plan is one of the main motivators that arouses the interest and support of all project stakeholders, including, of course, financial institutions. This is because the impact of this HVDC line lies in the fact that it will not only increase the transmission capacity of the national electricity system, but will also do so with greater efficiency, lower losses, and an environmental footprint aligned with the global challenges of the country’s energy transition.
