- Title: Lack of cash clouds Cuba's green energy outlook
- Date: 31st March 2017
- Summary: CIEGO DE AVILA, CUBA (RECENT) (REUTERS) GENERAL VIEW OF TRAIN WAGONS TRANSPORTING LOADS OF SUGAR CANE / BUILDINGS OF SUGAR PLANT "CIRO REDONDO" IN BACKGROUND WAGONS TRANSPORTING LOADS OF SUGAR CANE WORKERS SUPERVISING WORK SUGAR CANE MILL WORKING TRACTOR AT SUGAR CANE PLANT WORKERS AT PLANT PROCESSING SUGAR CANE RESIDUES TRACTOR AT SUGAR CANE MILL (SOUNDBITE) (English) BIOPOWER PRESIDENT, ANDREW MACDONALD, SAYING: "Probably the most challenging thing we've had to deal with in the last six years of developing this project has been the financing. The blockade, the U.S. blockade has strangled the financing from Europe and from other obvious sources, so financing projects even today is a struggle and a challenge." MACDONALD NEXT TO CUBAN ADVISERS AND MARABU PLANTS MARABU TREE TRUNKS WITH SPINES MARABU FOREST MARABU TREE TRUNK VARIOUS OF MARABU FOREST (SOUNDBITE) (English) ZHENGYUE CHEN, FORMER INVESTMENT MANAGER AT SHANGHAI ELECTRIC AND CURRENT BIOPOWER CHIEF FINANCIAL OFFICER, SAYING: "First of all, we have to check whether all the funders are open for the Cuban market or not. Once the first obstacle is overcome then we can move forward." GENERAL VIEW OF CHINESE TECHNICIANS WORK ON PLOT OF LAND WHERE BIOMASS PLANT WILL BE BUILT CHINESE TECHNICIAN WITH PROTECTIVE VEST TRACTOR UNLOADING EARTH INTO TRUCK (SOUNDBITE) (English) BIOPOWER PROJECT MANAGER LI HUI, SAYING: "We will hand over a fully-functioning power plant. At the same time we are responsible for two years operation of the power plant so make a smooth transfer to Biopower." LI HUI TO OTHER TECHNICIANS SUPERVISING WORKS IN CONSTRUCTION PLOT OF LAND WITH TOWERS OF SUGAR PLANT IN BACKGROUND LI HUI AND TECHNICIANS TALKING TRUCKS LEAVING LAND IN WORKS GENERAL VIEW OF ENTRANCE TO CIRO REDONDO PLANT
- Embargoed: 14th April 2017 18:04
- Keywords: Cuba energy deficit fuel booming renewables sector
- Location: CIEGO DE AVILA, CUBA
- City: CIEGO DE AVILA, CUBA
- Country: Cuba
- Topics: Environment
- Reuters ID: LVA0016AAKQBN
- Aspect Ratio: 16:9
- Story Text: Cuba, battling a chronic energy deficit, has all the sunshine, wind and sugar to fuel what should be a booming renewables sector - if only it could find the money.
The country's first utility-scale renewable energy project, a biomass plant in Ciro Redondo, is finally under construction thanks to an injection of funds from China, a socialist ally and in recent years, the island's merchant bank of last resort.
Turning Cuba's renewables potential into reality has become a state priority over the past year since crisis-stricken ally Venezuela slashed subsidized oil shipments to Cuba that were supposed to help power its traditional plants.
The government announced last July it was rationing energy, raising fears of a return to the crippling blackouts of the "Special Period" after the collapse of the Soviet Union. The energy shortage comes at a time when growing tourism and private business creation are generating greater demand.
"The most challenging thing we have had to deal with in the last six years of developing this project has been the financing," said Biopower President Andrew Macdonald, while touring the site of the Ciro Redondo plant.
The Scotsman, who has been doing business with Cuba for more than a decade, said the U.S. blockade had "strangled" funding from Europe "and other obvious sources", with banks afraid of sanctions.
His start-up Havana Energy joined forces with a subsidiary of domestic sugar monopoly Azcuba to create Biopower in 2012, with a contract to build five plants attached to sugar mills.
The plants are projected to use sugar cane byproduct bagasse and fast-growing woody weed marabu as biofuels, costing around $800 million to add some 300 MW to the grid.
Biopower was finally able this year to start building the first one, thanks to a decision by China's Shanghai Electric Group Ltd to buy an equity stake in Havana Energy. The JV is now looking for external financing for the next four plants.
Some international companies have shown an interest in gaining a foothold in the slowly opening Cuban market, encouraged by a three-year old investment law that allows full foreign ownership of renewables projects.
On top of the U.S. trade embargo, which frightens banks from offering Cuba loans, Cuba's payment capacity is questionable. While it has improved its debt servicing record under President Raul Castro, it is falling behind on paying foreign providers.
And it has little to offer as payment guarantees in hard currency. Its state electricity utility generates revenue in Cuban pesos, which are not traded internationally, only into convertible Cuban pesos at a state-fixed rate. The government has promised to unify those two currencies, but it is unclear how.
Moreover Cuba does not belong to multilateral institutions like the Inter-American Development Bank that could provide external guarantees.
That is likely to force further reliance on China, already Cuba's top creditor in recent years, having offered loans as a way to hike trade with the island. Shanghai Electric is importing and building the Ciro Redondo plant, as well as helping finance it.
Project Manager Li Hui, already directing excavators shifting earth on site, said he will stay on after the factory is built as the head of the company's first branch in Cuba.
But even Chinese largesse may have its limits. Biopower Chief Financial Officer Zhengyue Chen said Biopower was now in discussions with overseas funders, mainly from Europe, and hoped to secure commercial funds for the second plant by the end of this year.
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