Blended Investment in Wind Energy Ready to Fly Solo in Jamaica

June 14, 2022

By Erin Baldwin

Almost a decade ago, BMR Energy came to IFC with an opportunity — and a challenge. A leader in clean energy, the company knew that Jamaica was ripe for an investment in wind power — a big one.

Bruce Levy, CEO and President, and his partner Andrew Rovito, Senior Vice President, had a vision: construct a 36-megawatt (MW) wind turbine farm, using 11 3.3 MW wind turbines, which at the time was virtually unheard of in Jamaica, where most wind turbines are at the 2 MW size. It would be the first project for BMR Energy and the first private company to build a wind farm in Jamaica.

Despite the government of Jamaica’s interest in renewable energy, local, long-term financing was nearly impossible to attain given the weak economic situation. The power sector in Jamaica also faced critical issues: high generation costs driven by an over-reliance on imported fossil fuels and electricity theft which is driven by the high electricity prices and longstanding socioeconomic issues. Not to mention, the wind sector was relatively untested.

Could a project of this scale survive? Could it support the country’s ambitions to reduce its dependence on imported fossil fuels? Knowing the potential benefits this would have for climate change mitigation and the local population, BMR Energy engaged the US Development Finance Corporation (DFC, at the time OPIC), who shared some of the same concerns about the lack of track record in the country.

But the BMR Energy team was persistent. IFC, which had local experience and clients, was recruited to partner with DFC and help the deal cross the finish line. With the combination of Stop-Winlock’s own-account financing and blended concessional financing from the government of Canada, the project suddenly became bankable. “IFC went and found concessional financing that brought down their average cost of lending; IFC was a very important partner on this because it really helped DFC get comfortable in Jamaica,” says Levy. “Many things came out of this project because IFC was participating, and I think the concessional finance helped us get there.”

The potential of wind energy in Jamaica and further afield

How windy is it in Jamaica? Very. Ninety kilometers west of Kingston, BMR Wind’s 11 Vestas V112 3.3 MW wind turbines generate over 120,000 MWh per year, roughly equivalent to 3 percent of Jamaica’s 2022 current energy demand.

Power from the project is being sold to the JPS Company, under a 20-year power purchase agreement. “We are supposed to make 120,000 MWh a year. Three years after becoming operational, we were doing so well that we increased [our target] to 130,000 MWh” says Levy. The wind farm is helping avoid greenhouse gases by about 87,000 tons CO2 equivalent per year. “More profits have given us the ability to spend more on growing our business, which is focused on the Caribbean and Central America,” says Levy. “ Now we have five other plants, and all of the new ones are solar.”

A pioneering commercial project in Jamaica with a strong track record of success in the Caribbean, BMR Wind is now ready to leave the nest. The IFC nest, that is. “This is a well-run, impactful project that no longer has a need for blended concessional finance — it met our shared objectives to create and reinforce private markets by de-risking and rebalancing the risk-reward profile to demonstrate commercial viability with a minimum use of concessional funds.

It serves as a prime example of the catalytic power of blended concessional finance and partnership with countries like Canada,” says Kruskaia Sierra-Escalante, Senior Manager, Blended Finance and Corporate Strategy. Blended concessional finance is a de-risking instrument that includes a time-bound subsidy to help crowd in the private sector.

Jamaica’s largest private sector wind farm, BMR Wind, was made possible through a $62.7 million financing package, including blended concessional financing from the IFC-Canada Climate Change Program ($10 million), a senior loan of $10 million from IFC, and the remainder by the DFC. The critical IFC-Canada blended finance program funds helped the project proceed and go on to demonstrate the viability of private sector wind power in Jamaica, thus paving the way for long-term commercial investors.

BMR Energy won the competitive auction bid in 2013, and at the time, the electricity was among the lowest cost sources of power available to the Jamaican Public Service (JPS) Company, a company that provides electricity services to more than 600,000 residential and business customers through an integrated system that includes power generating plants, and an island-wide transmission and distribution network.

When projects are evaluated for blended finance use, a key question is “can the projects eventually succeed without the subsidy?” For BMR Wind, that assumption has become a reality. It has refinanced its IFC loan and government of Canada’s blended concessional finance loan through a commercial lender in the Caribbean. In other words, it’s ready to fly solo, as BMR Wind no longer needs concessional financing and is growing independently.

“BMR Wind is tangible proof that renewable energy projects in the Caribbean can be viable, profitable and play an important role in helping a country achieve its environmental objectives and create jobs. We at IFC are pleased to have been a part of this milestone transaction for BMR Wind and Jamaica, and we look forward to supporting other companies support the region’s ambitious climate goals with similar projects,” says Judith Green, IFC Country Manager for the Caribbean.

With the support of IFC and DFC, BMR Wind helped reduce entry costs for future developers and demonstrated the bankability of private sector developed utility-scale wind farms in the region. The success of this project and similar ones encouraged the government to issue a second Request for Proposals for Renewable Energy projects, which received responses from numerous developers. The government did another competitive auction in 2015 and awarded a 37MW solar project that was built (at a lower tariff than BMR Wind) — an affirmation that renewable energy projects are doable and not a high-risk approach.

Island nations like Jamaica remain particularly vulnerable to extreme weather events caused by climate change like hurricanes, rising sea levels and flooding. So, efforts to support climate mitigation are needed as the climate crisis hits the Caribbean. Ultimately these kinds of large-scale, high-impact climate projects need financing—but also persistence and partnership to get off the ground, and eventually, fly solo.

Published in June 2022