A British-Chinese group is moving ahead with another $140 million investment in Cuba to produce electricity from sugar-cane waste and the invasive weed marabu.
HE Ltd., formerly known as Havana Energy, already is building a 62 megawatt biomass plant at the Ciro Redondo sugar mill in central Cuba’s Ciego de Avila province at a cost of roughly $200 million, including outlays for studies.
Now, the group has decided to add a 62 MW plant at Cuba’s newest sugar mill, Mario Muñoz in western Matanzas province, at a cost of roughly $140 million. Construction should begin later this year and take about two years to complete, company chief Andrew MacDonald told Cuba Trade magazine during Cuba’s first renewable energy trade fair held last month in Havana.
The investment plans are the largest yet by a foreign group amid Cuba’s ambitious drive to obtain 24 percent of its electricity from renewable sources by 2030. The island now produces roughly 4 percent of its electricity from renewables, mainly by burning sugar-cane waste at mills during harvest season.
When the first two of HE’s plants open by 2021, supplying the grid year-round, they’ll add about 4 percent more to Cuba’s renewable energy tally, MacDonald figures. Each plant also should save Cuba about $50 million a year by substituting local biomass for imported fossil fuel. In all, HE and its Cuban state partner Zerus in their joint venture Biopower plan five 62 MW plants on the island within a decade, as they secure funding.
“Seeing is believing, and as we gain traction, as banks see four tons of biomass equals one of ton of fossil fuel, I think that’s going to bring a quantum leap in financing over the next 24 months,” said MacDonald.
Financing has been a key hurdle for renewable energy projects in Cuba, partly because Washington’s embargo on most U.S. business with the island makes even non-U.S. banks skittish. What’s more, Cuba is not a member of major multilateral finance groups such as the World Bank.
To fund its first Cuba power plant, HE turned to China’s giant Shanghai Electric Co. as an equity partner. Shanghai Electric is providing equipment for the Ciro Redondo project. A construction unit of Shanghai Electric called Simee also has set up a Cuban operation and won the bid to build the initial plant, MacDonald told Cuba Trade.
For its second Cuban plant, the group now is putting final touches on “more normal” financing: “We’re looking for senior debt. We’re putting the equity,” MacDonald said. The group’s third plant likely would use a similar structure, with loans repaid from energy sales to Cuba’s state electric company known as UNE.
“For Cuba, the quicker we can replicate the model, the better,” said MacDonald.
Helping ease financial bottlenecks is Cuba’s recent renegotiation of some foreign debt, plus its cooperation accord signed with the European Union in November that provides an initial 18 million euros ($22.4 million) to fund renewable energy on the island.
“If the EU says “Go, go, go,” that’s great for the banks” in Europe and elsewhere outside the U.S. to consider renewables projects in Cuba, MacDonald said. The EU was a co-sponsor of the renewables trade fair in Havana and its two-day forum that featured European energy and finance leaders.
MacDonald said HE chose Mario Munoz for its second Cuban power plant partly for its youth. Commissioned in 1984, the site was designed as an industrial complex, so it has no town around it the way some older sugar mills do. It’s also among the most efficient mills in Cuba, and it has plenty of marabu nearby that can be harvested and burned outside of sugar season, he said.
For its third power plant, HE is looking at Hector Molina mill in western Artemisa province. Pending funding, construction could begin there next year, MacDonald told Cuba Trade.
Cuban officials are pleased with the group’s advances, because the government aims to get the bulk of renewables on the island from sugar, marabu and other plants: 14 percent by 2030. “Biomass is fundamental, because it has stable production – not like the sun and wind that come and go,” said Argelia Balboa Monzon, senior advisor for renewable energy at Cuba’s Ministry of Energy and Mines.
Meanwhile, HE has teamed with another UK firm, Hive Energy, to help develop a 50 MW solar park in Cuba’s Mariel Special Economic Development Zone. The British-Chinese group will help secure funding for the 100-percent foreign-owned venture. Construction on the park is expected to begin this year, with solar output from the first phase likely before January, said MacDonald.