Q&A: Expanding into Asia and Latin America
SunFunder is expanding its operations, with the first steps into new markets in South and Southeast Asia, and Latin America this year.
We caught up with our investment team colleagues Marga Manzo and Nicole Kugelmass, who are leading SunFunder’s work in these new regions, to discuss how financing projects there can open up new opportunities to accelerate the clean energy transition.
We recently announced a deal with SunSource, the first in Southeast Asia (SEA) for SunFunder. How significant is this for the company?
Marga Manzo: That’s right. Asia has been a market that SunFunder has been looking at for a number of years, since as far back as 2016, and we’re now making concrete steps into the region with presence on the ground and an office in Singapore. This is a very significant move for SunFunder as there is a bigger scope of sectors where we see a lot of pent-up demand for financing in countries like Indonesia, Thailand and the Philippines. There are untapped opportunities in sectors like energy efficiency and in agriculture, in areas like solar for cooling and irrigation.
In Africa we have done a lot of work to support energy access, particularly with solar home system (SHS) and mini-grid companies. Whereas, in SEA , we have the opportunity to do something a bit different and focus more on energy efficiency, cost-savings through commercial & industrial (C&I) solar, as well as its impact on the environment.
How else is this new market different to other regions SunFunder is well established in?
MM: Unlike our operations in African countries, the local financial sector in Asia is a lot more mature. What SunFunder brings to this market is the ability to be more flexible with the types of products that we can provide (e.g. receivables financing, working capital financing) and an openness to explore alternative collateral packages so that the debt we provide aligns with our borrowers’ business cycles and does not constrain growth.
With our new Gigaton Fund, we’re also able to offer truly competitive tenors. In some markets, funders can typically only offer loans up to 8 years, and we’re looking at long-term periods of 12 years, which is better aligned with the power purchase agreements (PPAs) or leases that C&I developers sign with their customers.
What will be SunFunder’s first steps in this new and dynamic market?
MM: We’re looking primarily at the C&I space to begin with in countries like the Philippines, Indonesia, Vietnam and Thailand. But there is the opportunity to expand as the market evolves and clean energy needs – along with financing for these needs – grows. From e-mobility to agriculture and energy efficiency, there are a number of areas in which the sector is developing and SunFunder plans to be well placed to provide financing to support this transition.
What about SunFunder’s plans in Latin America?
Nicole Kugelmass: Our approach to Latin America is currently more opportunistic as we look to break through in the region. We are working on a project in South America and there is a pipeline of activity that can materialize with the Gigaton Fund. The themes that Marga mentioned are similar in LatAm. Compared to Sub-Saharan Africa it’s also a story of energy transition and efficiency rather than energy access.
As a result, similar to Asia, we are mainly going to be looking at C&I projects. Again, we also need to be competitive in the region, which is an opportunity we’re planning to seize with the Gigaton Fund.
Which countries in LatAm are being targeted and what are the challenges and opportunities there?
NK: At the moment we’re looking to understand the different opportunities for SunFunder across the board, but primarily in South and Central America, and the Caribbean.
We’re looking closely at the energy landscape across the region and also at an individual country level as countries have very different levels of enabling ecosystems for renewable energy. Uruguay for example has 60% of grid energy supplied by renewables, but there are also countries like the Dominican Republic which has 8% renewable grid-supply – so we are learning about the opportunities that each different context presents us.
What will be our first steps in this new market?
NK: One of SunFunder’s strengths as a team is our ability to take our industry experience and knowledge and learn by doing, getting on the ground, working on transactions and in that way, gaining the contextual understanding of these regions to support our work.
At this stage we are doing exactly that, learning and understanding the different markets and sectors in which we can be innovative, competitive and provide financing solutions that make sense for our clients in the local context. We’re already working on our first project in the region and developing our network of partners that will enable us to grow with a strong footing.