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Miami, FL, Feb.  22, 2021 – As presented by Bloomberg NEF’s 1H 2021 Corporate Energy Market Outlook published on Jan. 26, 2020, Atlas Renewable Energy ranked as the number one clean energy developer selling renewable energy to corporate buyers in Latin America during 2020 and occupied 6th place globally with over half a gigawatt contracted for private offtakers in the region.

This success includes a landmark long-term Power Purchase Agreements (PPA) that Atlas Renewable Energy contracted with Anglo-American, a natural resources multinational, which will procure clean energy to its operations in Brazil from the Casablanca project, Atlas Renewable Energy’s 349MW solar plant in Minas Gerais. Casablanca is the largest bilateral solar PPA signed in Latin America to this date.

Similarly, Atlas Renewable Energy signed another groundbreaking project with the Brazilian subsidiary of one of the largest petrochemical multinationals, Dow Chemical. The energy for that project will be sourced from Atlas Renewable Energy’s Jacaranda solar plant and will provide clean energy to Dow’s operations in the state of Bahía under a novel deal structure that addresses solar intermittency and provides a 24h energy offering by swapping the excess solar energy during the day with other clean energy sources that can produce at nighttime, thereby serving a continuous energy load.

Both projects fall under these companies’ strategy to attain ambitious sustainability goals, aiming to reduce a considerable amount of their CO2 emissions and clean their energy matrix, a trend that is rapidly being adopted and implemented in Latin America by large energy consumers in the natural resources and chemical sectors. And, importantly, both projects are uniquely characterized by equally pioneering and ambitious social community engagement programs promoting diversity and inclusion.

“We are extremely proud of the growth that Atlas Renewable Energy has consistently been able to sustain over recent years, repeatedly offering tailor-made energy solutions to our clients. Going forward, we see ourselves continuing to innovate in this space to reduce the carbon footprint of companies and institutions, while also reducing their energy bill.” said Carlos Barrera, Atlas Renewable Energy’s CEO. “The private sector is becoming more conscious about the need to operate sustainably. As such, procuring clean energy has become essential for large energy consumers, and Atlas can support them to find creative and smarter solutions to accelerate their adoption of cleaner sources of energy.”

According to Bloomberg NEF’s report, which tracks corporate clean energy trends, Corporate PPA activity in Latin America in 2020 totaled 1.5GW, of which 1,047MW was procured in Brazil, the region’s largest economy and clean energy market. Brazil PPA volumes nearly doubled from 2019 and

solar contracts accounted for nearly 80% of this growth, driving a strong trend towards solar energy at the regional level.

With these deals, large mining and chemical companies in Brazil dominated Latin America’s corporate procurement landscape in 2020. Global miner Anglo American was the largest corporate offtaker, based on Bloomberg’s report, followed by the Brazilian subsidiary of US-based multinational Dow Chemical.

With this major achievement, Atlas Renewable Energy looks to the future to continue supplying clean energy to big energy consumers across the Americas, accelerating the region’s transition toward clean energy, while promoting best practices and elevating the industry standards.

About Atlas Renewable Energy

Atlas Renewable Energy is a renewable energy generation company that develops, builds, and operates renewable energy projects with long-term contracts across the Americas. The current company portfolio is 2.2GW of contracted projects in development, construction, or operational stages, and aims to expand by an additional 4GW in the next years.

Launched in early 2017, Atlas Renewable Energy includes an experienced team with the longest track record in the solar energy industry in Latin America. The company is recognized for its high standards in the development, construction, and operation of large-scale projects.

Atlas Renewable Energy is part of the Energy Fund IV, founded by Actis, a leading private equity investor in the energy sector. Atlas Renewable Energy’s growth is focused on the leading emerging markets and economies, using its proven development, commercialization, and structuring know-how to accelerate the transformation toward clean energy. By actively engaging with the community and stakeholders at the center of its project strategy, the company works every day to provide a cleaner future.

To know more about Atlas Renewable Energy, visit: www.atlasrenewableenergy.com

In recent years, renewable energy has undergone a dramatic decrease in cost and is now more competitive than fossil fuels in many markets. In 2021, we believe that this decline, combined with sweeping policy changes across the globe and a renewed corporate focus on sustainability in the wake of the Covid-19 pandemic, will lead to a massive global growth opportunity in renewable energy. Here’s why.

THE US RETURNS TO PARIS

One of the immediate priorities for the newly inaugurated Biden-Harris administration is swift action on climate change. On his first day in office, President Joe Biden signed a sweeping executive order to rejoin the Paris Agreement, as part of a plan for the US to hit zero emissions by 2050. The agreement, which the former administration officially withdrew from in 2020, aims to limit global warming to 1.5 degrees Celsius compared to pre-industrial levels by reducing carbon dioxide and other greenhouse gas emissions through the year 2050. 

According to a recent note by Jahnavi Nadipi, a Platts Analytics North American power markets analyst, the US will need as much as 238GW more solar and wind power to meet the agreement’s targets – more than double its current installed capacity. To meet this, President Biden has put in place an ambitious investment target of $2 trillion in clean energy infrastructure over the next four years, boosting the near-term outlook for the renewables sector.

CHINA PLANS TO DOUBLE GLOBAL RENEWABLES CAPACITY

At the end of 2020, Chinese President Xi Jinping set out concrete plans to achieve net-zero carbon dioxide emissions for the first time. The country plans to achieve 1.2 TW of renewables capacity by 2030 – an amount equal to the current global total installed solar and wind capacity. The China Photovoltaic Industry Association (CPIA), the country’s main solar industry group, says it expects to see 70-90GW of new solar added each year up to 2025.

THE WORLD AIMS FOR NET ZERO

Beyond the world’s two largest economies, a wave of commitments from other Paris Agreement signatories, including Canada, India, the European Union, Japan, South Africa, and South Korea, have put the Agreement’s 1.5°C goals within striking distance for the first time, according to the Climate Action Tracker (CAT). In a clear signal to financiers, investors, manufacturers, and project developers, governments are now seeking a faster expansion of renewable power sources in order to meet these tighter targets.

AUCTIONS UNDERWAY IN LATIN AMERICA

The recent pace of clean energy growth in Latin America shows no sign of abating. The Colombian government will offer 5,000 MW of capacity in its third renewable energy auction in the first quarter of this year, taking it from less than 50 MW of installed renewables in 2018 to more than 2.8GW by the end of 2022. Meanwhile, in May, Chile will launch an auction for 2.31 TWh of renewables and storage.

RENEWABLE DEALMAKING PICKS UP

The increased political impetus to meet ambitious climate targets hasn’t passed energy companies and utilities by, and many spent 2020 shifting their focus to sustainability-focused business. In Latin America, Atlas Renewable Energy signed a total of 660MW in corporate PPAs – a record figure, making us the top developer in the region by contracted volume for 2020, according to Bloomberg. 

In March, we signed the largest-ever solar energy purchase and sale contract in Brazil with mining conglomerate Anglo American, helping it achieve its strategy to use 100% renewable energy for its operations in Brazil as of 2022. In June, we signed a 15-year agreement with material science giant Dow to provide it with clean energy from our 187MWp Jacaranda solar project, located in the municipality of Juazeiro in Bahia State, Brazil. The plant will generate 440GWh per year, which is enough to supply power to a city of over 750,000 inhabitants, enabling Dow to get closer to its renewable energy sourcing goals. 

This is a global trend. In the US, Dominion Energy and Duke Energy shelved their joint Atlantic Coast Pipeline project, while Dominion has sold its gas transmission and storage business and announced a series of additions to its solar portfolio. Meanwhile, French oil major Total’s energy transition strategy continues apace, with the acquisition of a 20% stake in India’s Adani Green Energy, the world’s biggest solar developer. 

INVESTORS FLOCK TO CLEAN ENERGY

2020 saw global stock markets roiled by the Covid-19 pandemic, but the clean energy industry held firm, with the S&P Global Clean Energy Index notching up an impressive 135.4% increase over the year. According to the International Energy Agency (IEA), shares in renewable equipment makers and project developers outperformed most major stock market indices over 2020, while the value of shares in solar firms has more than doubled since December 2019. With Goldman Sachs announcing its expectation that renewable power will become the largest area of expenditure in the energy sector in 2021, surpassing upstream oil and gas for the first time, we expect this trend to accelerate, as major investors seek to capitalize on the upswing in demand.

LARGE ENERGY USERS GO GREEN

Commitments by major corporates to reduce their emissions have trickled in over recent years, but 2020 saw market leaders convert promises into action – driving up demand for further renewable capacity. In May 2020, 155 companies — with a combined market capitalization of over $2.4 trillion —signed a statement urging governments around the world to align their COVID-19 economic aid and recovery efforts with current climate science. In July, Microsoft along with AP Moeller-Maersk, Danone, Mercedes-Benz, Natura & Co., Nike, Starbucks, Unilever, and Wipro created the Transform to Net Zero initiative, with the tech firm committing to develop a portfolio of 500 megawatts of solar energy projects in under-resourced communities in the US. Meanwhile, Google pledged in September to achieve 100% renewable energy by 2030, while Apple’s newly-launched Supplier Clean Energy Program has seen 71 manufacturing partners in 17 countries commit to 100% renewable energy for the tech giant’s production as it commits to transitioning the electricity used across its entire manufacturing supply chain to clean sources by 2030.

RECORD INCREASES IN PROJECTS COMING ONLINE

During the height of the pandemic, when overall power demand sank, renewable power’s share of the grid surged, and this trend is set to continue. According to the IEA, almost 90% of new electricity generation in 2020 was renewable, with just 10% powered by gas and coal, putting green electricity on track to become the largest power source by 2025, displacing coal. In the US, the Energy Information Administration’s (EIA) latest inventory of electricity generators, developers, and power plant owners shows 39.7 GW of new electricity generating capacity will start commercial operation in 2021, with solar accounting for the largest share of new capacity at 39%, followed by wind at 31%.

COVID RECOVERY MONEY HEADS TO RENEWABLES

Despite the pandemic and consequent global recession, decarbonization plans continued through 2020, demonstrating the acceptance of the need for climate action no matter the economic backdrop. With Covid-19 stimulus money now on the table, the International Finance Corporation (IFC) says that supporting low carbon investment and renewables generation capacity could generate a US$10.2tn investment opportunity, create 213 million jobs, and reduce greenhouse gas emissions by 4bn tons by 2030.

FUELING THE NEW NORMAL – NO GOING BACK

Taken together, all of these trends indicate a strong 2021 – and beyond – for the renewables sector. As the global economy charts, a path toward a new normal, clean energy can power a green recovery that leaves no-one behind. And with increased demand, a favorable regulatory framework, and rising investor appetite for green projects, we believe that the outlook for the industry is brighter than ever before.

Across Latin America, companies have woken to the need for embedding sustainability into what they do. But, as the climate change clock keeps ticking, we’re seeing business leaders start to ask how to tackle this issue on a larger and more impactful scale, and we believe that this conversation is one that’s worth having.

The latest World Economic Outlook, published in October by the International Monetary Fund (IMF), shows that we’re at a pivotal moment in history. At the current rate, global temperatures will increase “well above the safe levels agreed to in The Paris Agreement, raising the risk of catastrophic damage for the planet”, it remarks and adds that the window for attaining net-zero emissions by 2050 is rapidly closing. The time for action is now.

Companies make and ship almost everything we buy, use, and throw away, and therefore play an outsized role in global emissions. In recent years, we’ve seen businesses around our region start to look seriously at sustainability, and the buy-in from employees and consumers alike has been encouraging.

However, we believe that unless companies make a decisive shift to tackling the key CO2 emissions elements in their business, the majority of their efforts will not make enough of a difference.

SUSTAINABLE PRACTICES BEYOND THE OFFICE

In recent years, we’ve seen how going green has become an integral part of day-to-day office life, as companies around the region have put in place policies from installing energy-saving light bulbs in buildings to promoting the use of alternatives to single-use plastic. The paperless office idea has taken root, and recycling containers are now in most professional workplaces. Meanwhile, a growing number of firms are pushing the use of sustainable building materials, such as recycled furniture and carpets made from recycled materials, in their offices. We’re also seeing companies start to demand greener manufacturing practices from their suppliers, too, while others have started to promote the safe disposal of the products they make.

These steps are obviously positive. Companies adopt green practices create positive brand associations among consumers and boost the morale of employees who believe in what their company is doing. But do they make a real difference?

LATIN AMERICAN COMPANIES WANT TO DO BETTER

Each year, the S&P Global Corporate Sustainability Assessment assesses sustainability practices across 124 actively participating companies from Latin America. For the third consecutive year, businesses in the region have increased their participation in the CSA, from 38% of those invited in 2018 to 46% in 2019, which proves a growing number are willing to address and improve their sustainability performance. In fact, the participation rate for Latin America is above the global participation rate, demonstrating that there’s a real trend underway for companies to do better.

The progress they’re making, however, is slow. The S&P assessment looks at a number of sustainability dimensions, but on the environment and climate strategy, Latin American companies are well below the global average, showing that although they’re actively seeking to cut down on emissions, there’s still more they could be doing.

ENERGY MATTERS

From an emissions standpoint, Latin America is different from many other global regions, as the bulk of its greenhouse gas production is from land use and agriculture, rather than from energy. However, this is set to change quickly, as economic growth and its rising middle class are expected to drive up energy demand to at least 80% higher than present-day levels by 2040, according to the Inter-American Development Bank, leading to total emissions caused by power generation reaching approximately 2 billion metric tons of carbon dioxide equivalent (MTCO2e) per year.

In order to offset that, you would need to switch 76 billion incandescent lamps over to LEDs or recycle 680 million tons of waste. As a result, the small-scale initiatives being carried out in offices in an attempt to go green are just a drop in the ocean.

It’s clear that only by reducing energy emissions are companies going to be able to minimize their carbon footprint, and this is something more and more business leaders are beginning to think seriously about.

MAKING THE GRADE

Since many companies have already done as much as they can to reduce their overall energy usage, switching to renewable energy presents the best and most far-reaching way of cutting emissions without compromising on performance and adding significant cost reductions. While figuring out how to harness the power of renewable energy to achieve emissions reduction goals may seem like a daunting task, the good news is that business leaders don’t need to become experts in energy sourcing in order to do so.

At Atlas Renewable Energy, we’re starting to hear from a growing number of firms who are committed to making a real difference to their carbon footprint. It’s not just the usual suspects in the most-polluting industries, either: companies in every sector across Latin America, from retail and manufacturing to heavy industry and beyond, know they need to do more on sustainability. The region still has a long way to go, but we think the tide is turning, as more business leaders wake up to the need to take real action on corporate sustainability. Is your company ready to take the next step?

At Atlas Renewable Energy, we recently signed a renewable power purchase agreement with the Brazilian subsidiary of the American material science giant Dow. This landmark deal lays the framework for chemical companies across Latin America to meet their environmental objectives while lowering energy costs at the same time. In this article, we take a closer look at what makes this project so innovative.

Like most industrial companies, Dow has long sought to reduce the environmental and cost implications of its energy-intensive activities. Its leading position as a supplier of chemicals, plastics, synthetic fibers, and agricultural products also means it’s one of the world’s largest industrial energy consumers.

In the past, Dow utilized grid power and fossil fuels to power its plants, but as renewable energy has become more competitive and available in recent years, it has started to rethink its energy portfolio, setting itself a hard target to meet 750 MW of its power demand with renewables by 2025, and achieve carbon neutrality by 2050.

To help achieve this ambitious goal, the company has partnered with Atlas to provide clean energy to its Aratu complex in Brazil, the largest Dow manufacturing facility in the country.

This groundbreaking agreement not only avoids approximately 35,000 metric tons of CO2 emissions per year – the equivalent of taking around 36,800 cars off of the streets of São Paulo – but it lays the foundation for the rest of the Latin American chemicals industry to harness the benefits of renewable energy to achieve climate change mitigation goals while locking in stable energy prices for the long term.

CREATING EFFICIENCIES

Under the 15-year power purchase agreement, we will provide Dow with clean energy from our 187MWp Jacaranda solar project, located in the municipality of Juazeiro in Bahia State. The plant will generate 440GWh per year, which is enough to supply power to a city of over 750,000 inhabitants, enabling Dow to get closer to its renewable energy sourcing goals.

One of the key issues with solar power is intermittency – the sun doesn’t shine 24 hours a day. Because Dow needs all-day power, Atlas will swap energy from Jacaranda with other renewable energy providers to guarantee a full-cycle supply. Essentially, by packaging up our solar power with additional renewable sources that are available on the market, we’ve made it possible for Dow to meet all of its energy needs with renewables – not just its daytime needs. This is the first time that this has been done in Brazil and opens opportunities for companies who may have been dissuaded from using renewables because of their electricity demand profile.

As a large energy user, electricity accounts for a huge proportion of Dow’s fixed costs, and even the tiniest increase can have an enormous impact on its bottom line. To tackle this, Atlas built in a series of efficiency-boosting measures.

The first is the bifacial modules used in the plant, which can deliver a power generation gain of up to 9% over equivalent mono facial panels, cutting down on land use for the same amount of electricity. Second, the project is being connected to Atlas’ digital substation, which enhances controllability and reliability while optimizing costs. But the efficiency doesn’t stop there: we also implemented a unique US dollar financing structure that created a natural currency hedge.

SPEAKING THE SAME LANGUAGE

In selecting a partner to help it achieve its aims, Dow was looking for a like-minded company with similar values. That’s why, aside from clean energy and favorable pricing as part of the Atlas Green Finance Framework – our commitment to developing projects that protect and preserve the environment – we also incorporated our signature social engagement. At the Jacaranda plant, we are offering opportunities to the local community that promote diversity and inclusion within the construction’s hiring process. To do this – and to get this right – we have brought in NGOs and local authorities to help us provide training in specialized fields to local women, and we’re incentivizing our local contractors to prioritize people from minority backgrounds in their hiring processes.

A TRUSTED AND CAPABLE PARTNER

Achieving all of this during the turbulence and upheaval that 2020 has brought to the world was no mean feat. We’ve worked hard to ensure the health and safety of workers on our sites because we know how important renewable energy is to the recovery of Latin America’s economy post-Covid19. As a result, our operational capabilities, our execution, and our closing speed have remained optimal.

We’ve been able to do all of this because we’re not new to this. We already have four projects operating in Brazil and several more across the region. All of them have been delivered on time and on budget, and this has boosted our reputation among lenders and partners alike. Because of this, in spite of the tough economic and financial backdrop, we’re in the privileged position of being able to negotiate favorable funding conditions – which translates to cost savings that we can pass on to our customers.

THE BEGINNING OF A TREND

In Latin America, renewable energy is already as affordable as – if not cheaper than – traditional sources. This Corporate Power Purchase Agreement, which leverages financial, operational, and technological innovation, makes it possible for large energy consumers in the chemical industry and beyond to make a huge step towards achieving their carbon emission reduction goals while gaining real visibility over their long-term energy costs.

We’re seeing an increasing number of inquiries from these kinds of companies, and we continue to find competitive solutions for them. The mining industry has already got on board – from the Atlas’ Casablanca plant, which will supply clean energy to mining giant Anglo American in Brazil, to our Javiera plant in Chile, which already powers a copper mine. Our agreement with Dow shows just how much we can achieve when two leaders in their respective fields get together. We believe it paves the way now for the chemical industry to join the green energy revolution – all around the region.

In recent years, we’ve seen the beginnings of a far-reaching sustainability transition among corporations in Latin America that is slowly beginning to move the needle on creating fairer, more inclusive economies for all.

As a region, Latin America bears an outsized brunt of climate change, with extreme weather phenomena from hurricanes in the Caribbean to El Niño on the Pacific coast, as well as rising sea levels and poor air quality, all of which make environmental considerations all the more important.

But it is also a region where enormous progress can be made in other sustainability metrics, such as improving rural livelihoods, contributing to increased gender equality, and boosting the participation of indigenous and minority populations in the economy.

In recent years, we have seen a growing number of companies across Latin America start to focus on these issues. International Environmental, Social and Governance (ESG) best practices are being integrated into the region’s corporations, and it’s happening across all industries. The IndexAmericas[1], created by the Inter-American Development Bank (IDB), highlights the top 100 sustainable firms operating in Latin America and the Caribbean, measured against environmental, social, and corporate governance criteria, as well as on their performance in areas such as gender equality and diversity.

The index has largely been made up of foreign multinationals since its inception, but in the last three years, the number of Latin American firms has increased by almost 30%, demonstrating just how much the issue of corporate sustainability is gaining force in the region.

Another example of this growing trend can be found in the Dow Jones Sustainability MILA Pacific Alliance Index. It measures best-in-class companies across Chile, Colombia, Mexico and Peru that fulfill certain sustainability targets better than the majority of their peers within their respective industries. When it was first set up in 2017, only 42[2] companies met its criteria. Today, that number has grown to 116[3].

Sustainability is also becoming a major focus for the region’s investors, who according to a recent study by Natixis[4] display higher demand for ESG than any other region in the world, as they believe that it can help them enhance risk adjusted returns as well as help them align their assets with organizational values.

When we speak to our partners around the region, what we hear is that incorporating ESG into business models is not a fad. Companies and investors alike are seeking to achieve the triple bottom line of social, environmental and financial success, and the trend is picking up steam.

GREEN ALONE IS NOT ENOUGH

Switching to renewable power, especially in a region as abundant in solar and wind energy as Latin America, is one possibility for companies seeking to reduce their environmental footprint.

Thanks in large part to the government‑led efforts to increase the use of renewables, the region is making solid progress towards its commitments under the Paris Agreement.

But simply “going green” doesn’t equate to sustainability. Sustainability is determined by three different parameters: environmental, social and financial, and if a corporation only switches to renewable energy without addressing the wider implications, they are missing an opportunity.

Latin American corporations today want to be assured of a long-term solution that not only guarantees the availability of clean electricity without hampering the access of others to resources as well as acting as a force for good in society. As a result, an increasing number of companies across the region are not only starting to explore the possibilities of renewable power purchase agreements, but are also beginning to question where the finance for those projects comes from, how the workforce on those projects is structured, and how the developer operates within local communities.

THE ATLAS APPROACH

In our experience, we have discovered that there are no truly quick wins in sustainability. That’s why Atlas has, since the very beginning, dedicated large amounts of resources to ESG, because we believe that real sustainability comes from making strategic investments for the long term.

A major focus for us is social sustainability. When working with local communities, we focus on promoting local welfare increase. In our view, building relationships with the local community doesn’t just mean handing out footballs or school uniforms; it means being cognizant of the fact that the asset will be part of the community for 30 years, and that, if managed correctly, it can represent an opportunity for job creation and income generation. We take on board all of the implications around generating power, and we take comfort in knowing that our presence boosts the local economy wherever we are.

As an example, in June 2020, Atlas Renewable Energy and Dow signed a large-scale solar energy contract in Brazil. The amount of energy generated will cover the equivalent of the power needs of a city of over 750,000 inhabitants, and will result in the avoidance of around 35,000 metric tons of CO2 emissions per year. In addition, the project includes a commitment to gender inclusion and rural employment generation, with training provided for the local female workforce to enable them to access the better-paid job opportunities presented by the project. During the construction of this project, we expect to hire three to four times more women than are usually employed in these developments, with 70% of the total workforce expected to be from the local area.

Meanwhile, at our Guajiro solar plant in Mexico, we have partnered with The Pale Blue Dot, a Mexican organization that promotes educational programs through the use of technology in schools and community centers, to provide more than 400 students from the local community with internet access and digital classrooms.

Financial sustainability is also a key contributing factor to how we do business. We work with impact investment partners such as the World Bank Group’s Clean Technologies Fund and the Inter-American Development Bank’s IDB Invest, and seek wherever possible to tap in to favorable interest rates by linking our funding to our environmental and social performance.

Being sustainable also represents risk mitigation, all the way through the project, from ensuring the transparency of the supply chain of components to achieving bankable projects that have gained the support of the communities in which we operate. This ensures that we can assist our corporate partners in getting their sustainability objectives over the line by providing them with the environmental, social and financial benefits they need in order to meet their obligations.


[1]https://indexamericas.iadb.org/en/Aboutus
[2]http://worldofficeforum.com/wp-content/uploads/2017/11/dow-jones-sustainability-index-mila-constituents.pdf
[3]https://www.spglobal.com/spdji/en/idsenhancedfactsheet/file.pdf?calcFrequency=M&force_download=true&hostIdentifier=48190c8c-42c4-46af-8d1a-0cd5db894797&indexId=91920628
[4]https://www.spglobal.com/spdji/en/idsenhancedfactsheet/file.pdf?calcFrequency=M&force_download=true&hostIdentifier=48190c8c-42c4-46af-8d1a-0cd5db894797&indexId=91920628

Latin America’s renewable energy sector is heading towards 239 gigawatts of installed wind and solar power capacity by 2040, underpinning the tremendous investment potential in the sector. In this article, we take a look at the main opportunities for the private renewable energy market in the region, as well as addressing some of the uncertainties.

Around the world, support for old polluting industries has waned, while clean, green energy has risen in popularity. Fossil fuels are in steady decline, with the traditional energy sector consistently underperforming the S&P 500, and recent research shows that 77% of investments in new power generation to 2050 will be in renewables.

Latin America, home to some of the world’s most plentiful wind and solar resources, is set to play a vital role in this energy transition, and we see a number of trends that point to now being the right time to invest in the sector.

Economic factors  

Unlike the more consolidated economies of the US and Europe where the conventional electricity consumer market is either stagnant or shrinking, Latin America’s middle class has been expanding over the past decade, both in absolute terms and as a share of total households, fueling domestic energy needs. The region’s demand for electricity is increasing consistently year-on-year: Social mobility enables the population to buy appliances and lead more modern lives with greater energy consumption, while in many countries the energy-intensive industries that form a core part of the business community continue to expand operations.

We believe this demand will be best met by renewables, firstly because of cost: unlike in other regions, renewable energy is competitive against new thermal generation in Latin America, even without subsidies. There is little doubt that massive cost reductions in the last decade are one of the main reasons behind renewables rapidly transforming the region’s electricity mix.

But it’s not only future energy demand that we see being addressed by renewables. In many markets, the cost competitiveness of renewable energy can undercut existing thermal assets. This opens up the opportunity of capacity replacement by renewables – something we’re already seeing in Chile, which has implemented a decarbonization roadmap, to be completed by 2040. Other countries are likely to follow suit; it’s only a matter of time.

The make-up of Latin America’s economies is also an important factor. As major exporters of the commodities that power the growth of the rest of the world, the region’s fortunes are driven in large part by international oil and mining companies and their clients – all of which are seeing increased pressure to reduce their carbon footprint and demonstrate progress in sustainability. As a result, renewable energy procurement has become an increasingly important part of their corporate strategy.

Moreover, it isn’t just the commodity exporters. We’re seeing multinational companies with a strong presence in Latin America, from the tech sector with its data centers to consumer goods brands, to chemicals conglomerates, manufacturing companies, car companies, and even large retailers, change their approach to energy consumption in the face of shareholder and consumer pressure to go green.

Projects moving forward

Like any outlook, however, there are some uncertainties.

The role of government remains instrumental to renewable energy deployment, and certain developments, such as the postponements of electricity auctions in Brazil and Chile, or recent regulatory roadblocks in Mexico that limit the operation of new renewables plants, have demonstrated the importance of strong on-the-ground knowledge when considering participating in the market.

Meanwhile, the Covid-19 pandemic has seriously dented global economic growth, and Latin America is no exception. The timing and pace of the recovery remain unpredictable, however, we believe that the pandemic has the potential to change the priority of government policies, and renewable energy will play a key role in Latin America’s rebound from the crisis.

Despite these global challenges, renewable energy projects are still going ahead. On a global level, looking at the project pipeline through 2025, almost one-third of wind and solar PV projects are already contracted and/or financed, according to the International Energy Agency’s latest renewable energy market update[1].

There’s another trend that we’re starting to see in the region which adds strength to our conviction of a renewables-led economic recovery. As the pandemic accelerates the focus on sustainability from policymakers and investors, we have seen an increase in the take-up of private-sector reporting on exposure to climate-based financial risks. One example is in Chile, where institutional investors and the Santiago Stock Exchange have started to implement the principles laid out by the Task Force on Climate-related Financial Disclosures (TCFD), an initiative started in 2015 by the Financial Stability Board. We think this will lead to an even greater number of funds investing in green projects, such as wind and solar power, further driving the growth of the sector.

A flight to safety

With projections for a deep and long-lasting global recession as a result of pandemic-related lockdown measures, investing in clean energy is increasingly viewed not just as a way to reduce pollution, but as a means to hedge against future risks and stranded assets.

For investors, renewable energy is much akin to real estate investment: the largest cost is the initial equipment, but once the project is completed, it represents a stable asset with few moving parts, low operating costs and very long term revenue streams that can be paired with pension and insurance obligation maturities.

If the project is developed with a power purchase agreement (PPA), the stable nature of the benefits is even more evident. These structures secure electricity revenues for a significant part of the project life, and can be likened to owning a building with a 15-year lease already signed, guaranteeing income for years to come. Meanwhile, renewable energy demand is expected to continue to surge – especially in Latin America, where electricity consumption is projected to rise more than 70% by 2030, according to the Global Wind Energy Council.[3]  

This capacity is unlikely to be made up by fossil fuels, particularly as growing concerns over carbon emissions and climate change put project approvals in doubt. As a result, we expect to see a flight to quality by investors seeking low-risk, long-term revenue streams, with increased allocations going to renewable energy infrastructure.

A maturing market

Latin America’s advantages when it comes to attracting investment into renewables hasn’t gone unnoticed. In recent years, we’ve seen the confidence of international developers and international lenders alike translate into projects across the continent.

These players were first movers, and they have since been followed by large utility companies, which have begun to switch their investment focus to renewables after conventional energy began to lose market share.

Now, as corporations start to take up PPAs in their droves, the market has become increasingly dynamic, particularly in Brazil, Chile, and Mexico. There’s still a lot of room for growth in other markets, such as Colombia, and even in the more consolidated markets, we are seeing further opportunities as new technologies are being deployed, from storage solutions to bifacial modules in photovoltaic plants.

We believe that the market is still early in its growth curve, presenting multiple opportunities for investment, and various studies back that up. According to the International Renewable Energy Agency (IRENA), by 2050, Latin America will see an additional 131GW of installed wind capacity and 172GW of new solar capacity.

At Atlas Renewable Energy, our experienced team is at the forefront of developing and operating clean energy projects in Latin America. We have provided investors with stable, strong returns in Brazil, Uruguay, Chile, and beyond, and we know first-hand the strength of the region’s renewable energy market. Throughout the region, as we’ve outlined here, there are several trends that we think make renewable energy a compelling investment play. We believe that with the right partners and carefully chosen projects, investors, financiers and corporations alike can reap the benefits of the Latin American renewable sector for many years to come – and the time to do so is now.

SOURCES COMPILATION

https://www.gartner.com/smarterwithgartner/9-future-of-work-trends-post-covid-19/
https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Apr/IRENA_GRO_R06_LAC.pdf?la=en&hash=1493165ED11340CC1F2681321F8D24754F0292C6
https://gwec.net/gwec-and-olade-team-up-to-drive-the-energy-transition-in-latin-america/
https://www.fsb-tcfd.org/supportive-quotes/
https://www.iea.org/reports/renewable-energy-market-update/challenges-and-opportunities-beyond-2021


There is no doubt that the first half of 2020 didn’t play out quite as planned. However, while the current global economic situation has stressed industries to unimaginable extents, today’s low energy price scenario provides large corporate energy users with an unprecedented opportunity to lock in reduced costs, shore up their business model, and hedge against future uncertainty. Here’s why.

Gaining control over costs

The financial impact of the Covid-19 crisis on Latin America’s companies has been widespread. In aggregate, Latin American stocks fell by 35%[1] in the first six months of this year, compared with a loss of 10.4%[2] for the emerging markets as a whole.

With so much uncertainty still ahead, long-term scenario planning is all but impossible. But gaining control over energy costs can be a means to free up working capital, strengthen the balance sheet, and gain long-term visibility.

This is the first time in recent history that the energy price environment is so favorable, and no-one can predict how long this will last. And in most markets in Latin America, renewable energy is competitive with conventional sources, or in many cases even less expensive. Large energy users today have an unprecedented opportunity to negotiate the best long-term deal, and they cannot afford to miss this chance.

Why renewables?

Recently, we have seen the speed and scale of what can be achieved by social justice movements around the world, as consumers vote with their wallets to reward responsible actors. Environmental activism is no different. Companies that recognize this and transform their business models away from polluting power sources are ensuring a successful future, responding to their consumers and readapting their strategy, sourcing, and logistics to the world of tomorrow.

We’re already seeing a growing trend by financial markets to move towards companies with solid climate policies in place, making capital scarcer and more expensive for those who don’t. In January this year, BlackRock, the world’s largest money manager, said it will exit investments with high environmental risks, and we believe this is just the beginning.

With both Fitch and S&P Global Ratings reporting that credit conditions in Latin America are worsening amid the Covid-19 outbreak, energy-intensive industries across the region are seeking to shore up their power requirements to weather the storm in the financial markets. One way of doing this is by bringing power purchasing decisions in-house in order to control the attributes of the product and services they’re buying.

In effect, having a sound energy strategy has become as important to many companies as having a sound financial strategy. Consumers and shareholders alike now want to see proof of a companies’ green credentials, whether it shows that their renewable energy sources have substituted a traditional source, or that their energy comes from a producer with a sound community relationship and social program strategy. All of these factors can be meaningfully controlled if the purchase is brought in-house.

Partnering for good

The good news is that large energy users don’t need to build their own renewable energy generation plants in order to access all of these benefits. Through the power purchase agreement (PPA) structure, corporate energy consumers across the region can take advantage of better strategic energy sourcing decisions with the assistance of a knowledgeable partner. This is the perfect opportunity to reduce risks – be that backlash from clients and financial markets related to power sourcing, or the execution risk of the projects that are needed to supply them with power.

Renewable energy projects are fast and relatively simple to execute and have modularity to them that allow them to easily adapt to the corporate energy purchaser’s size. What’s more, they can be leveraged by the corporate purchaser to demonstrate their sustainability commitments, providing a visible signal to customers and investors alike that they are on the right side of the climate equation.

Energy-intensive industries: the backbone of the Latin American economy

In resource-rich Latin America, the energy-intensive extractive and chemical industries make up a large portion of the economy and export basket. 

But it isn’t only the large miners and chemical producers who can take advantage of the current situation. The region is home to a wide range of big energy users, from agribusiness to the pharmaceutical and healthcare industry, mining processing, water desalination, the technology sector, and even retailers. International companies operating in Chile, Peru, Brazil, and Mexico have been early movers in this respect – from Anglo American to multinational company Dow.

A window of opportunity has opened to transition from conventional energy sourcing to renewables. It is hard to know how long this downturn will last, how soon the recovery will be, and more importantly, what other black swan events may push energy costs in the opposite direction.

If these last months have taught us anything, it is that factoring in extreme events needs to be a part of risk models going forward. We believe bilateral power purchase agreements for renewable energy are a vital tool in building resilient energy-intensive businesses for the new normal, post-pandemic. Not only do they offer long-term price agreements at attractive rates, but allow companies to align themselves with customer expectations.

SOURCES COMPILATION

https://www.iea.org/reports/renewable-energy-market-update/challenges-and-opportunities-beyond-2021
https://www.gartner.com/smarterwithgartner/9-future-of-work-trends-post-covid-19/
https://gwec.net/gwec-and-olade-team-up-to-drive-the-energy-transition-in-latin-america/
https://www.fsb-tcfd.org/supportive-quotes/

[1] Source: Reuters MSCI https://www.reuters.com/article/emerging-markets-latam/emerging-markets-latam-fx-stocks-fall-on-spike-in-virus-cases-dour-growth-forecast-idUSL1N2E11WA
[2] Source: Hargreaves Lansdown https://www.hl.co.uk/news/articles/how-are-stock-markets-in-latin-america-coping-with-coronavirus-turbulence

Compared to other infrastructure sectors in Latin America during the Covid-19 pandemic, renewable energy project execution has demonstrated remarkable resilience. After overcoming supply shocks from the beginning of the year as factories briefly halted operations, construction activity on solar and wind projects – deemed as an essential activity in many jurisdictions – has been largely undisrupted by work stoppages that have affected other industries.

As we have adapted to the new normal, we have worked hard to bring together world-class best practices to ensure workers’ health and safety. In this article, we share what we’ve learned and how Covid-19 has demonstrated, once more, the strength of the renewable energy sector, even during a global health crisis.

Learning from others’ experience

This is a new situation for everyone, but this doesn’t mean we need to reinvent the wheel. At Atlas, we have strong relationships that span the globe. From our suppliers in China to our contractors who bring experience from Europe, we’ve been able to capture findings from the geographies that have already gone through the worst of the pandemic and take their protocols as a starting point when exploring ways to implement world-class safety standards in Latin America.

Keeping workers safe

By their very nature, renewable energy project sites lend themselves well to social distancing. Wind turbines need to be spaced hundreds of yards apart in vast, open spaces, and even the smallest of our solar farms are measured in the hundreds of acres. This inherent reality helps us to mitigate on-site risks right off the bat.

But simply relying on natural distance isn’t enough. To keep our workers safe, we have pinpointed the many risk factors throughout their day – even before they arrive on-site – and put in place measures to mitigate them.

We’ve adapted the transportation methods our workers and contractors use to ensure adequate distancing between people and put in place daily deep cleaning of the vehicles to ensure optimal sanitization. Once workers arrive onsite, we hold daily safety meetings where we devote time to discuss Covid-19, making sure everyone is aware of the protocols that are in place and giving people the opportunity to raise any concerns about their health. We’re also checking for coronavirus symptoms, which includes temperature measurements and questionnaires to identify any workers who have been in contact with friends or family members who may have been exposed to the virus.

Because we have seen from other countries that many people who are infected with the virus are asymptomatic, we’re taking an extremely conservative approach to personal safety. We’ve revised our entire modus operandi all the way down the value chain, cutting out unnecessary face-to-face meetings with service providers. On-site, we are sanitizing all common areas and providing personal protective equipment to every worker, including masks and gloves. Following examples set elsewhere in the world, we are also exploring the possibility of providing remote virus testing, which will provide an additional layer of safety to our workforce.

Our sites have always been technologically advanced, but in these strange times we are taking this a step further. One example is our virtual safety walks, where our supervisors can now check-in – at a distance – on workers’ performance as well as adherence to safety standards via video technology. Additionally, we’ve also put in place cohort segregation, which minimizes interactions among the workforce and enables the quarantining of small groups in case of any reported infections, creating an efficient way of working even during the pandemic.

Combatting mixed messaging

One of the biggest issues faced by international health authorities has been ensuring the global population is adequately informed, and busting myths about the spread, diagnostic, and treatment of Covid-19. This is of enormous importance to us as we seek to achieve alignment among all of our stakeholders on risk identification and mitigation.

On-site medical staff play a key role in communicating the facts about the disease to workers and ensuring they understand that the precautions they take at work also need to be taken outside of work in order to protect their families.

In the local communities, our community liaison officers have produced communication modules using resources from international institutions that go out via social media, radio, and other means to provide people with a trusted source of information in these confusing times.

Working together as an ecosystem

We don’t operate in a vacuum, and throughout these difficult times, we have learned that open channels of communication are key to getting the job done. Renewable energy generation will play a transformational role in the economy post-Covid-19, and it is incumbent upon us to meet our commitments to our projects. Our close ties with local authorities, the communities we operate in, and our contractors have been vital, and there is a common understanding that we need to work closely together as we seek to adapt to this new normal.

We have seen positive reactions from all of our contractors, who have provided suggestions and recommendations based on their experiences in other areas. This drive towards benchmarking and knowledge-sharing has brought about a collaborative means of creating best practices that go above and beyond those required by national legislation, and will only serve to boost resilience across the entire industry.

Local authorities, too, cognizant of the need to safeguard jobs as well as community health, have facilitated knowledge transfer between companies operating in their regions to support the completion of projects which will bring both employment and clean energy to the population. We believe that this new focus on cooperation will remain and will help to bring about better standards and greater efficiency throughout the industry.

Moving along the learning curve

We are living in unprecedented times, and we are still in a period of adaptation. However, our experiences have taught us that for the renewable energy sector at least, the impacts of the Covid-19 pandemic can be successfully managed, to the extent that we don’t foresee any material impact on project execution in the coming months. In this sense, the world can continue to invest in renewable energy opportunities creating hundreds of thousands, if not millions, of much needed jobs.

Renewable energy demand remains high across Latin America, and by putting ourselves at the forefront and setting industry-leading standards to keep people safe from Covid-19, we are ensuring the sustainability of our projects for many years to come.

SOURCES

Atlas Renewable Energy Executives Interview – May, 2020

In recent years, the Latin American renewables market has undergone a dramatic transformation, with political risk factors, investment trends, technological advances, and external shocks affecting the sector in myriad ways. As the Covid-19 pandemic brings historic disruption to the world’s economies, we lay out the trends shaping the Latin American market and our outlook for the sector going forward.

Power sector demonstrates resilience amid infrastructure slowdown

As the world continues to count the economic and human cost of Covid-19, its impact on infrastructure projects has begun to emerge. The outbreak has caused factory closures, halts in production, and delayed shipments. The United Nations Conference on Trade and Development (UNCTAD) estimates a potential US$50bn decrease in exports across global value chains in the first quarter of this year alone as a direct result[1].

On the demand side, as government funding and bureaucratic capacity are diverted towards combating the outbreak of the virus, ongoing infrastructure projects have been halted and project pipelines canceled. With movement restrictions and shelter-in-place regulations still in force in several geographies, public procurement has ceased while operational restrictions and economic certainty are holding back private sector investment in many infrastructure projects.

Not so for the power sector. With much economic activity heavily dependent on the use of electricity, maintaining, and even expanding energy access has become a priority. Because of this focus on electricity generation capability, governments around the region have ruled power projects as essential infrastructure development, even during lockdowns.

Renewables demand holds up even as electricity usage plunges

That isn’t to say that all is well for the power sector. The Covid-19 pandemic has caused the biggest shock to the global energy system in more than seven decades, with a 6% drop in demand for 2020[2] – the equivalent of losing the entire energy demand of India, the world’s third-largest energy consumer.

Taking the brunt of this significant decline is coal, which has fallen so far this year, that we believe the industry might never recover.

Statistics coming in from around the world support our view: the UK has marked a whole month without burning a single lump of coal for electricity generation –the longest uninterrupted period since 1882. Sweden has closed its last coal-fired plant two months ahead of schedule. And for the first time in history, the US will produce more energy from renewables than from coal this year. We don’t think coal is coming back any time soon, particularly as growing concerns over carbon emissions and climate change put project approvals in doubt.

Overall, the plunge in demand for nearly all major fuels is enormous, especially for coal, oil, and gas. But renewables are holding up, according to a new report by the International Energy Agency. It projects that solar PV and wind are on track to lift renewable energy generation by an impressive 5% in 2020, as governments take this opportunity of lower demand to reduce fossil fuel dependency and move to clean energy.

Additionally, as the economic impact of Covid-19 hits companies’ bottom line, they are starting to seek out cheaper energy sources to hold down costs, further boosting demand for wind and solar power. This momentous shock means that the energy industry that emerges from this crisis will be quite different from the one that came before, and we believe that renewables will shape the future of the energy world.

Technological advances keep driving costs down

One of the most obvious reasons renewables are set to do well, particularly in Latin America, is their low costs. This downward pricing trend is going to consolidate itself further as technological advances make solar and wind power cheaper – and better – as the years go by.

But don’t take our word for it. The latest report by the International Renewable Energy Agency (IRENA) shows that unsubsidized renewable energy is now the most affordable power source for many locations and markets, with cost reductions set to continue into the next decade.

Meanwhile, improvements in battery storage systems, which can effectively integrate high shares of solar and wind renewables into power systems, as well as an increase in availability of smart grid and metering systems around the region, will see low-cost renewable electricity generation continue to underpin Latin America’s energy sector transformation to 2050.

A new perspective from financiers

As governments look to boost their economies post-pandemic, capital demands for secure, profitable, and predictable returns will increase. Operational and greenfield renewables projects from companies like us, who have a strong track record in the industry, make even more sense at times like these.

In fact, because wind and photovoltaic power are no longer seen as nascent technologies, we’ve seen investors becoming more comfortable with investments in these sectors. The latest data from BNEF proves this: investment in renewable energy capacity worldwide climbed to US$282.2bn last year, up 1% from 2018’s US$280.2bn, even in the face of a subdued global investment landscape.

In Latin America, that growth was substantially higher. In 2019, Brazil lifted renewable energy capacity investment by 74% to US$6.5bn, while Mexico committed US$4.3bn, up 17%, and Chile US$4.9bn, up fourfold. Only Argentina bucked the trend, with an 18% fall.

We’re seeing investment coming into the sector from all sides. In the past five years, major project finance banks have increasingly offered long-term traditional non-recourse financing, but so, too, have the capital markets. This array of optionality allows developers to obtain more efficient financing in both cost and tenor terms, which then further drives down the cost of electricity, enabling contracts to be won at a lower price.

The growing trend toward sustainable finance is paying dividends in the Latin American renewables market, with investment-grade green bonds powering the construction of numerous projects around the region. Our recent issuance of a US$253mn private placement (USPP) with DNB Markets to refinance Javiera and build Sol del Desierto, two solar PV plants located in the north of Chile, is one example, marking the largest solar PV green USPP issuance in Latin America to date. Meanwhile, innovative structures, such as the US$114.4mn bond we issued for our El Naranjal and Del Litoral solar power plants in Uruguay, demonstrate the ability of local players to put together solid capital structuring. The financing was placed by DNB Markets and the Inter-American Investment Corporation (IDB-Invest) and arranged as an A/B bond structure with an investment-grade senior tranche and a sub-investment grade subordinated tranche, both at attractive rates and long tenors.

The rise of corporate PPAs

However, structuring the right kind of financing is only half of the battle. For investors, the key factor influencing decisions is the ability of an energy producer to sign supply contracts with offtakers with healthy financial track records.

Due in large part to pressure on corporations for sustainable and economical energy solutions, corporate power purchase agreements (PPAs), whereby businesses purchase electricity directly from independent generators instead of from a utility, have surged in Latin America.

2019 marked a record year for corporate PPAs in the region, as companies purchased 2GW of clean energy – a threefold increase over 2018. This figure is set to increase further as a growing number of firms aim to reduce emissions in line with the Paris Agreement, and sign-up to initiatives such as the RE100 target whereby they pledge to offset 100% of their electricity demand with clean energy.

But it is not just sustainability factors that are driving this trend. Market liberalization is also playing its part. Argentina, Brazil, Chile, Colombia, Mexico, and Peru have issued regulations that facilitate access to bilateral PPAs and spot markets, and we’ve seen corporations also look to these agreements for economic advantages, including long-term price predictability and the ability to hedge against future price increases.

As Latin America’s renewable energy and power storage market grows, yet more innovative structures are available to spread corporate PPAs to a larger number of players, with fewer take-or-pay contracts and a shift towards delivery-focused deals which aim to serve the load of the offtaker.

Investment and energy policies support the transition to renewables and boost economy

During last year’s UN Climate Conference COP25 in Madrid, a new regional initiative coordinated by the Latin American Energy Organization (OLADE) laid out plans to reach at least 70% of renewable energy in electricity by 2030. The commitment by Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Haiti, Honduras, Paraguay, and Peru is open for the participation of other countries in the region, and seeks to build upon the world-beating progress made by a series of reforms put in place by governments across the region which aim to lure investment into the Latin American renewable energy industry.

We believe Latin America will continue to lead the world in its dedication to the growth of the share of renewables in the region’s energy matrix, even in the face of an uncertain political context in some countries. We’ve seen for ourselves that although new administrations often bring with them new investment and energy policies, affecting appetite for different markets, the overarching commitment to clean energy across Latin America has remained pretty constant.

The continued profitability of renewable energy now stands in sharp contrast to other assets across the region, with many backers coming to view the sector as a relatively safer bet in these troubled times. In fact, beyond just being a safer bet, we believe renewables will help power Latin America’s recovery after Covid-19.

Land of opportunities – with the right partner

The renewable energy market in Latin America is at an inflection point, poised to expand substantially and help boost the economic recovery post-Covid. With favorable energy and investment policies and growing demand for clean power, the region provides unprecedented prospects for investors who are able to navigate the market. But not all opportunities are created equal. In order to take advantage of Latin America’s green energy revolution, investors must ensure they have the support of trusted partners who can structure profitable, secure transactions focused on strong risk management and bankable long-term and stable contracts with credit-worthy sponsors.

Atlas is a leading renewable energy generation company operating across all of Latin America. With one of the largest solar asset bases in the region, Atlas specializes in developing, building and operating large-scale renewable energy projects that are tailor-made for Latin America’s energy needs. For more information please contact us at: contacto@atlasren.com

SOURCES COMPILATION


[1] https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2297
[2] https://www.weforum.org/agenda/2020/05/covid19-energy-use-drop-crisis/

The uptake of bilateral renewable energy PPAs in Latin America has risen to record levels, but their adoption is still not fully mainstream. As pressure grows on corporations to find sustainable and economical energy solutions, we expect to see these innovative structures become a transformational feature of the region’s energy landscape – but finding the right partner to guide companies through what’s available will be key to allow for this trend to take hold.

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