- Enel Green Power (EGP), a renewable energy developer, sought relationships with suppliers that focused on sustainable business practices
- Working with Bank of America’s Sustainable Supply Chain Finance program, EGP sourced five suppliers, accelerated the onboarding process and benefited from a flexible credit assessment
- At full implementation, EGP increased program utilization to 72%, improved DSO and DPO, and positioned itself for global growth by making payments in major currencies
Italy-based Enel Green Power (EGP) has been operating in Mexico since 2008 with a focus on the development and management of energy production from renewable sources.
Today, it operates 19 wind, hydro and solar plants that collectively generates approximately 2.79 GW in carbon neutral energy, helping foster sustainable development in Mexico.
EGP regards its suppliers as an extension of its operation and is keen to offer incentives to those who already meet a certain standard in sustainable practices while simultaneously encouraging others to follow suit. It began exploring Sustainable Supply Chain Finance with Bank of America and it awarded the deal to the bank shortly after for an initial batch of five suppliers involved in the installation and maintenance of its solar panel and wind farms across six buyer entities.
With the full support of EGP and the targeted suppliers, Bank of America completed the onboarding process for the first supplier in less than one month – a process that could take three months. The remaining four suppliers were onboarded in the next six months and program utilization jumped from 3% to 72% – a sound attestation of the tangible value of the program. Other key aspects of the program include:
Creditworthiness assessment for EGP: EGP was operating through special purpose vehicles with thin capital structure in Mexico. Bank of America took this into consideration when structuring the program and proposed a flexibility approach in assessing EGP’s creditworthiness that did not call for a guarantee from EGP’s headquarters in Italy, helping save time and cost.
Days Sales Outstanding improvement for suppliers: The program came at a critical juncture for these suppliers providing them with access to liquidity during straitened times and certainty of funding based on their receivables.
Days Payable Outstanding improvement for EGP: The program enabled EGP to harmonize its payment terms with these suppliers, improve working capital ratios and preserve capital for more urgent priorities.
“As it turns out, Sustainable Supply Chain Finance was a good option for Enel Green Power in normal times and a great decision in straitened times. It offered both Enel Green Power and our strategic suppliers a means to improve our cash flow on the account of our focus on sustainability. Our initial concern that COVID-19 could delay the launch of this program was unfounded. If anything, Bank of America took pains to help us move forward with the launch and we are pleased with the progress and reception to the program.”
Hanna Bolio Montes
Head of Treasury, Mexico
Enel Green Power
Integrated electronic payment for suppliers: Payment is made directly into the suppliers’ account of choice removing the need for paper checks and improving ease of reconciliation. Furthermore, payment can be made in Mexican Peso or other major currencies such as USD and EUR, based on the needs of the supplier.
Mexico’s energy mix is presently dominated by oil and gas, with oil accounting for around half of the total – a share higher than in the Middle East, according to statistics from the International Energy Agency (IEA). This is, however, expected to change as support for power generation from renewable sources and clean energy gains momentum and EGP is at the forefront supporting Mexico’s transformation to renewable energy.