Powering Up Communities
Salvadoran Americans are investing in clean energy and community development back home, with support from USAID
Nauak Power, a renewable energy company in El Salvador, had a vision for social and environmental impact but faced operational and financial sustainability challenges. Support from USAID El Salvador through INVEST allowed the company to restructure its existing loans and position itself for additional impact-focused investments, maximizing its impact in the community, particularly among women and youth.
A shorter version of this piece originally appeared on USAID’s Medium page. Read the piece here.
By Natalie Alm, INVEST Communications Advisor
Omar Ortez never expected to be running a solar power plant in his home country of El Salvador. Although he was born and grew up there, he moved to the United States for graduate school and lived there for decades, working in international development and doing community work with other immigrants in Boston. “My wife and I started our lives there, but we always came back to the question of what we could contribute back to El Salvador and the Central American region,” Ortez says.
Omar and his wife, Carmen Henriquez, began researching sectors where investment from the Salvadoran diaspora could have an impact, leading them to renewable energy. From the outset, their interest was not only in generating renewable energy and reducing carbon emissions, but also catalyzing local and inclusive economic growth.
Why renewable energy?
In El Salvador, energy access is near universal, even in relatively rural areas. However, fossil fuels still make up around half of the energy supply, and affordability remains a challenge. The government is interested in helping the country diversify into more renewable energy sources — such as solar, wind, and biogas.
The Ortez-Henriquezes pooled investments from half a dozen contacts, most of them Salvadorans living abroad to found Nauak Power in 2016. “We wanted to showcase that it’s possible to mobilize diaspora investments into productive projects that can generate employment and are situated in a strategic sector of the economy,” says Ortez.
After a year scouting land in El Salvador that would be suitable for a plant, based on its orientation, the amount of sunlight it receives, and access to the power grid. They finally found the right location outside Santa Ana, El Salvador’s second largest city, located in a coffee-rich region in the western part of the country. They also secured an agreement with a local utility company, which ensured a steady energy buyer for the energy produced at the plant over the next twenty years. Two Salvadoran educational institutions contributed additional investments and strategic support to the diaspora initiative.
In addition to the initial seed funding, Nauak secured around $6 million in commercial bank debt to begin construction in early 2020 on the Natividad solar plant, which is about the size of fifteen football fields put together.
Then the COVID-19 pandemic hit, which delayed construction for a year and a half. Since the plant was not yet operational, the interest they owed kept accumulating and significantly increased the size of the loan, by three quarters of a million dollars.
Acceleration with USAID
That’s when the stars aligned, and Nauak Power was selected as one of ten companies to receive support through the Investment, Enterprise, and Sustainability (INES) program, funded by USAID El Salvador through the INVEST initiative. The program was designed to accelerate ten projects towards bankability, with the goal to raise at least $30 million in capital in sectors that support economic growth while generating meaningful social or environmental impacts. Four of the ten projects in the program are focused on solar energy generation.
Through the program, Nauak Power received acceleration and capital mobilization support from Deetken Impact, a Canadian-based asset manager with an investment focus on climate action and gender equality in the Americas. “From the beginning, it was clear that Nauak Power was impact focused. They were thinking about the surrounding community and how the project can support it,” says Fernando Alvarado, Deetken Impact Sustainable Energy’s CEO.
Deetken Impact helped Nauak identify their needs and priorities. First, they worked together to clean up Nauak Power’s balance sheet, analyzing the company’s finances so it could renegotiate with their original bank lender and restructure their loan. Nauak Power even secured an additional loan of more than a half million dollars from the same lender.
Deetken Impact also devised a strategy to complement that funding with more diverse sources of capital, working on a new pitch deck highlighting the project’s social impact and making introductions to several impact investors, given that Nauak is more impactful than the typical commercial solar project. Finally, Deetken Impact assessed and enhanced the project’s community impact strategy, through in-person interviews with community leaders and socioeconomic data analysis to inform recommendations for gender-inclusive initiatives that promote women’s health and wellbeing, education, and entrepreneurship. Importantly, Deetken Impact provided capacity building to engage with members of the local community through consultation and collaboration.
Social and environmental impact
In the community around Nauak’s Natividad plant, 90% of households are led by women, and about half have family members who have migrated elsewhere in search of economic opportunities. Given this gender gap in the community, Deetken’s recommendation to Nauak was to implement training and projects focused on women and youth.
Nauak has started these kinds of workshops and hopes to hold more going forward, training women on topics such as agroforestry, business skills, entrepreneurship, and women’s rights.
The company was intentional about generating local employment from the start. To build the plant, Nauak Power included a contract clause that ensured that at least 40% of the labor force was hired locally. They organized a job fair in the surrounding community to generate interest and facilitate job applications. They were able to surpass this initial goal, with 61% of the 252 jobs created held by community residents, about a fifth held by youth and another fifth by women. Of the plant’s current maintenance crew, four of the six employees are women.
Nauak Power’s solar plant is also helping El Salvador move towards a greener future — the plant has five megawatts of installed capacity, enough to power around 8,400 homes, and it is displacing the equivalent of 1,600 cars’ worth of emissions each year with renewable energy.
Ortez’s team is also exploring other opportunities for sustainable activities on the land, seeding a plant used for animal feed on the land under the solar panels, which would otherwise go unused, and reforesting areas near a waterway on the property with moringa trees, which have a number of uses. They are also planning to share best practices in agroforestry with the local community through trainings and propagation of seedlings.
“Our values are threefold: solid, sustainability, and solidarity,” Ortez explains. “Solid, in making investments that make sense in the long term and in a strategic sector of the economy. Sustainability, in choosing sectors that contribute to the environment. And solidarity, in contributing to local development as much as we can.”
Looking forward
Today, Nauak Power is operational and sustainable, generating consistent revenues since July 2022 and with more favorable loan terms, and a long-term, twenty-year agreement with the local utility company providing predictable revenue. After the Natividad solar plant, Nauak Power is planning to pursue expansions on the rest of the land, which will include agro-photovoltaics, small-hydroelectric generation, and a biogas project, which will generate more revenue, create more jobs, and further support the surrounding community.
Now that they can better communicate the social and gender impacts of the project, Nauak Power is also well positioned to secure additional sources of funding from impact investors, diaspora members, and other donors willing to provide concessional capital. “This is not your typical solar project,” says Alvarado from Deetken. “All the projects we support have some community engagement, but this one is on another level because what motivated the design and implementation of the project from the start was achieving social and environmental impacts and empowering the community.”
For Ortez, everything is reflected in the name of the company. “Nauak” is a word in Nahuatl, an indigenous language of Central America, which means gathering together, side by side — the opposite of “diaspora,” which refers to scattering or separating. The project brings together the financial resources of the diaspora and their strategic partners with and the human capital resources of the local community for greater impact and scale.
