• From zero to more than 1,897MW of installed capacity in five years
• Incremental EBITDA over time as more hydro capacity is geared toward private offtakers
• Very high net leverage at first, to gradually reduce over time

 

MSU Green’s story started in 2022, when it was created with only a few solar assets. At the time, tight capital controls were in place in Argentina and companies were looking for options to allocate their leftover liquidity, almost exclusively denominated in ARS, given that it was forbidden to exchange them for USD at the official exchange rate.

The MSU Group shareholders decided to their expertise in the country’s energy sector acquired through MSU Energy to build solar parks and offer Argentine companies the option of buying this type of energy. In January 2023, the government received bids for a new round of renewable auctions with PPAs that had state wholseale administrator Cammesa as an offtaker. MSU Green was awarded 12 solar projects that were signed in September 2023. Not coincidentally, MSU Energy issued USD 114m worth of domestic bonds in October of 2023 to finance the construction of the solar parks at very competitive rates.

Using prepayments from three Argentine offtakers, three domestic bonds issued and some bank debt, MSU Green was able to complete its first solar park in December 2023. The second followed in August 2024, and then seven more during 1Q25, and the last one in August 2025.

Those who have followed the story of MSU Energy won’t be surprised to see that the controlling family hasn’t put much equity into MSU Green and financed it mostly with debt. The once-highly levered company completed the construction of the remaining assets (52MW of solar and 150MW of batteries), then EBITDA goes up, the company gradually delevers and equity gets created over time. The counterargument is that probably the family provided millions of dollars in guarantees during the construction of those projects, but those funds are not in MSU Green today.

In late 2025, the government auctioned four hydroelectric assets whose 30-year concessions ended a few years previously. The MSU Group, through a subsidiary (BML Inversora SAU) won the bid for one of them. Subsequently, MSU Green acquired BML Inversora SAU and in June issued the USD 400m international 2036 bond (Figure 1).

By mid-2027 the company will have passed from zero to 1,897MW or ~9.4% of the total renewable energy capacity (or at least, not thermal) in Argentina (Table 1).

Hydro (El Chocon)

The main reason MSU Green issued the international bond was probably to refinance the loan taken to acquire the El Chocon hydroelectric power plant. By the end of 2025, after several delays, the government finally launched a bidding process to reauction the four hydro plants located in the Comahue area. The largest was El Chocon, which was until recently operated by a subsidiary of Italy’s Enel.

There were four bidders for the asset. MSU Green’s USD 236m beat out the consortium of Aluar and Genneia (USD 224m), Enel (USD 172m) and Pampa Energia (USD 125m). In addition to the concession fee, the winner also has the commitment to invest USD 230m in upgrading of the infrastructure. However, the bulk of this investment (USD ~200m) will have to be disbursed in the final 10 years of the concession).

To provide some context, Central Puerto, the previous operator of Piedra del Aguila that won the right to continue as operator, bid USD 40m more than the runners up. The other large hydroelectric plant was Alicura, previously operated by AES Argentina Generacion. AES Argentina Generacion bid USD 130m, but was outbid by a group of Argentine businessmen offering USD 162m.

Initially, we would want to think that the operator for the assets for the last 30 years is the one who knows the asset the best, and would make the most reasonable offer. In the specific case of El Chocon, outbidding the original operator by USD 64m, or 37%, might sound like overpaying for the assets, but time will tell. In MSU’s favor, having the consortium of Aluar and Genneia offering a very similar amount gives us comfort that the price is logical. It is also possible that the two international companies that hold the big concessions (AES for Alicura and Enel for El Chocon) are exiting the region and may have placed a very high IRR objective for this project and were beaten by local players that are willing to take higher risk and are more tolerant of domestic volatility (Table 2).

Finally, there was Cerros Colorados. Even though the MSU Group had the best initial offer, there was a run-off with Grupo Neuss. MSU group, via BML Inversora SAU, increased its offer to USD 62.7m, but Grupo Neuss outbid it with USD 64.1m.

El Chocon is the second largest hydroelectric power plant in the Comahue region, in the south of Argentina, with 1,418WM (first is Piedra del Aguila with 1,440MW). Hydroelectric generation represents a little over 20% of Argentina’s total energy generation and installed capacity. In the 1990s, this percentage was much greater, but no new hydro capacity was added in more than a decade.

Over the last 34 years, hydroelectric generation in the Comahue region averaged ~11TWh per year, with lows of ~6TWh and highs of ~19TWh (Figure 2).

The problem comes when trying to extrapolate a trend for the next 30 years. We plotted a logarithmic, a linear and an exponential trend. The three show a decline, but some (the linear and exponential) much greater than the logarithmic. The logarithmic shows a ~0.5TWh decline over the time period (from ~11.5TWh to ~11TWh), while the others show a ~2TWh decline (from ~12TWh to ~10TWh). It is clearly not the same if in 30 more years generation will be ~10.5TWh (assuming the logarithmic trend) than if it will be ~8TWh (taking the linear or exponential trends).

As we don’t hold a PhD in Atmospheric Sciences, we will limit ourselves to presenting the alternatives and let the investor pick the one to use in building a model.

When one looks at the generation of El Chocon in particular, not surprisingly, we see a similar pattern (Figure 3).

We added the P50 (2.9 TWh) and P90 (1.9 TWh) to the previous figure to have a more elements to assess sensitivities The company’s projections assume 2.6TWh (similar to a P62), which sort of assumes that the decline is logarithmic (Figures 4 and 5).

The concession is structured in a way that in the first two years, 95% of the production is sold to Cammesa, which will pay a specific price for available capacity and another for the energy (operated and generated). These amounts get indexed yearly by US inflation. The remaining 5% can be sold freely to private offtakers. For years three and four the percentage is 90% to Cammesa and 10% to private offtakers and then it gets reduced 10% every two years the volume sold to Cammesa until, since year 21, the company can freely sell 100% of the production to private offtakers (Figure 6).

If we take an average dispatch rate of 20%, the all-in compensation (capacity + generation + ancillary) from Cammesa would start at USD 20-USD 21 per MWh. When we look at the company’s assumption for remuneration from private offtakers (twice the payment for capacity and 6x-7x the amount for generation), under the same dispatch rate assumptions, we get a price of USD ~75 per MWh.

The government could have gotten much more for the concession fees paid by the new concessionaires, but it likely wanted to keep the overall cost of energy lower for longer.

Solar assets

Between the 12 projects awarded during the renewables auction launched in January 2023 and signed in September 2023 and the three projects with private offtakers, MSU Green will finish with 329MW of solar capacity. Of this amount, 137MW is contracted to Cammesa under 15-year PPA contracts, and the rest with private offtakers.

MSU Green still needs to finish the construction of seven solar projects with a total of 52MW of capacity to complete the 137MW it was awarded.

In terms of geographical breakdown, 32MW is located in the province of La Rioja, part of the Cuyo region, while the remaining 297MW will be in the provinces of Chaco and Formosa, part of the North-East (NEA) region.

The location of the solar parks matters. Two of the oldest solar parks in Argentina are the 80MW Cordillera Solar located in the Cuyo region and the 80MW Cafayate in the Northern region (NOA). When we compare MSU’s Las Lomas, its only solar park located in the Cuyo region, we see a very similar dispatch rate to Cordillera Solar, and better in the peak months (November, December, January and February) than Cafayate located in the NOA.

However, Las Lomas only has 32MW, or ~10% of the total amount of MSU Green’s solar capacity, after the company finishes all the projects it has pending. Pampas del Infierno — the company’s first and largest solar project, located in the Province of Chaco, in the NEA — has similar dispatch in some months (January, February and August), but for the most part is ~5 percentage points less than Las Lomas (Figure 7).

Out of the 329MW, 137MW is contracted to Cammesa in long-term USD-denominated (buy payable in ARS) PPA, and the other 192MW are catered to private offtakers. The three projects with private offtakers are operational: Las Lomas came online in late 2023, Pampa del Infierno in 3Q24, and Villa Angela V in 1Q25.

The trio with private offtakers were financed mostly with prepayments from customers. These are Las Lomas (32MW), Pampa del Infierno (130MW) and Villa Angela V (30MW). Las Lomas and Villa Angela are fully contracted with 10-year PPAs. As these parks were funded with prepayments from Dow Chemical, Volkswagen, and Air Liquide, MSU Green won’t see cash inflows until it delivers the energy to fully amortize the prepayments.

Pampa del Infierno was financed partially with prepayments from Dow Chemical, Volkswagen and Air Liquide, but also from bank loans. Pampa del Infierno produced ~300GWh in 2025, of which it has to deliver energy as payback for the prepayments for ~85GWh. The company has signed PPAs with other for the rest with private offtakers (some top-tier clients like Unilever, Telecom and Georgalos) ranging from five to 10 years.

Using an average dispatch rate of 27% (average so far for the available solar projects for MSU Green from January 2024 to May 2026), capacity of 329MW and average price of USD 59 per MWh, this segment contributes annual revenues of USD 46m. Assuming an EBITDA margin of 80%, there is USD 37m of EBITDA contribution from this technology each year.

The company projects annual EBITDA contribution from the solar segment of USD 39m-USD 41m between 2027 and 2032, gradually declining to USD 35m-USD 37m until 2036. Below, we presented a sensitivity analysis assuming an average price of USD 59 per MWh (Table 3).

Complementarity of assets

One positive note for MSU Energy is how well the hydro and solar businesses complement each other. Hydro assets tend to produce more energy during the winter (May, June, July and August), while solar assets obviously have higher dispatch rates during the summer months (October, November, December, January and February).

As a result, it is easier for MSU Green to offer a relatively stable amount of energy to its private offtakers throughout the year, where during the hotter months it will have a higher component of solar, and during the colder months a higher component of hydro.

We calculated that the weighted average dispatch rate of the hydro plus solar portfolio once fully built, after a few simplifying assumptions, is ~21%, with lows of 18% and highs of 25%. This is well-suited for private offtakers looking for a one-stop shop to procure a stable amount of non-thermal energy all year round.

As such, as the company has more energy available to sell to private offtakers from their hydro generation, it wouldn’t be surprising to see the same names as in solar (Figure 8).

Sensitivity analysis

Based on MSU Energy’s bond roadshow materials, it expects to have no net debt by 2036, when the international bond expires. The main assumption for the hydro assets is the generation volume (2.6TWh per year) and the price it will get from private offtakers (all-in price of USD ~75 per MWh).

If we stress the generation to assume 1.9TWh per year, which is assuming a P90 value of the distribution of the last 40 years, we calculate that over the next 10 years, EBITDA will be reduced by a cumulative USD 139m. Considering that and an accumulated higher overall interest expense cost — because the company will not be able to retire debt as quickly and will be paying interest for longer — at a yearly EBITDA rate of USD 120m-USD 130m (projected for 2037 after accounting for lower hydro revenues and EBITDA), it will probably take the company an extra two years to be debt-free (Figure 9).

In the solar segment, we could argue that the presented model overestimates the segment’s EBITDA by USD 3m-USD 4m a year, or USD ~35m over the life of 2036.

All things considered, if we combine USD ~140m in lower accumulated EBITDA from hydro and USD ~35m from solar, and somewhat incremental interest expense for taking longer to repay the debt, we estimate that MSU Green could take at the very most, two additional years to repay all the debt. If the largest problem for a fixed-income investor is that a borrower will take 12 rather than 10 years to repay, considering the hydro concession is 30 years, they are probably in good shape.

Batteries

To complement its generation portfolio, MSU Green is building 150MW of battery capacity with maximum COD on 31 December 2028. The Argentine government launched a bid for companies to build batteries around Buenos Aires, with the goal of supplying the densely populated metropolitan area with energy during peak consumption moments. Bids were presented in 1H25 and the projects were awarded in August of that year.

This contract is a PPA agreement with the country’s largest distributor, Edenor, for 15 years, signed in April 2026. The key to this agreement is that if Edenor is not allowed to pass on to the customers the incremental cost of paying for the battery PPAs, Cammesa is ultimately responsible.

The battery PPAs are very similar to the thermal PPAs in Argentina. There is a payment for installed capacity, which at the end of the day ends up being the predominant driver, and another payment if the battery actually has to transfer the stored energy to the system (similar to the concept of energy generated).

The capacity payments are for USD 11,290 per month, or USD 5m per quarter. Looking at MSU Green’s revenue projections, these are in general in the order of USD 22m to USD 25m per year, of which we just saw that USD 20m come just for capacity payments. This is equivalent to saying that 80%-90% of the revenue comes from capacity payments.

Very clean capital structure

With the issuance of the 2036 bonds, MSU Green was able to clean up and simplify its capital structure. The USD 400m bond will enable the company to repay the USD 218m syndicated loan, the USD 28m short-term bank loans, repay the Class I bonds for USD 23m due in October 2026 and build the solar parks left and the batteries. As such, the only instruments left are the USD 21m Class III that matures in December 2028, the USD 99m Class II the amortizes quarterly between January 2027 and October 2033, and the recently issued 2036s.

Debt service payments increase until a peak in 2028, to then fall to USD 92m-USD 95m per year until the 2036s start to amortize in 2034. But as we have come to get accustomed to the MSU Group companies, the bulk of the capital structure is a long-term USD-denominated bond with some sort of amortization in the last couple of years.

One very positive aspect is the low refinancing risk. First, cash flows match the maturities, especially during the first couple of years. Second, with the exception of the coupon of the 2036s, all payments are for domestic-market instruments and payable in pesos (although they are linked to the price of the USD). Given the history of capital controls and regulations in Argentina, it is positive that MSU Green would not be very affected even if a left-wing and more interventionist government wins next year’s presidential election (Figure 10).

Disclaimer:

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