Meeting of the Regional Network of Ozone Officers 4 th to 7 th October 2011 Port-of-Spain, Trinidad and Tobago .

Meeting of the Regional Network of Ozone Officers

4th to 7th October 2011 Port-of-Spain, Trinidad and

Tobago.

“TheClimate Investment Funds (CIF):

International financing for mitigation projects”

• International financing of climate change mitigation

• The Climate Investment Funds (CIF)

• The Clean Technology Fund (CTF)

• Mexico‘s Investment Plan under the CTF

• Financing structured by the Inter-American Development Bank (IADB) under the CTF

• Key Points in Project Financing

Content

International Financing for Climate Change

MDB’s

Donor Countries(International

Funds)

Projects based

Capacity Building

Policy Based Loans (PBL)

Capacity Building

Developing

Countries

MDB’s

Climate Investment Funds CIF(CTF, FIP)

• Through the World Bank and Multilateral Development Banks (MDBs) and mainly taking

Sovereign Risk

Structure of the Climate Investment Funds (CIF)

Support specific programs towards new facilities with high possibility to be replicated in a greater scaleFunding: USD 2,000 millon in grants and concessional financing

Funding: USD 4,500 million in concessional financing

The CTF finances the increase of the demonstration, use and transfer of clean technologies.

Climate Investment Funds (CIF)• At the end of 2008, developed countries

created a climate fund of about USD 6,500 million to offer developing countries the possibility to access financing for Climate Change Mitigation (low carbon).

• The World Bank acts as fiduciary; the World Bank and the Multilateral Development Banks (MDBs), such as the IADB, act as implementing agencies.

• Purpose:− To cover inmediately the financing gap

for urgent actions until “Post-2012” is defined.

− Large-scale investments convert projects into programs and accelerate public and private investments.

• Implementing Period: 3 to 5 years.

Donor Countries for the the CIFCountry USD Million*Australia 135Canada 97Denmark 38France 300Germany 813Japan 1,200Republic of Corea 3Netherlands 76Norway 194Spain 152Sweden 92Switzerland 20United Kingdom 1,414United States 2,000Total $6,500

*based on exchange rate on September 25 2008, initial CIF pledging date

Climate Investment Funds – Governance

Clean Technology

FundAustralia, Brazil,

China, Egypt, France, Germany, India, Japan, Mexico, Morocco, South Africa, Spain,

Sweden, Turkey, UK, United States

Trust Fund Committee

Active ObserversUNDP, GEF, UNEP, UNFCCC4 civil society; 2 private sector

PPCRTrust Fund Committee

Algeria, Australia, Bangladesh, Canada, Costa Rica, Germany, Indonesia,

Japan, Kenya, Netherlands, Norway,

Switzerland, Thailand, UK, Yemen

Active ObserversUNDP, GEF, UNEP, UNFCCC 4 civil society; 2 Indigenous Peoples; 2 private sector

Strategic Climate Fund

Sub-Committee

Plus the chair of the Adaptation

Fund

Australia, Bangladesh,

Bolivia, Canada,

Denmark, Germany,

Japan, Kenya, Samoa,

Senegal, UK, Yemen

Partnership ForumA broad based meeting of stakeholders including: donor and

eligible recipient countries, MDBs, UN and UN agencies, GEF, UNFCCC, the Adaptation Fund, bilateral development agencies,

NGOs, private sector entities, scientific and technical experts

Clean Technology Fund (CTF) - Objectives

1. Provide scaled-up financing in countries’ investment plans for demonstration and transfer of low carbon technologies with significant potential for GHG emissions reductions:• Power sector: renewable energies, efficiency in

generation, transsmition and distribution.• Transport: Efficiency, modal shifts to public

transportation• Energy Efficiency: Buildings, Industry,

Agriculture

2. Support activities to stimulate transformational change: • Institutional strengthening and capacity – lead

to long-term investment • Engage private sector on new investments – build

experience and confidence of low carbon investment options

• Complement and additional to existing Government or MDB activities

CTF: Products and T&C Develop and pilot financing products – all include

concessional elements 1. CTF Public Sector financial products tailored

to projects/ programs:• Grants• Concessional loans• Guarantees on concessional terms• Combination of the above instruments

2. CTF Private Sector as above, plus:• Equity investments• Debt – Senior or Subordinated and;• Other risk sharing mechanisms (e.g. partial

guarantee of off-take payment)

3. Project proposals to justify use of concessional CTF finance within a blended package on the basis of identified incremental costs or specific activities for removing barriers

Countries with CTF financingCountry and regional programs (in USD Million)

Colombia 150 Middle East and North Africa Regional Program

US$750 MillionEgypt 300 Algeria

India (pending) EgyptIndonesia 400 Jordan

Kazakhstan 200 MarrocoMexico 500 TunisiaMarroco 150Nigeria

Philippines 250South Africa 500

Thailand 300Turkey 250Ucraine 350

Viet Nam 250

Approved Investment Plans by January 2011:Financing of the CTF: US$4,500 million and US$3,700 million in co-financing.

CIF: Definition of Investment Plans

Clean Technology Fund (CTF)

INVESTMENT PLAN

SOVEREIGN RISKLines of Credit granted to Local Development Banks

PRIVATE SECTORStructuring

“Project Finance ”

WORLD BANK

& MDBs

FINANCE MINISTRY

The Clean Technology Fund (CTF) in Mexico:• Mexico was the first country in obtaining

CTF’s authorization for its Investment Plan (2009) for a total amount of USD 500 millon.

• Mexicos’s Investment Plan has the objective to support public and private sectors in developing projects in Energy Efficiency, Renewable Energy, and Transport.

• The World Bank (WB) and the Inter-American Development Bank (IADB) are implementig agencies. WB and IADB are channeling CTF resources throughout their lines of credit, together with their own resources.

• Because CTF resources are blended with public and private investments, local and multilateral financings, Carbón Finance and grants on technical assistance; they generate substantial investments in low carbon sectors.

• Mexico’s Investment Plan supports Climate Change Mitigation.

El Clean Technology Fund (CTF) in Mexico: By Implementing Agency and Programs

Institution Program

WORLD BANK: USD 250 M

USD 200 M transport, approvedUSD 50 M energy efficiency, approved

IFC: USD 50 M

USD 15.6 M wind farm project, approvedUSD 14.4 M other wind farm project, pending for approval USD 20 M energy efficiency projects, pending for approval

INTER-AMERICANDEVELOPMENT BANK: IADB USD 200 M

USD 53.38 M renewable energy for private sector developers, approvedUSD 50.6 M sustaineble housing program (Green Mortgage) with public bank SHF, in sructuring processUSD 71.62 M renewable energy program with public bank NAFIN, in structuring processUSD 24.4 M energy efficiency program with commercial banks, pending for approval

La Mata- Ventosa Wind Farm Project

Wind farm project developed by Electricite

de France- Energies Nouvelles (EDF-EN), installed capacity 67.5

MW, cost US$200 millon

Private Producer with Off-taker Walt-Mart México.

Financed by IADB, IFC, US-Eximbank y CTF (through IADB).

Eurus Wind Farm Project

Wind farm project developed by Acciona

(Spain), installed capacity 200MW, costo

US$525 millon.

Private producer with Off-taker Cemex.

Financed by IADB, IFC, CTF (through IFC) and other Mexican banks (public and

commercial).

CTF financing with Private Sector: The case of Wind Farm Projects in Oaxaca, Mexico

Renewable Energy Program with

Nacional Financiera (NAFIN)

USD 210 millon

Through IADB line of credit named CCLIP

established with NAFIN.USD 70 M – CTF

USD 70 M – IADB line of credit

USD 70 M – NAFIN’s funding

Sustainable Housing Program

with Sociedad Hipotecaria

Federal (SHF)

USD 100 millon

Through IADB line of credit named CCLIP

with SHF.

USD 50 M – CTFUSD 50 M – IADB line of credit

CTF-IADB financing with Public Banks: The case of RE and EE Programs in Mexico

Project Financing: Barriers/Oportunities• Key Points on RE and EE

Structuring ProjectsDeveloper Project “Off-Taker”

• Technical Capacity

• Financial Capacity“Equity”

(30/70)Financial

capacity to give a Partial Guarantee on the project financing (Ej. ~20%)

Approx.50% of the total cost

• Technology Risk• Quality of the

Renewable Energies• Plant Generation

Capacity• Sufficient Income by

Energy Selling• Additional Income by

ERPAs• Political RiskLand Ownership Change in the

Regulatory Framework

• Credit Rating by S&P or Moody’s

(AAA, AA, A, BBB, etc)

Guarantee as a tool to Risks’ Mitigation

Commercial Banks and/ or International Banking

LOW CARBONProject

Financing

WB/MDB

and/or Public Banks

Revolving and Contingent Line of Credit• To secure sufficient project’s income to support its

Senior Debt

Project’s Income

“Senior” Debt

MDB’s and CTF

Line of Credit

Public Banks

Revolving and

Contingent Facility

Lenders (Commercial and Internati

onal Banks)

Scenarios:

• Payment Default by off-taker

•Reduced Energy Tariffs

• Lower Energy generation than expected

Subordinated Debt

Resources from the Revolving and Contingent Line are used

Project’s

Income ($)

Tenor (yrs)15 25Revolving and Contingent Line:

i) Up-front fee and Commitment fee, ii) Re-payment, is permitted iii) Used resources will be subordinated debt

payable after Senior Debt is paid

Clean Tech Clusters Development

1st. Stage: development of a “cluster” with diverse actors’ participation

Federal Govnt MDB´sLocal

Govnt

Tech Supplier

R&D Centers Univers

ities

Private Sector

GEF

Resul:ts• Tech Cost

• Local Capacity Building

• Employees• R&D• Industry• RE lower

Cost of production2nd. Stage: Support National

Developers

• Promote ER-EE competitive Local Developers• Better and more financing

Public BanksMDB´s

Commercial

Banks

• Capacity Building• Guarantess

Thank You!

Dolores BarrientosUNEP Mexico

Representative OfficerTel.: (52 55) 4000-9877

[email protected]