Scaling Up Renewable Energy Investments You Can Bank On. Esteban Sarzosa Infrastructure & Energy Division

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1 Scaling Up Renewable Energy Investments You Can Bank On Esteban Sarzosa Infrastructure & Energy Division

2 IDB Organizational Structure President Executive Vice President VP Countries VP Sectors & Knowledge VP Private Sector VP Finance SCF responsible for leading the Bank s operations without sovereign guarantee Structured & Corporate Finance SCF SCF invests in large companies, financial institutions, infrastructure projects, and mixedcapital entities SCF partners with commercial banks, institutional investors, co-guarantors, and other co-lenders to mobilize private capital into high development impact projects Opportunities for The Majority Multilateral Investment Fund Inter-American Investment Corporation OMJ MIF IIC 2

3 Structured and Corporate Finance - SCF SCF Products Loans both senior and subordinated products Credit enhancements covering up to 50% of total debt exposure for corporate issuers, securitizations and future flow transactions Guarantees of up to 100% for trade transactions between issuing and confirming banks within SCF Trade Finance Facilitation Program Knowledge products to support topics such as gender equality, road safety, solar efficient lighting, financial literacy for women and human capital development. SCF Clients Privately controlled entities in all sectors Utilities and other infrastructure operators Banks and other financial market institutions State-owned companies (non sovereign if meeting certain parameters) Corporates

4 The SCF Strategy

5 Infrastructure Overarching Priorities Energy Emphasis on renewable generation (Wind, Solar, Geothermal, Hydro) Promoting service improvements to energy transmission and distribution Focus on low access and supply areas Transportation Toll Roads Airports Ports Increase capacity & access International safety standards Water & Sanitation Water supply Water and waste treatment Energy efficiency

6 SCF in Renewable Energy and Energy Efficiency SCF approach to renewable energy investments Support development, construction and operation of creditworthy green energy investments that: contribute to the diversification of energy supply reduce dependence on imported fossil fuels reduce greenhouse gas emissions and environmental footprint of energy generation reduce consumption and growth in energy demand Leverage through partnerships Support technology transfer and innovation through technical assistance in partnership with donors

7 Short term SCF in Renewable Energy and Energy Efficiency Short Term Focus on the most effective investments and policies to close the gap between energy demand and supply Construction and rehabilitation of renewable energy plants Energy efficiency programs Medium term Implement projects and programs consistent with sustainable energy matrix that includes energy policy reformulation Support national policy shift and implementation of large scale sustainable energy and energy efficiency projects Support technical assistance programs for renewable energy and energy efficiency, which will lead to concrete projects Continue to support private investors in the region

8 Seizing the Opportunity Track Record in Climate Friendly Investments $1.5B in loans and guarantees to the private sector annually, increasing to $2B Project finance Corporate finance Financial institutions Private equity funds In 2011, over $700M in climate investments with total project values exceeding $4B Renewable power Green lines for banks and private equity funds Industrial energy efficiency Agriculture methane capture Energy efficient hotels

9 Infrastructure Renewable Energy Wind Farms US$ 80 million 396 MW Mareña wind farm in Mexico US$ 45 million MW Eurus wind farm in Mexico US$ 21 million MW La Ventosa wind farm in Mexico US$ 78.3 million - Bani and Pecasa 80.6 MW wind farms in the Dominican Republic Geothermal US$ 40 million - San Jacinto-Tizate 72 MW renewable energy expansion in Nicaragua Biomass US$ 6.5 million MW biomass cogeneration plant in Chile Hydro US$ 40 million Pando Monte Lirio 83 MW run-ofthe-river hydropower plant in Panamá

10 Factors that impact the bankability of renewable power projects Power purchase agreement (PPA) and length of contract Price of power Market price (merchant plants) Proven and sustainable energy sector framework Creditworthiness of power off-taker Other options for sale (e.g. other off-takers) Creditworthiness and track-record of Sponsors Cost of capital Subsidies (tax incentives, accelerated depreciation, renewable energy credits, carbon credits) Resource potential (solarity, avg. wind speed, access to low cost and high quality biomass, geothermal/hydro resource) Transmission Access policies Distance (for utility-scale) Interconnection policies

11 Canadian Climate Fund $250M to provide concessional finance for climate change projects Co-financing with IDB Group loans for climate change mitigation and adaptation projects Concessional terms available to overcome clear cost or risk barriers Financial tools include: senior low cost debt, subordinated debt, guarantees Pivotal to technology scale-up

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13 Esteban Sarzosa