mexico group april 2014 with nadbank
DESCRIPTION
Free Trade Alliance San Antonio's Monthly Mexico Group with guest speakers from NADBank.TRANSCRIPT
North American Development Bank (NADB)
Border Environment Cooperation Commission (BECC)
April 2014
22
Issues for Discussion
1. Update on Project Activities
2. Progress on Port-of-Entry Study
3. The Future of NADB – Options for a General Capital Increase; and the case for NADB-BECC institutional merger
3
Established in 1994 to develop and finance infrastructure projects that protect, preserve and enhance the environment and promote sustainable development along the U.S.-Mexico border.
The Bank provides financing to projects located within 100 km north and 300 km south of the border that have been certified by the Border Environment Cooperation Commission (BECC).
Overview
Mandate Ownership Structure NADB is 100% owned by the United
States and Mexican Governments in equal shares.
50% 50%
USA MEXICO
3
4
NADB and BECC share a ten-member Board of Directors, with an equal number of representatives from the U.S. and Mexico.
U.S. Members Mexico Members
Secretary of the Treasury Secretary of Finance and Public Credit (SHCP)*
Secretary of State Secretary of Foreign Affairs (SRE)
Administrator of the Environmental Protection Agency
Secretary of the Environment and Natural Resources (SEMARNAT)
U.S. Border State Representative Mexican Border State Representative
U.S. Border Public Representative Mexican Border Public Representative
*Current chair; chairmanship rotates annually between U.S. and Mexico.
Overview
4
5
Loans Grant AdministrationTechnical Assistance
and Training Market-rate lending Financing up to 85% of project cost
with terms as long as 25 years in dollars and pesos
Focus on financial feasibility of the projects (credit & risk analysis, payment source and structure, and credit support)
BECC and NADB technical assistance grants and training programs for project development and institutional strengthening of borrowers or potential borrowers
Product Portfolio
Eligible Sectors
Water, Wastewater & Storm Drainage
Solid, Industrial & Hazardous Waste Air Quality
Clean/Renewable Energy Energy Efficiency
Water supply, treatment and distribution
Wastewater collection, treatment and reuse
Water conservation Storm drainage
Sanitary landfills Collection & disposal
equipment Dumpsite closure Recycling Site remediation Toxic waste disposal
Street paving and roadway improvements
Ports of entry Public transportation Emissions reduction
Solar Wind Biofuels Methane capture Waste-to-energy Hydro Geothermal
Public lighting Building retrofits Equipment
replacement Water utilities
Grants allow NADB to expand the pool of eligible borrowers in border municipalities where debt financing options are often limited EPA-funded Border Environment
Infrastructure Fund (BEIF) NADB-funded Community
Assistance Program (CAP)
Overview
5
6
Jurisdiction Projects eligible to receive BECC-NADB financing must be located within 100 kilometers north
and within 300 kilometers south of the U.S.-Mexico border (the “border region”).
Geographic Jurisdiction
U.S. Border: 37 counties in four states Population: 9.6 million
(3.1% of U.S. population)
Mexican Border: 213 municipalities in six states Population: 16.6 million
(14.8% of Mexican population)
Population within JurisdictionMexico
State PopulationBaja California 3,155,070Chihuahua 3,094,944Coahuila 1,832,232Nuevo Leon 4,610,918Sonora 1,650,527Tamaulipas 2,243,135
Total 16,586,826United States
State Population
Arizona 1,354,780California 5,459,482New Mexico 268,736Texas 2,559,239
Total 9,642,237
Source: U.S. Census Bureau, 2010 census Source: INEGI, 2010 census
Overview
6
77
Operating Environment
The ten states of the U.S.-Mexico border comprise a vibrant economic region with a GDP of almost US$5 trillion.1
Trade of goods between the U.S. and Mexico reached over $500 billion in 2013, which represents an increase of about 118% since 2002. Of this trade, surface trade (land modes) accounts for over 86% of total trade.2
Mexico’s economy grew at 2.2.% in 2013, and is expected to grow at 3.0% in 2014, and 3.5% in 2015. In the U.S., growth is expected at 2.8% for 2014 before rising to 3% in 2015.3
Rapid demographic growth continues to impact the region, with the population projected to grow at rates exceeding anticipated national averages, in some cases by more than 40%. The border population is expected to increase by 4.6 million people by the year 2020.4
Mexico is projected to be the 7th largest economy by 20505
1 Colegio de la Frontera Norte, “Indicadores Prioritarios Transfronterizos,” 2010 estimate.2 Office of the United States Trade Representative.3 International Monetary Fund.4 EPA/SEMARNAT, “State of the Border Region: Indicators Report,” 1st edition (2011).5 PwC
88
Operating Environment (continued)
Climate Change: A Driving Factor Reduction of greenhouse gas emissions has emerged as a central point of U.S.-
Mexico bilateral cooperation, as evidenced by the 2009 Bilateral Framework on Clean Energy and Climate Change, positioning the NADB as a project leader and expert in the border region.
Mexico’s General Law on Climate Change is one of the strongest national climate change laws to date, establishing reduction goals of 30% by 2020 and 50% by 2050.
Impact on border:
Several cities in the NADB region in Mexico are considering implementation of modern mass-transit systems, particularly Bus Rapid Transit, which may be subsidized by the federal program, FONADIN, and require capital and debt components for project implementation.
Paving and the construction of thoroughfares to improve traffic flows will continue to generate potential projects in Mexico in the coming years.
99
Operating Environment (continued)
Clean/Renewable Energy and Energy Efficiency United States: Renewable Portfolio Standard requirements and the extension of
federal PTCs, coupled with the resource potential for solar and wind energy in the border region, will continue to drive renewable energy growth for the coming years, despite the termination of some fiscal incentives.
Mexico:
Mexico’s electricity needs areexpected to grow 5.2% annually, with even higher rates in certain population centers. 1
With grid parity in Mexico, the 2008 Law for Renewable Energy, and the continued downward trend in costsper megawatt for wind and solar energy, important growth is expectedin the NADB’s region.
1 Instituto Nacional de Ecología
1010
Operating Environment (continued)
Water and Wastewater The water stressed conditions in the
border region will generate demand for substantial investments in water supply, water efficiency, and wastewater reuse projects in urban and rural areas.
These investments will be in addition to those driven by projected population growth in the region.
Diminishing grant funds to subsidize water/wastewater infrastructure will compel communities to finance needed improvements with debt.
BECC estimates current basic infrastructure needs in the border region at over US$8.6 billion.
11
19 new projects certified by BECC ✓ Water: 2 drinking water, 5 wastewater and 1 storm drainage
✓ Air quality: 1 paving and 1 basic urban infrastructure project
✓ Clean Energy: 7 solar energy, 1 wind energy and 1 landfill gas-to-energy
US$359.7 million in new financing contracted✓ US$349.9 million in loans for 11 projects
✓ US$9.8 million in grants for 9 water/wastewater projects & 1 storm drainage project
US$232.9 million in funding disbursed to 28 projects✓ US$215.0 million in loans
2013 Results
✓ US$17.9 million in grants
11
12
Annual Financing ActivityAs of February 28, 2014
Breakdown of Annual Grant & Loan Activity
12
13
Cumulative FinancingAs of February 28, 2014
US$2.22 billion contracted to support 192 projects representing an investment of more than US$5.67 billion
✓ US$1.53 billion in loans ✓ US$0.69 billion in grants
13
14
Project OutcomesAs of December 31, 2013
US$1.98 billion disbursed to support 175 projects
Of the 192 certified projects financed by NADB to date:✓ 140 – have been fully implemented✓ 41 – are in various stages of construction✓ 11 – are at the bidding or design stage✓ 1 – has been cancelled
These projects include…
✓ 22 WTP & 39 drinking water distribution systems
✓ 177,112 households with first-time/improved water services
✓ 58 WWTP & 94 WW collection systems
✓ 294,829 sewer connections to treatment systems that will prevent discharge of untreated sewage into rivers and streams
✓ Wastewater treatment coverage in Mexican border region increased about 27% to over 80%
14
15
Project OutcomesAs of December 31, 2013
9.3 million square meters of dirt roads paved and 187 km of roadway improvements, resulting in better traffic circulation and reduced CO2 emissions
1 port of entry reducing idling times, fuel consumption and exhaust emissions
16 landfills built/expanded & 12 dumpsites closed
759.7 MW of new solar and wind energy capacity installed, which will contribute to the displacement of an estimated 1.5 million metric tons/yr. of CO2 emissions
15
1616
International Crossing Study
In the context of the U.S.-Mexico High-Level Economic Dialogue (HLED), the BECC-NADB Board adopted a resolution in November 2013 direct the Bank to support the two governments in mapping priority points-of-entry (POE) infrastructure projects and identifying potential financing structures for them.
General Scope: Gather and organize existing information on all international
crossings/bridges between Mexico and the U.S., as well as those currently being implemented and those proposed in the future.
Evaluate current financing mechanisms and identify new options. Create a permanent IT system for follow-up on the projects, which
would be the exclusive property of the two governments.
Funding: Equally funded by NADB and the Mexican Government, through FONADIN, US$300,000 each.
1717
International Crossing Study
Study Status: Two project managers, one from each country and experts in the
field, have been hired to oversee the procurement and performance of the study
Various binational and inter-agency meetings in Mexico City and Washington, D.C., both in person and by teleconference, have been held with the participating federal agencies, as well as other institutions and experts on border crossings.
The terms of reference of the study are under development and will be finalized in April.
Procurement is scheduled to begin April 15th, with contract award in May.
The study will be completed in October 2014
1818
General Capital Increase
Since 2009, NADB’s project financing has grown at an average annual rate of 40.2%, disbursing over $1.3 billion to support communities in the border region.
Over the past several years, NADB has made significant strides in diversifying the sectors in which it operates, and the borrowers to which it lends. The Bank has expanded its portfolio to include basic infrastructure other than water and renewable energy.
Due to its strong capitalization, NADB has maintained a high credit rating which has played a crucial role in its ability to access the capital markets at relatively low interest rates.
The benefit of those low rates has been transferred to project sponsors and hence to the development of environmental infrastructure.
1919
General Capital Increase
Due to significant growth in recent years, NADB’s capital adequacy ratios have deteriorated to the point of compromising future growth.
2020
General Capital Increase
As a result of the deterioration of its capital adequacy ratios, NADB’s credit rating was downgraded by S&P in 2012 and by Moody’s in 2014.
These credit rating downgrades have increased the interest rate at which NADB borrows funds.
A general capital increase in the near future is critical to:
Prevent a further increase in NADB’s cost of funding and, therefore, in the interest rates offered to project sponsors.
Preserve the Bank’s capacity to promote the development of environmental infrastructure.
21
Completed Projects in 2013
21
‘Los Alisos’Nogales, SON
‘Alcatraces’ Tijuana, BC
WWTP Playas de Rosarito, BC
San Luis RC, SON
El Centro Solar, CA
Ramona Solar, CA
Ocotillo Wind, CA
Rio Grande City, TX