Patrick DoyleSenior Energy and Climate OfficerStructured and Corporate Finance Departmentpatrickd@iadb.org

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Private Sector with Purpose We seek to create opportunities for

current and future generations in Latin America and the Caribbean through sustainable private sector investments.

Through the Structured and Corporate Finance Department (SCF), IDB partners with private sector stakeholders to achieve breakthrough financial results with high development impact.

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Our expertise

Infrastructure

Social Infrastructure

Industries and Services

Financial Markets

Syndications

IDB Private Sector- Structured and Corporate Finance DepartmentOur Clients Corporations, private utilities and infrastructure operators,

financial institutions, and state-owned entities without a sovereign guarantee

Our Products and Services Loans (syndications and parallel) Project Finance and Public Private Partnerships Guarantees Technical cooperation Climate change concessional finance Clean energy audits

In 2011-2012, over $1 billion lent for over $6B in climate investments

Renewables – solar, wind, biomass, hydro, biofuels planetBanking “Green lines” for banks and private equity funds Industrial, commercial building, hotel energy efficiency Agriculture methane capture and use

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Directly financing large-scale renewable energyWind US$108 million - El Libertador and Palmatir wind

farms in Uruguay 115 MW US$ 40 million - 250 MW Eurus wind farm in Mexico US$ 21 million - 67.5 MW La Ventosa wind farm in

Mexico US$ 78.3 million - Bani and Pecasa 80.6 MW wind

farms in the Dominican RepublicGeothermal US$ 40 million - San Jacinto-Tizate 72 MW

renewable energy expansion in NicaraguaBiomass US$ 6.5 million - 15.6 MW biomass cogeneration

plant in Chile

Hydro Pando Monte Lirio: 83.3 MW run of river hydro

power plants in Panama 5

Providing corporate loans for sustainable agriculture and promoting renewable forestry with Nordic companiesProject Overview SCF is supporting Stora-Enso and the Montes del Plata

Group through a $200 million loan to build and operate a eucalyptus pulp plant and bio-mass electricity plant.

The largest private sector investment in Uruguay history (approx. $2 billion), it follows IDB’s strict environmental and social standards for renewable forestry

Development Impact Create 5,800 and 5,350 jobs during construction and

operations, respectively Forest Stewardship Certified plantations and carbon

credits produced 160 MW of renewable energy (approx. 70 MW exceed

internal needs and will be supplied to the national grid and other industrial entities)

Contribute $750 million annually to GDP and generate $700 million in exports per year

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Mobilizing private capital

We act as catalyst, leveraging our own investments (A loans) and mobilizing other sources for co-financing through our B loans and parallel loans

B lenders include commercial banks, institutions and impact investors Other financing partners include development finance institutions and

private equity investors

Historical Results

Number of B-Loans Closed: 90

Amount of B-Loan mobilized: $8.19 billion

Number of historical participants: 141 institutions

Greening SME’s through planetBanking loans and Technical Assistance

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Financial Institution

Green Projects

Green LinesA/B LoansCofinance

Technical Assistance

Subloans

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-Energy efficiency-Renewable energy-Sustainable agriculture-Cleaner production

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Example planetBanking Greenline Projects Financed

Sector Proyecto País Intermediario Financiero

Renewable Energy Micro-hydro plant Honduras

Clean water Water treatment plant Panamá

Cleaner Production Bicycle manufacturing center México

Energy Efficiency LEED Gold certified buildings including a new education center Panamá

Sustainable agriculture and water efficiency

Drip irrigation system Colombia

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Mobilizing private capital We act as catalyst, leveraging our own investments (A loans) and mobilizing

other sources for co-financing through our B loans and parallel loans B lenders include commercial banks, institutions and impact investors Other financing partners include development finance institutions and

private equity investors

Historical Results

Number of B-Loans Closed: 90

Amount of B-Loan mobilized: $8.19 billion

Number of historical participants: 141 institutions

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Promoting renewable forestry practicesProject Overview IDB is supporting Montes del Plata Group through a

$200 million loan to build and operate a eucalyptus pulp plant and bio-mass electricity plant.

The largest private sector investment in Uruguay history (approx. $2 billion), it follows IDB’s strict environmental and social standards for renewable forestry

Development Impact Create 5,800 and 5,350 jobs during construction and

operations, respectively Produce 160 MW of renewable energy (approx. 70 MW

exceed internal needs and will be supplied to the national grid and other industrial entities)

Contribute $750 million annually to GDP and generate$700 million in exports per year

Structured and Corporate Finance Department Tools for Clean Technology Investment

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Information barriers– Unaware /lack of confidence in savings and

performance predictions– Projects require $20 to $200K in engineering

analysis to prove feasibility Lack of finance– High collateral requirements from banks and low

value to energy savings assets once installed High transaction costs – Project finance is costly and risky– High engineering cost/project value ratio– MM&V if required by financier

Resource risk - Production uncertaintyOfftaker/purchaser risk– Long term contracts needed to recover upfront

capex/energy paymentsTechnology risks– Uncertain installation and O&M costs and life of

project, warranties from new cleantech companies less valuable

Barriers to Clean Energy Investment by the Private Sector

IDB Private Sector Tools

• Grants for technical assistance –audits, feasibility studies, green building analysis (NDF and SECCI)

• Energy Efficiency Finance Facility for facilitated approval of $500K - $5M loans – first loss guarantee via donor funds in select countries (NDF)

• Greenlines of credit and Financial institution training and market analyses (NDF&SECCI)

• Concessional loans via the Canadian Climate Fund (C2F)

• Brazil Energy Efficiency credit and savings contract performance guarantees (GEF)

• High risk equity/subdebt funds?

Catalyzing climate investment with public funds

Subordinated loans, e.g.:

• Unsecured

• Payment terms

• Targeted risks

• Local currency

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SCF’s climate team manages the $250M Canadian Climate Fund for the Private Sector in the Americas (C2F)

IDB Concessional Loan Donor Reimbursable Fund

Co-financing with IDB Group loans for climate change mitigation and adaptation projects

No grant funding, no equity

Concessional loans to overcome barriers:

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Risk barriers, e.g.:

• Technology risk (Output, costs, reliability)

• Resource risk (Probability scenarios)

• Offtaker risk (Credit or alternative purchasers)

Cost barriers, e.g.:

• Bridge the gap between renewable energy production costs and market prices

• Reduce costs of “greening a project” – (e.g. energy efficiency, methane capture, reforestation) to meet corporate hurdle rates

Financial Tools

Lower cost loans, e.g.:

• Longer tenor

• Lower interest rate

• Lower fees

• Local currency

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Reducing initial costs or off-taker, resource or technology risks Value Proposition/NeedValue Proposition/Need

Wind, biomass, geothermal, biomass, reforestation project with risks that can not be taken by lenders

and Equity unable to be raised or high equity

requirements make project uneconomical

Wind, biomass, geothermal, biomass, reforestation project with risks that can not be taken by lenders

and Equity unable to be raised or high equity

requirements make project uneconomical

Financial additionalityFinancial additionality

Risk barrier – PPA or fuel sale agreement insufficient to cover loan at DSCR required based on resource assessment

Cost barrier – Power price reduced by reducing debt/equity ratio and reducing interest rate on debt

Risk barrier – PPA or fuel sale agreement insufficient to cover loan at DSCR required based on resource assessment

Cost barrier – Power price reduced by reducing debt/equity ratio and reducing interest rate on debt

C2F SolutionC2F Solution

Provide C2F subordinated debt (at below market rates if justified)

Use barrier analysis to quantify the amount of subordinated debt needed to cover the default risk

Provide C2F subordinated debt (at below market rates if justified)

Use barrier analysis to quantify the amount of subordinated debt needed to cover the default risk

Technical Assistance Funding for Private Sector Project Identification and Feasibility AnalysesProjects - 24 performed or in progress Energy efficiency - Investment Grade energy efficiency audits Renewable energy self-supply engineering analyses - methane, biomass, solar, cogeneration Green-building design value added engineering consultingClients Hospital, university, airport, commercial buildings Agroprocessors

• Beef, swine, chicken, fish and shrimp (aquaculture)• Milk, sugar, wheat, rice, peanuts, fruit, palm oil

Manufacturers• Recycling centers, beverages, bottlers, snacks, textiles

Results Financially viable investments Potential GHG reductions

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Technical Assistance and the IDB Private Sector

$10M NDF Energy Efficiency Guarantee Fund supporting a $50M SCF Energy Efficiency Finance Facility Eligible projects

Energy efficiency and small-scale, self-supply renewable energy projects, including agricultural methane, biomass, solar

Eligible countries Central America, Colombia, Dominican Republic, Jamaica and Bolivia Max Loan Size: $5M

Concessional financeThe Energy Efficiency Finance Facility will benefit from an €8 million contribution from the Nordic Development Fund:

€7M is reimbursable funding to provide up to 25% first-loss guarantees to SCF loans in NDF eligible countries.

The guarantees will enhance the credit profile and reduce the price of the IDB A loan €1 million is non-reimbursable grant funding critical to reduce the transaction costs – support

engineering feasibility and environmental impact analyses and legal costs as necessary to make small loans economically viable

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SCF and Energy Efficiency

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Selection and Contracting Process for Private Sector Projects

Consulting Procurement

Responsible Officer (RO) prepares the terms of reference (TORs)

RO prepares short list with at least three firms

http://www.iadb.org/resources/business/doingBusiness/formConsultant.cfm

RO shares proposals submitted with partner co-financiers

RO evaluates the proposals based on the TOR and the Evaluation Matrix

Discusses with and recommends to Management a firm/individual

RO notifies the winner via e-mail or fax and upon acceptance notifies the client

A Consultant Service Agreement (CSA) is negotiated between the client, the firm and the Bank, with the assistance of legal

Client pays for consulting services provided to the Bank

Our deal is with the future.

Patrick Doylepatrickd@iadb.org