Patrick Doyle Senior Energy and Climate Officer Structured and Corporate Finance Department patrickd@iadb.org

1. Patrick Doyle Senior Energy and Climate Officer Structured and Corporate Finance Department patrickd@iadb.org

2. 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.

3. Our expertise Infrastructure Industries and Services Syndications Social Infrastructure Financial Markets

4. IDB Private Sector- Structured and Corporate Finance Department Our 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

5. Directly financing large-scale renewable energy Wind 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 Republic Geothermal US$ 40 million - San Jacinto-Tizate 72 MW renewable energy expansion in Nicaragua Biomass 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

6. Providing corporate loans for sustainable agriculture and promoting renewable forestry with Nordic companies Project Overview SCFis 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

7. 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

8. Greening SME’s through planetBanking loans and Technical Assistance Green Lines A/B Loans Cofinance TechnicalAssistance 1 1 FinancialInstitution Subloans 2 • Energyefficiency • Renewableenergy • Sustainableagriculture • Cleanerproduction Green Projects

9. Example planetBankingGreenline Projects Financed

10. 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

11. Promoting renewable forestry practices Project 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

12. Structured and Corporate Finance Department Tools for Clean Technology Investment

13. Catalyzing climate investment with public funds Barriers to Clean Energy Investment by the Private Sector IDB Private Sector Tools • 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 uncertainty • Offtaker/purchaser risk • Long term contracts needed to recover upfront capex/energy payments • Technology risks • Uncertain installation and O&M costs and life of project, warranties from new cleantech companies less valuable • 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) • Greenlinesof 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?

14. IDB Concessional Loan Donor Reimbursable Fund SCF’s climate team manages the $250M Canadian Climate Fund for the Private Sector in the Americas (C2F) • Co-financing with IDB Group loans for climate change mitigation and adaptation projects • No grant funding, no equity • Concessional loans to overcome barriers: • Risk barriers, e.g.: • Technology risk (Output, costs, reliability) • Resource risk (Probability scenarios) • Offtaker risk (Credit or alternative purchasers) Financial Tools • Subordinated loans, e.g.: • Unsecured • Payment terms • Targeted risks • Local currency 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 • Lower cost loans, e.g.: • Longer tenor • Lower interest rate • Lower fees • Local currency

15. Reducing initial costs or off-taker, resource or technology risks Value 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 Financial additionality C2F Solution • 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 • 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

16. Technical Assistance and the IDB Private Sector Technical Assistance Funding for Private Sector Project Identification and Feasibility Analyses Projects - 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 consulting Clients • 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

17. SCF and Energy Efficiency $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 finance The 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 17

18. Consulting Procurement Selection and Contracting Process for Private Sector Projects • 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

19. Our deal is with the future. Patrick Doyle patrickd@iadb.org