Meeting of the Regional Network of Ozone Officers 4 th to 7 th October 2011 Port-of-Spain, Trinidad and Tobago 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 scale Funding: 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 CIF CountryUSD Million* Australia135 Canada97 Denmark38 France300 Germany813 Japan1,200 Republic of Corea3 Netherlands76 Norway194 Spain152 Sweden92 Switzerland20 United Kingdom1,414 United States2,000 Total$6,500 *based on exchange rate on September , initial CIF pledging date

Climate Investment Funds – Governance Clean Technology Fund Australia, Brazil, China, Egypt, France, Germany, India, Japan, Mexico, Morocco, South Africa, Spain, Sweden, Turkey, UK, United States Trust Fund Committee Active Observers UNDP, GEF, UNEP, UNFCCC 4 civil society; 2 private sector PPCR Trust Fund Committee Algeria, Australia, Bangladesh, Canada, Costa Rica, Germany, Indonesia, Japan, Kenya, Netherlands, Norway, Switzerland, Thailand, UK, Yemen Active Observers UNDP, 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 Forum A 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 financing Country and regional programs (in USD Million) Colombia150Middle East and North Africa Regional Program US$750 Million Egypt300Algeria India (pending)Egypt Indonesia400Jordan Kazakhstan200Marroco Mexico500Tunisia Marroco150 Nigeria Philippines250 South Africa500 Thailand300 Turkey250 Ucraine350 Viet Nam250 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 RISK Lines 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 ProgramsInstitutionProgram WORLD BANK: USD 250 M USD 200 M transport, approved USD 50 M energy efficiency, approved IFC: USD 50 M USD 15.6 M wind farm project, approved USD 14.4 M other wind farm project, pending for approval USD 20 M energy efficiency projects, pending for approval INTER-AMERICAN DEVELOPMENT BANK: IADB USD 200 M USD 200 M USD M renewable energy for private sector developers, approved USD 50.6 M sustaineble housing program (Green Mortgage) with public bank SHF, in sructuring process USD M renewable energy program with public bank NAFIN, in structuring process USD 24.4 M energy efficiency program with commercial banks, pending for approval

La Mata- Ventosa Wind Farm Project Wind farm project developed by 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 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 – CTF USD 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 Projects Key Points on RE and EE Structuring Projects Developer 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 Risk Land 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 Guarantee Fund to cover the following Risks: i) Technology (Suppliers) ii) Plant Capacity (Performance) iii) Political Risk iv) CERs Delivery Commercial Banks and/ or International Banking LOW CARBON Project 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 International 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) Revolving 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´s Local 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 production 2nd. Stage: Support National Developers Promote ER-EE competitive Local Developers Better and more financing Public Banks MDB´s Commerc ial Banks Capacity Building Guarantess

Thank You! Dolores Barrientos UNEP Mexico Representative Officer Tel.: (52 55)