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Meeting of the Regional Network of Ozone Officers 4 th to 7 th October 2011

“ The Climate Investment Funds (CIF): International financing for mitigation projects ”. Meeting of the Regional Network of Ozone Officers 4 th to 7 th October 2011 Port-of-Spain, Trinidad and Tobago . Content. International financing of climate change mitigation

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Meeting of the Regional Network of Ozone Officers 4 th to 7 th October 2011

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  1. “TheClimateInvestmentFunds (CIF): International financingformitigationprojects” Meeting of the Regional Network of Ozone Officers 4th to 7th October 2011 Port-of-Spain, Trinidad and Tobago.

  2. Content • International financing of climatechangemitigation • TheClimateInvestmentFunds (CIF) • TheCleanTechnologyFund (CTF) • Mexico‘s Investment Plan under the CTF • Financingstructuredbythe Inter-American Development Bank (IADB) underthe CTF • Key Points in Project Financing

  3. International Financing for Climate Change PolicyBasedLoans(PBL) CapacityBuilding Projectsbased CapacityBuilding Donor Countries (International Funds) • ThroughtheWorld Bank and Multilateral Development Banks (MDBs) and mainlytakingSovereignRisk MDB’s ClimateInvestmentFundsCIF (CTF, FIP) Developing Countries MDB’s

  4. Structure of the Climate Investment Funds (CIF) The CTF financestheincrease of thedemonstration, use and transfer of cleantechnologies. Supportspecificprogramstowards new facilitieswithhighpossibilitytobereplicated in a greaterscale Funding: USD 2,000 millonin grants and concessional financing Funding: USD 4,500 million in concessionalfinancing

  5. Climate Investment Funds (CIF) • At theend of 2008, developedcountriescreated a climatefund of aboutUSD 6,500 milliontoofferdevelopingcountriesthepossibilitytoaccessfinancingforClimateChangeMitigation (lowcarbon). • TheWorld Bankacts as fiduciary; theWorld Bank and the Multilateral Development Banks (MDBs), such as the IADB, act as implementing agencies. • Purpose: • Tocoverinmediatelythefinancing gap forurgentactionsuntil “Post-2012” isdefined. • Large-scaleinvestmentsconvertprojectsintoprograms and acceleratepublic and privateinvestments. • ImplementingPeriod: 3 to 5 years.

  6. Donor Countries for the the CIF *based on exchange rate on September 25 2008, initial CIF pledging date

  7. Climate Investment Funds – Governance Partnership ForumA 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 PPCR Strategic Climate Fund Trust Fund Committee Trust Fund Committee Sub-Committee Australia, Brazil, China, Egypt, France, Germany, India, Japan, Mexico, Morocco, South Africa, Spain, Sweden, Turkey, UK, United States Algeria, Australia, Bangladesh, Canada, Costa Rica, Germany, Indonesia, Japan, Kenya, Netherlands, Norway, Switzerland, Thailand, UK, Yemen Australia, Bangladesh, Bolivia, Canada, Denmark, Germany, Japan, Kenya, Samoa, Senegal, UK, Yemen Active ObserversUNDP, GEF,UNEP, UNFCCC4 civil society; 2 private sector Active ObserversUNDP, GEF, UNEP, UNFCCC 4 civil society; 2 Indigenous Peoples; 2 private sector Plus the chair of the Adaptation Fund

  8. 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

  9. 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

  10. Countries with CTF financing ApprovedInvestmentPlansbyJanuary 2011: Financing of the CTF: US$4,500 million and US$3,700 million in co-financing.

  11. CIF: Definition of Investment Plans Clean Technology Fund (CTF) FINANCE MINISTRY INVESTMENT PLAN SOVEREIGN RISK Lines of Creditgrantedto Local Development Banks PRIVATE SECTOR Structuring “Project Finance” WORLD BANK & MDBs

  12. The Clean Technology Fund (CTF) in Mexico: • Mexicowasthefirst country in obtainingCTF’sauthorizationforitsInvestment Plan (2009) for a total amount of USD 500 millon. • Mexicos’sInvestment Plan has theobjectivetosupportpublic and privatesectors in developingprojects in EnergyEfficiency, RenewableEnergy, and Transport. • TheWorld Bank (WB) and theInter-American Development Bank (IADB) are implementig agencies. WB and IADB are channeling CTF resourcesthroughouttheirlines of credit, togetherwiththeirownresources. • Because CTF resources are blendedwithpublic and privateinvestments, local and multilateral financings, Carbón Finance and grantsontechnicalassistance; theygeneratesubstantialinvestments in lowcarbonsectors. • Mexico’sInvestment Plan supportsClimateChangeMitigation.

  13. El Clean Technology Fund (CTF) in Mexico: By Implementing Agency and Programs

  14. CTF financingwithPrivate Sector: The case of WindFarmProjects in Oaxaca, Mexico

  15. CTF-IADB financingwithPublic Banks: The case of RE and EE Programs in Mexico

  16. Project Financing: Barriers/Oportunities • Key Points on RE and EE Structuring Projects Developer Project “Off-Taker” • TechnicalCapacity • FinancialCapacity • “Equity” (30/70) • Financialcapacitytogive a PartialGuaranteeontheprojectfinancing (Ej. ~20%) • Approx.50% of the total cost • TechnologyRisk • Quality of theRenewableEnergies • PlantGenerationCapacity • SufficientIncomebyEnergySelling • AdditionalIncomebyERPAs • PoliticalRisk • LandOwnership • Change in theRegulatory Framework • Credit Rating by S&P orMoody’s • (AAA, AA, A, BBB, etc)

  17. Guarantee as a tooltoRisks’ Mitigation LOW CARBON Project Financing WB/MDB and/or Public Banks

  18. Revolving and Contingent Line of Credit • Tosecuresufficientproject’sincometosupportitsSeniorDebt • Scenarios: • Payment Default byoff-taker • ReducedEnergyTariffs • LowerEnergygenerationthanexpected ResourcesfromtheRevolving and Contingent Line are used Project’sIncome ($) Project’sIncome “Senior” Debt SubordinatedDebt Tenor (yrs) 15 25 • Revolving and Contingent Line: • Up-frontfeeand Commitmentfee, • Re-payment, ispermitted • UsedresourceswillbesubordinateddebtpayableafterSeniorDebtispaid

  19. CleanTechClustersDevelopment 1st. Stage: development of a “cluster” withdiverseactors’ participation • Resul:ts • TechCost • Local • CapacityBuilding • Employees • R&D • Industry • RE lower • Cost of production Public Banks Commercial Banks Federal Govnt Local Govnt R&D Centers Universities Private Sector GEF TechSupplier MDB´s MDB´s • 2nd. Stage: SupportNationalDevelopers • Promote ER-EE competitive • Local Developers • Better and more financing • Capacity Building • Guarantess

  20. Thank You! Dolores Barrientos UNEP Mexico Representative Officer Tel.: (52 55) 4000-9877 dolores.barrientos@unep.org

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