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Design of Financing Mechanisms for Renewable Energy Projects in the Caribbean Roland Clarke, Ph. D. Project Manager, Caribbean Renewable Energy Development Programme, CREDP CARICOM Secretariat, Georgetown, Guyana Presented at CARILEC Renewable Energy Conference, Royal St. Lucian Hotel, St. Lucia 4th – 5th November 2002.
BACKGROUND AND CONTEXT • In 1998, 14 Caribbean countries and 2 British dependencies agreed to work together to prepare a regional project to remove barriers to the use of renewable energy and thereby foster its development and commercialisation
Antigua & Barbuda The Bahamas Barbados Belize British Virgin Islands Cuba Dominica Grenada Guyana Jamaica St. Kitts & Nevis Saint Lucia St. Vincent & The Grenadines Suriname Trinidad & Tobago Turks & Caicos Islands Participating Countries
UNDP/GEF & Cost-Sharing Financing (US$) • Project funded by the GEF/UNDP through the PDF Block B Grant Facility. • TOTAL: 17.776 million • UNDP/GEFProject 4.076 MM • PDF B 0.350 MM • Sub-total GEF:4.426 MM
UNDP/GEF & Cost-Sharing Financing (US$) • Parallel financing: • Governments, and regional/ national institutions: 1.150 MM • Other donors (GTZ): 2.200 MM • Equity (private/public): 6.000 MM • Loans (CDB etc.): 4.000 MM • Sub-Total Parallel financing: 13.35 MM
Barriers to Renewable Energy Development • Policy • Establish a Policy Advisory Unit at CARICOM; • Appoint National Policy Advisory Committees in each State • Capacity • Conduct Capacity Building Workshops • Develop training programmes for utility and ministry staff;
Barriers to Renewable Energy Development • Awareness • Strengthen the existing national RE information awareness network; • Establish a Regional Information Awarness programme; • Awareness • Establish a Virtual Regional Demonstration Centre • Establish short term consultancies for technology transfer
Barriers to Renewable Energy Development (cont’d) • Financing • Design and demonstrate innovative financing mechanisms • Design a Financial Assitance Fund, FAF • Design a Loan Gurantee Mechanism • Develop a pipeline of RE projects
Design and Demonstrate Innovative Financing Mechanisms • Consutants selected – Econergy International Corporation; • RE Debt and/or Equity Fund called the Caribbean Renewable Energy Investment Fund, CREIF • Seek capitization from investors e.g. CDB, IDB, IIC, MIF, and others such as Norfund, IFC, multinational oil companies, and you.
Design a Financial Assistance Fund, FAF • Objective – Assist project developers to conduct feasibility studies, initial designs, market studies, risk mitigation, due diligence • Structured as a contingent grant convertible to equity or debt for successful projects only. • Funding of US $1.6 MM from GEF
Government Guarantee Mechanism, GGM • Objective – To demonstrate Government commitment. • Strategies include sovereign guarantees, particularly in-kind guarantees e.g. land leases, tax concessions, etc. • Commercial Loan Guarantees
Our Approach • Questionnaire aim at Investors to: • Assess the demand (amount and type) for RE Financing • Assess the markets for RE (by country, by technology) • Assess the “financing gaps.” • Design mechanisms to address gaps.
Our Approach • Questionnaire aimed at Financiers i.e. commercial banks, micro lenders, multilateral banks, to: • Identify lending policies • Due diligence requirements • Special considerations for RE that may affect lending practices
Our Approach • Qualify a short list of RE Financiers from outside the Caribbean • Preliminary assessment of RE pipeline • Develop collateral materials • Prepare Final Report
TIME LINE • January 2003 – Designs completed • February 2003 – GTZ contribution • March 2003 – GEF Secretariat decision • June 2003 – Full implementation of CREDP
TIME LINE cont’d • June 2007 – SUCCESS