Fiorello's Sister
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Brazil Renewable Energy and Energy Efficiency Financing Facility |
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Monday, 03 March 2008 |
 BACKGROUND: MOSAICO projects are divided into two categories. “Category I” are small rural agriculture or infrastructure pilot projects aiming at demonstrating the financial viability of small-scale farmer-owned sustainable enterprises. “Category II” projects support access to financing for sustainable infrastructure and agriculture projects on a larger scale by supporting a local partner to form and to capitalize an equity fund.
The Brazil Renewable Energy and Energy Efficiency Financing Facility was initiated as “Category II” project, based on a pre-feasibility study conducted by MOSAICO partner Fiorello H. LaGuardia Foundation and its local partners Econotech (link to its website) and Globobank.
ACTIVITIES: In 2004, the LGF performed a pre-feasibility study on the financing facility with an experienced local funds manager interested in partnering to establish the fund. The partner, Econotech, in its first fund, developed highly efficient techniques to identify virtually all promising projects in a given geographical/technical area and mechanisms to screen them, raised some US$ 27 million for small hydros in the state of Santa Catarina, and secured a commitment from the national development bank, BNDES, for complementary debt financing.
In addition, Econotech developed a model for cooperation with the host utility, and new mechanisms for bundling small projects and for guaranteeing payments to the generators and supply to the purchasers of the electricity. LGF and Econotech did in-depth analysis of a number of small hydro, biomass, and energy efficiency projects and determined that a small hydropower fund was feasible. LGF supported Econotech in preliminary discussions with CEMIG, the distribution utility of Minas Gerais, and investors.
 IMPACTS: A groundbreaking private R$ 200 (US $91) million equity/guarantee facility began operation in the second quarter of 2006, 80% of the capital being subscribed by Brazilian pension funds. At least 200 MW of new, installed capacity of renewable energy generation can be built within the first 3 years of the fund, which constitutes 13 projects in the states of Mato Grosso and Minas Gerais. Construction has begun on the five Mato Grosso plants, scheduled to be on-line in early 2008.
The financing facility will provide leverage for at least R$ 655 (US$ 275 M) in debt from the Brazilian National Development Bank (BNDES) and a significant new opportunity for the participation of local investors. Finally, negotiations are ongoing with BNDES to replace their current requirement for real asset guarantees with financial guarantee structures.
For information on other MOSAICO financing facilities in China and India, please go to CEF 2004.
To download a summary of this project, please click here. |
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