CONTEXT
In mature energy markets like Germany or the US, it is common to finance an energy project based off of solely the cashflows or electricity savings, with the bank having recourse only to the energy system itself. Meanwhile, such non-recourse debt financing is not taking place in Chile. In order for project finance to take place, the bank needs to be able to utilise the asset in the case of default.
As a result, banks will most likely make the loan as an on-balance sheet corporate loan, in which case collateral is naturally required. This is despite the fact that unlike many typical corporate loans, energy systems generate consistent cashflows/savings from the first day of installation. Perceived risk on the performance of the system, and thus the ability of the business to repay the loan, may also increase the collateral requirements beyond a typical corporate loan.
PROJECT
The objective of this project was to identify and develop pilot projects so that local financial institutions could finance under the Renewable Energy Self-Supply and Energy Efficiency Program (RESSEE). This activity was focused on local financial institutions as a means to unlock the potential for expanding access to finance in the following targeted market segments identified:
OUTCOME
BASE designed and developed pilot projects in target market segment selected (Corporate segment targeting energy efficiency and self-supply renewable energy for all kinds of business entities) and identified and summarised potential projects (term sheet for each individual project) for local financial institutions to finance (min. USD 25 million of total amount of financing).
BASE also estimated the size of the target market segment (i.e. the amount of total project costs of investment) and in close coordination with IFC, identified financial institutions interested in financing the projects. Currently, the pipeline reaches USD 50 million of identified projects.
