Through its Investing in Reversing strategy, IDB Invest joins efforts with private sector actors, financially innovating to help the countries in the region meet their Paris Agreement targets.
For example, Chile’s decarbonization goal calling for the gradual closure of its 28 thermoelectric plants between 2019 and 2040, which will be replaced by others that use renewable energy. Eight of them will be closed in the first five years of the plan, which will reduce emissions by 20 percent.
In this context, IDB Invest, a member of the IDB Group, provided a $125 million financial package to ENGIE Energía Chile, with the aim of accelerating the decarbonization of the country’s electricity matrix. The financial package consists of a $74 million senior loan from IDB Invest, $15 million of blended financing from the Clean Technology Fund (CTF) and $36 million from the Chinese Fund for Co-financing in Latin America and the Caribbean. The funds, with a tenor of up to 12 years, will be used to build, operate and maintain the Calama wind farm with an installed capacity of approximately 151 megawatts (MW), which will be located near the city of Calama, in the region of Antofagasta. The project is part of ENGIE’s energy transformation plan, which, in addition to the successive closure of its coal-fired units, includes building more than 1,000 MW of wind and solar initiatives in Chile over the next few years.
The innovation in the deal comes from the structuring of a pilot financial instrument to accelerate decarbonization activities in Chile, by monetizing the displacement of greenhouse gas emissions (GHG) when closing thermoelectric coal plants early and replacing them with clean technology projects. In the event that a regulated carbon market is created during the life of the loan, both the CTF and ENGIE would share any increase in the minimum carbon price.