• Victoria Galeano

Capital market instruments for financing renewable energy

Updated: 4 days ago

To launch climate financing platforms, countries need to understand their financial and clean tech sector ecosystems and create the appropriate policy and regulatory frameworks to enable these infancy industries to flourish.


Assignment Name:

Development of capital market instruments for financing renewable energy in Colombia


Client:

The World Bank


Challenge:

The Government of Colombia adopted a Privatization Policy in an effort to increase private sector participation in service delivery so as to enhance efficiency, and reduce the size of the public sector. Colombia’s National Development Finance Agency (FDN) was in charge of mobilizing funds and promoting innovative financial schemes in the market in order to finance development of a new Renewable Energy (RE) sector market.


The International Renewable Energy Agency estimated that Colombia had a “high” resource potential to develop wind, solar, hydro and geothermal generation (IRENA, 2012), yet most of that potential had not been tapped since Colombia had a limited project finance market and very limited experience in the clean energy sector.


Thus, in order to scale up the RE sector there is a critical need to explore the use of innovative financial products such Green Bonds and Asset Backed Securitization along with debt from local and international capital markets with participation of institutional investors and intermediary investment vehicles including infrastructure funds.


Solution:

Prissma, in collaboration with GreenMax were selected by the World Bank to support Colombia’s National Development Finance Agency (FDN) in designing a roadmap for the development of innovative capital market instruments, including Green Bonds, Asset-Backed Securities, and Energy Efficiency Certificates to develop the clean energy and energy efficiency sectors in Colombia.


The team undertook a detailed feasibility study to assess the viability of securitizing the underlying cash flows of PPAs of a portfolio of RE projects in order to demonstrate under what conditions and with what features, risk safeguards and supporting instruments, the RE asset-backed securitization transaction would succeed in both the international and Colombian financial market.


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