The Inter-American Development Bank (IDB) and the Clean Technology Fund (CTF) have closed the first phase of a $125 million financing for energy efficiency projects developed by Mexican energy service companies (ESCOs) through the issuance of green bonds in the local capital markets.
Estimates by Mexico´s National Program for Sustainable Energy Use (PRONASE), predict potential savings in final energy consumption resulting from the implementation of energy efficiency mechanisms ranging from 34,800 to 40,500 GWh by the year 2025. Despite the important role played by ESCOs in the energy efficiency market in Mexico, the funding sources they have been able to tap for such projects are usually limited, expensive, and have very short terms, which at times makes financing unfeasible.
In the first phase of this unique transaction, the IDB financing is structured as a warehouse line for up to $50 million in order to accumulate a portfolio of standardized energy efficiency receivables from two ESCOs--ECON Soluciones Energéticas Integrales, S.A.P.I de C.V. (ECON) and Veolus Energía y Gestión Técnica S.A. de C.V. (VEOLUS). Those investments will then be securitized in a second phase though the issuance of green bonds in the local debt capital markets. The transaction is also mobilizing $19 million in resources from the Clean Technology Fund (CTF), in the form of guarantees for the portfolio of projects.
“This innovative transaction underscores how the IDB can achieve a triple bottom line contributing not only to closing the long-term financing gap for ESCOs in developing energy efficiency projects in Mexico, but also promoting the efficient use of energy and reducing GHG emissions, and lastly, preparing the development of a new asset class in the debt capital markets, in Mexico, the region and the rest of the world,” said Gema Sacristán, Chief of the IDB’s Financial Markets Division.
This financing scheme provides long-term resources supporting the ESCOs' commitment to develop small-scale (less than 5 MW) energy efficiency projects, allowing them to promote the highest standards and responsible energy consumption in the energy sector.
Samuel Reyes, CEO of ECON, said, “We are proud to partner with the IDB in this first-of-its-kind program and look forward to similar transactions in the future that will allow us to achieve our financial and environmental mission.”
Francisco Torres, CEO of VEOLUS, said, “We are pleased with this transaction as it supports our business strategy to promote energy efficiency projects.”
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source oflong-term financing for economic, social and institutional development in Latin America and the Caribbean.The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.
- John Ferriter
IDB Project Team Leader