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IDB approves $25 million for a sustainable energy matrix in Peru

The Inter-American Development Bank (IDB) approved the third transaction of a programmatic policy-based loan (PBL) designed to help Peru develop a sustainable energy matrix. The amount of this transaction, the third of four that make up the program, is $25 million.

PBLs are flexible instruments whose funds may be disbursed rapidly to provide support for institutional changes and policies at the sectoral or subsectoral level, through an agreed-upon reform program.

Peru is seeking to increase the efficiency of its energy matrix so as to make more optimal use of natural gas and electricity resources. This could lead to a reduction of up to 50 percent in the growth rate of natural gas consumed in producing electricity. In turn, this reduction may generate additional benefits for the country, with surpluses available for industrial and household use or for natural gas exports.

As part of the program, Peru will undertake one of the first strategic environmental assessments of sectoral policies. In addition, the government will seek to apply best practices in the management of revenues derived from the energy sector.

In 2009 and 2010, the IDB approved the first two loans in the program, and Peru undertook reforms to promote the use of renewable energy and energy efficiency, improve inter-institutional coordination, update the national energy balance, support the inclusion of biofuels in commercial fuel mixes, formulate a National Agricultural Energy Plan and create a Multisectoral Commission on Bioenergy, among other achievements.

The IDB loan is granted for a 20-year term, with a 5-year grace period and an interest rate based on LIBOR. The executing agency will be Peru's Ministry of the Economy and Finance.