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MIF invests $5 million in Chilean renewable energy fund

Equity investment seeks to spark a new development model for the local venture capital industry around renewable energy

The Multilateral Investment fund (MIF), of the IDB Group, will provide equity investment of up to $5 million in the Chilean Renovarum Renewable Energy Fund, a project that seeks to create a new development model for the local venture capital industry around low-carbon and climate-friendly technologies.

The project will pave the way for the fund to make direct investments in clean energy, contribute to build local management capabilities and demonstrate the financial viability of the new development model for the local venture capital industry. The fund, managed by Renovarum Investment Management S.A., will invest in up to eight small-scale hydro projects that will add 160 megawatts of renewable energy capacity in Chile, which as of 2010 had a total gross installed power capacity of 15.8 gigawatts.

“By supporting specialized venture capital funds and investment vehicles, the MIF plans to create an effective means of combining the energy and financial expertise needed to develop these deals at an early stage and help Chile address its climate and energy challenges,’’ said Patricio Diaz Lucarelli, co-team leader of the project.

The project will contribute to help Chile create new jobs and reduce its reliance on foreign fossil fuel imports and CO2e emissions, which can potentially be quantified as carbon credits under the Clean Development Mechanism (CDM) of the Kyoto Protocol. Ultimately, the fund’s impact will be higher contributions from investee companies to sustainable economic growth and greenhouse gas emission reductions.

“The Fund will help leverage private capital in support of the Chilean government’s priority of increasing power generation capacity from non-conventional renewable sources,” says Susana García-Robles, co-team leader of the project.

The Multilateral Investment Fund plays a leading role in the development of conducive ecosystems to finance entrepreneurship, and is an active investor in seed and venture capital funds in Latin America and the Caribbean; effectively creating a model of a Fund of Funds with development goals. In its 17 years of experience, the MIF has been an active investor, supporting 55 seed and venture funds and has created regional capacity through a network of partnerships and alliances with the public and private sector, including venture capital associations and fund managers.