Expected to be first IFC-financed project
to sell carbon credits
Washington D.C., December 20, 2002—The International Finance Corporation,
the private sector arm of the World Bank Group, signed an agreement to
finance the construction of the El Canadá 43 MW hydroelectric power plant
in western Guatemala. IFC is also assisting the sponsor with the sale of
carbon credits generated by the project with another World Bank affiliate.
The sponsor of the project is Energía Global International, a wholly owned
subsidiary of Enel, S.p.A. of Italy.
El Canadá is a run-of-the-river, hydroelectric plant, which will be built
about 200 km west of Guatemala City and will be constructed downstream
of an existing hydroelectric plant on the Samalá River. The plant will
use some existing infrastructure, which will reduce its environmental impact.
The project is based on an innovative contractual structure, that relies
upon Guatemala’s competitive market framework.
IFC is investing US$15 million for its own account in the project. The
Netherlands Development Bank (FMO) is providing $12 million in the form
of a B-Loan, and Banco de Occidente of Guatemala is providing $10 million
in debt.
Francisco A. Tourreilles, Director of IFC’s Power Department, said, “The
El Canadá project demonstrates that renewable energy projects in competitive
markets are possible, provided capital costs are economical, the regulatory
environment is stable, and long-term financing from a lender such as IFC
is available. IFC is particularly pleased to be working with Energía Global
International and Enel in this important project in Guatemala, a country
which has played a pioneering role in private power over the last decade
and where IFC looks forward to finance other projects in the sector.”
Mr. Tourreilles added, “The prospect for the sale of carbon credits generated
by the project highlights the potential of this new significant revenue
source to enhance the profitability of renewable and environmentally friendly
power projects.”
Edward M. Stern, CEO of Energía Global International said, “We value our
relationship with the IFC in this important project and believe that it
represents a true international partnership in support of economically
and environmentally beneficial development.”
The El Canadá project will be one of the few new hydroelectric projects
built in Guatemala over the past 12 years, and will displace approximately
140,000 tonnes of equivalent/year greenhouse gas emissions. The World Bank
Group manages two in-house carbon credit finance groups that work closely
with IFC’s Power Department to offer clients both project finance and
carbon credits sales. The combination of the two provides sponsors
with a significant financial advantage by lowering costs and providing
greater efficiency.
IFC is actively promoting the new and evolving market for greenhouse gas
emission reductions. For developing countries, the purchases of carbon
credits by the World Bank-managed carbon credit finance groups will encourage
the transfer of cleaner technologies to reduce emissions at an effectively
reduced cost, and for developed countries the purchases increase the range
of options for complying with the Kyoto Protocol emission reduction requirements.
The Kyoto Protocol of the U.N. Framework Convention on Climate Change calls
for industrialized countries to reduce their GHG emissions to levels below
those generated in 1990 by the period 2008 – 2012. Emission reductions
result from activities that avoid or reduce the production of carbon dioxide,
methane or other greenhouse gases as compared to a ‘business as usual’
situation, or from ‘sequestering’ carbon emissions in biomass such as
forests and soils. The market for GHG emission reductions is becoming established
and is expected to grow significantly over the next few years.
IFC’s mission (www.ifc.org)
is to promote sustainable private sector investment in developing countries,
helping to reduce poverty and improve people’s lives. IFC finances private
sector investments in the developing world, mobilizes capital in the international
financial markets, and provides technical assistance and advice to governments
and businesses. Since its founding in 1956 through FY02, IFC has committed
more than $34 billion of its own funds and arranged $21 billion in syndications
for 2,825 companies in 140 developing countries. IFC’s worldwide committed
portfolio as of FY02 was $15.1 billion for its own account and $6.5 billion
held for participants in loan syndications.