SEF will fund renewable energy, including geothermal power, energy efficiency, and institutional capacity projects in six Eastern Caribbean countries.
The Sustainable Energy Facility for the Eastern Caribbean, a US$71.5 million loan and grant package approved by the Inter-American Development Bank (IDB) and the Caribbean Development Bank (CDB), was signed on Tuesday by Presidents Alberto Moreno of the IDB and Dr. William Warren Smith of the CDB.
The signing occurred at the Intercontinental Hotel in Miami ahead of the start of the annual Caribbean Renewable Energy Conference.
The six independent countries of the Organisation of Eastern Caribbean States (OECS) – Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines – are island states with small and isolated electricity markets, lacking the scale necessary to import cheaper fossil fuels, such as natural gas, and inadequate development of renewable energy potential. The project has the potential to change the energy matrix of the beneficiary countries and increase energy security, which is critical for these economies to be competitive.
“This operation has the potential to trigger a radical transformation of the energy matrix of the Eastern Caribbean. Geothermal power plants established in each of the Eastern Caribbean countries with potential could have aggregate capacity of proximately 60MW, which would substitute the equivalent amount of diesel and heavy fuel oil currently used for baseload power generation. This would displace an average of almost a million barrels of oil per year, which is equivalent to a 44 percent reduction in oil imports or US$56 million per year,” said Christiaan Gischler, the IDB’s team leader of the SEF.
Gischler added that public private partnerships could be a mechanism by which many of the energy projects could be successfully delivered.
“Under SEF, Eastern Caribbean governments and geothermal developers will be encouraged to form public and private partnerships. The PPP approach will encourage private partners to assume the loans and minimize the risks associated with the geothermal development. Governments will be able to diversify their energy mix without increasing their debt load,” explained Gischler.
A component of this facility is concessional financing from the Clean Technology Fund. The availability of these resources will catalyze the private sector capital and expertise required for developing sustainable energy projects in the region. Tessa Williams-Robertson, Head of CDB’s Renewable Energy and Energy Efficiency Unit, highlighted the critical importance of a facility like the SEF that makes concessional resources available for investment in sustainable energy.“A substantial focus of the SEF will be to provide seed resources to CDB’s GeoSMART Facility which is being established to support geothermal energy development in the region. GeoSMART will provide financing instruments appropriate to address the level of risk associated with each stage of the geothermal development”, she said.
SEF Financing consists of:
• a Global Credit Loan from IDB’s Ordinary Capital Resources to CDB of up to USD 20 million
• a grant to CDB of up to the equivalent of US$19,050,000 from the Clean Technology Fund
• a grant to CDB of up to the equivalent US$3,013,698 from the Global Environment Facility Trust Fund (GEF Grant)
• a counterpart contribution of US$29,435,000 is available within CDB’s existing resources for the relevant disbursement period to finance projects which meet SEF objectives, including for private sector electric utilities and at least one energy sector/policy loan for at least one of the beneficiary countries.
• The IDB loan is for a 22-year term, with an 8.5 year grace period and a LIBOR-based interest rate.
The Inter-American Development Bank, established in 1959, is a leading source of long-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.
The Caribbean Development Bank is a regional financial institution established in 1970 for the purpose of contributing to the harmonious economic growth and development of member countries. The Bank’s founding president was noted economist and Nobel Laureate, Sir Arthur Lewis. There are nineteen regional borrowing member countries, including Guyana and Suriname, and three regional non-borrowing member countries – Mexico, Venezuela and Colombia. Members from outside the region are Canada, China, Germany, Italy, and the UK. As of December 31, 2014, CDB had total assets of US$2.61 billion (this includes US$1.38 billion of ordinary capital resources and US$1.23 billion of special funds resources). CDB has an “Aa1” with stable outlook rating with Moody’s Rating Agency, and an “AA/A-1+” with stable outlook rating with Standard and Poor’s Rating Agency. In 2014 the Bank approved loans and grants of US$269.5 million.