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URUGUAY

Observatory of Renewable Energy

in Latin America and �e Caribbean

AUGUST 2011

Final ReportProduct 3: Financial Mechanism

Final ReportProduct 3: Financial Mechanism

www.purelysolarpower.comC

This document was prepared by the following consultants:

JUAN MANUEL CALDAS

The opinions expressed in this document are those of the author and do not necessarily reflect the views of the sponsoring organizations: the Latin American Energy Organization (OLADE) and the United Nations Industrial Development Organization (UNIDO).

Accurate reproduction of information contained in this documentation is authorized, provi-ded the source is acknowledged.

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Uruguay- Producto III

CASE OF URUGUAY

Final Report

Product 3: Financial Mechanisms

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Tableofcontents

1. INTRODUCTION ......................................................................................................4

2. METHODOLOGY......................................................................................................4

3. FINANCIAL MECHANISMS ...................................................................................5

a. Green Interest Rate Programme – Bandes Uruguay Bank .................................. 6

b. Green financing – HSBC..................................................................................... 8

c. Italy-Uruguay Loan ............................................................................................. 9

d. AFAP................................................................................................................. 11

e. IDB’s SCF ......................................................................................................... 14

f. Andean Development Corporation (CAF)......................................................... 16

g. ECA................................................................................................................... 17

h. Comparative analysis ........................................................................................ 18

i. Succesful experiences and barriers .................................................................... 23

4. SUPPORTING MECHANISMS ..............................................................................24

a. Energy Efficiency Trusteeship .......................................................................... 24

b. IDB’s MIF ......................................................................................................... 25

c. SECCI IDB Fund............................................................................................... 27

d. Global Environment Facility (GEF).................................................................. 29

e. GEF’s Small Grant’s Programme - Uruguay .................................................... 31

f. Clean Development Mechanism (CDM) ........................................................... 31

g. Succesful experiences and found barriers ......................................................... 32

5. CONCLUSIONS.......................................................................................................33

List of tables Table 1: List of financial mechanisms. .................................................................................. 5Table 2: Rates of Technical Assistance loans ........................................................................ 7Table 3: Rates of loans for realization of project................................................................... 7Table 4: Green Interest Programme sheet.............................................................................. 8Table 5: Green Loan sheet. .................................................................................................... 9

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Table 6: Criteria for the definition of small and medium enterprises (SMEs), for the Italy-Uruguay Loan. ....................................................................................................................... 9Table 7: Italy-Uruguay Loan sheet. ..................................................................................... 11Table 8: Permitted investments for AFAPs and maximum limits ....................................... 12Table 9: Maximum limits on investments per emitter, according to its risk (see text) and AFAP. .................................................................................................................................. 13Table 10: Information sheet for financing undertakings through AFAPs. .......................... 14Table 11: SCF’s information sheet. ..................................................................................... 16Table 12: Comparative analysis of financial mechanisms................................................... 22Table 13: Comparative analysis of financial mechanisms (cont.). ...................................... 23Table 14: List of supporting mechanisms. ........................................................................... 24

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1. INTRODUCTION

Different financial and support mechanisms, aimed for investments in renewable energy projects and provided by different local, regional and international organizations, are described in this report. The goal is to provide a sufficiently broad spectrum of existing possibilities for financing renewable energy projects. In that sense, not only specific financing lines for renewables are described, but also organizations and credit lines/mechanisms which due to their profile, pursued goals, etc., may be suited for renewable energy projects. Such is the case of the Pension Fund Administrators (AFAP), on a local plane, of the Andean Development Corporation (CAF), on a regional plane, and of the Export Credit Agencies (ECA), on a global plane. The financial mechanisms are described in the first part of this report, following an order determined by their geographical scope (national, regional and global). A comparative analysis is included and synthezised in Table 12 and Table 13. In the second part, public support mechanisms and national and international incentives are described. In some cases, contact information is provided, in order to make it easier for the interested to get more detailed information than the one included here, contributing in this way and as much as possible, to the execution of more renewable energy projects, which is ultimately the main goal of this report.

2. METHODOLOGY The primary sources of information used for this report included:

• Personal or interviews by telephone or email with people linked directly or indirectly to the addressed financial mechanisms.

• Consultations with personnel at the National Direction of Energy and Nuclear Technology (DNETN).

The secondary sources of information used for this report were:

• The study “Financing opportunities for wind farms in Uruguay”, developed by the Uruguayan Wind Energy Programme (DNETN), referenced to as PEEU (2009).

• CAF’s Annual Report-2009, referenced to as CAF (2009b). • Several sources from Internet, detailed in the References.

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3. FINANCIAL MECHANISMS Following table summarizes the financial mechanisms presented in this report.

Organization Programme/Mechanism Type of mechanism

Project phase being

covered

Geographical scope Website

Bandes Uruguay Bank

Green Interest Rate Programme

Loan Feasibility study. Realization of project.

National. www.bandes.com.uy

HSBC Bank Green Financing Loan Acquirement of solar thermal energy systems.

National. www.hsbc.com.uy

National Corporation for Development

Italy-Uruguay loan Loan Acquirement of goods, transference of technology, training.

National. www.cnd.org.uy

AFAP Value investing, acquirement of company’s stock.

National. www.rafap.com.uy www.afinidadafap.com.uy www.unioncapital.com.uy www.integracionafap.com.uy

IDB Structured and Corporate Finance Department (SCF)

Corporative and greenfield projects finance.

Regional. www.iadb.org

CAF Latinamerican Carbon, Clean and Alternative Energy Programme (PLAC+e).

Project Finance. Advances of future capital flows due to emission reduction.

Regional. www.caf.com

Banco do Brasil Programme for the Finance of Brazil’s Export (PROEX).

Loan. Up to 100% of Brazilian export of goods and services.

Global. www.bb.com.br

BNDES Loan. Up to 100% of the export’s value, in any INCOTERM.

Global. www.bndes.gov.br

Table 1: List of financial mechanisms.

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Below follows a more detailed description of these financial mechanisms, starting with the national ones, continuing with the regional and ending with the global mechanisms.

a. Green Interest Rate Programme – Bandes Uruguay Bank This programme includes two credit lines, one linked to the Energy Efficiency Programme, and the other one called “Rate 0”, aimed exclusively for solar thermal energy, both for persons and companies. The latter’s loan period is maximum 12 months, evethough it can be considered to extend it to 24 months. Besides, the solar thermal energy systems being installed must be provided by certain companies (Miakits, 2010). The line linked to the Energy Efficiency Programme may be used for “projects that represent benefits directly linked to energy efficiency and other additional ones, obtained through the execution of the project. For instance: improvement of productivity, reduction of maintenance costs, operative costs reduction, tariff improvement, etc., and all projects that present a satisfactory cost-benefit ratio. The projects must imply saving of grid electric energy or fossile fuel, by substituting it with another source” (Bandes 2010). Among the accepted technologies are (Bandes, 2010): • Solar energy. • Geothermal energy. • Wind energy. • Biofuels usage. • Adequate electric energy. To apply to this loan it is mandatory to have “a feasibility study for the implementation of the project”. This study must be supported by an ESCO (Energy Service Company), as was mentioned before. Loans are given both for the Feasibility Study and the Investment Project itself. “The CND, as the administrator of the Energy Efficiency Trusteeship (FEE), guarantees 100% of loans plus interests for technical assistance (Author’s highlight), and up to 60 % of the capital financed by Bandes (…) Bandes can ask for additional guarantees (…)” (Bandes, 2010). Here follows a detailed description of the characteristics of the loans given for Technical Assistance and Investment in Energy Efficiency (data from Bandes, 2010): Technical Assistance Financing:

• Currency: US Dollars. • Maximum amount: USD 5.000

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• Fixed term: 180 days. • It finances up to 67% of the total cost of the technical assistance study.

Investment project:

• Currency: US Dollars and Indexed Units. • Maximum amount: According to evaluation of credit rating. • Repayment: according to project’s feasibility. • It finances up to 80 % of the total investment.

The general requirements and documentation to be presented at the bank, are described in Bandes (2010). The fixed rates for these two lines are detailed in following tables:

Product Period Fixed rate (%) Dollars 6-12 9,00

Table 2: Rates of Technical Assistance loans (Bandes, 2010).

Product Period Fixed rate (%) 12 9,00 Dollars

13 - 36 9,50 UI 12-36 9.50%

Table 3: Rates of loans for realization of project (Bandes, 2010).

1. Simulation of loan for Investment Project

Suppose that a Feasibility Study shows that it is convenient to carry out a certain project. Suppose also that the amount of the investment is US$ 100.000, and that the loan requested is for 80% of this amount, that is US$ 80.000, which is the maximum percentage of the investment that can be required, as was mentioned before. The FEE guarantees 60% of the requested amount, that is US$ 48.000. Suppose that the investor gets the remaining 40% of the guarantees, by some other means. Suppose that the loan period is 3 years (36 months). Then the loan’s monthly payment can be of the order of the monthly saving involved in a renewable energy project. This saving could even be greater than the payment, but one must keep in mind that 20% of the investment is not financed.

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Parameter Unit Information

Name of the mechanism Green Interest Programme Organization Bandes Uruguay Bank

Type of technology The projects must imply saving of grid electric energy or fossile fuels, by substituting it with other sources.

Period 12-36 months Geographic area The whole country. Phase of project Technical Assistance and Realization of project.

Type of loan

This credit line is linked to the Energy Efficiency Programme. It can be used for “projects that imply benefits directly linked to energy efficiency and other additional benefits obtained through the implementation of the project. For instance: improvement of productivity, reduction of maintenance costs, operative costs reduction, tariff improvement, etc., and all projects that present a satisfactory cost-benefit ratio”.

Interest rate % See Table 2 and Table 3.

Applying procedure The investor must contact an ESCO in order to design the

project, and present it firstly before the financial entity, and secondly before the CND, in order to obtain the guarantee.

Date 27/09/2010 Number of favored projects

2 for technical assistance. 1 for investment project.

Table 4: Green Interest Programme sheet.

b. Green financing – HSBC

HSBC bank has a credit line called “Green Loan”, aimed to finance solar thermal energy systems, both for homes and companies, having following characteristics (HSBC, 2010): • Financing: Up to 100% of the value of the equipment. • Currency:

o US Dollars: 18 or 24 payments. AER: 11%. o Indexed Units: Up to 24 payments. AER: 9%.

As was the case for BANDES’ Green Interest Programme, the equipment acquired must be supplied by a certain company.

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Mechanism Green Loan Organization HSBC Bank Aimed for Persons or companies Type of technology Solar thermal energy Geographic area The whole country. Phase of project Acquiring of equipment. Brief description The acquired systems must be supplied by a

certain company.

Type of loan Loan aimed to finance the acquisition of

solar thermal energy systems both for homes and companies.

Interest rate % US$: 11% AER UI: 9% AER

Applying procedure Through any of HSBC’s offices or by phone (Customer service: +598 2915 10 10)

Table 5: Green Loan sheet.

c. Italy-Uruguay Loan

The funding for this loan comes from a credit that the Government of the Republic of Italy gave to the Government of the Oriental Republic of Uruguay, for a total amount of € 20.000.000 (twenty million euros). This credit line is aimed to finance small and medium Italian-Uruguayan and Uruguayan enterprises that fulfill following requirements (CND, 2009):

Type of company Maximum number of employees

Maximum annual sales, without VAT (I.U.)

Small 19 10.000.0001 Medium sized 99 75.000.0002

Table 6: Criteria for the definition of small and medium enterprises (SMEs), for the Italy-Uruguay Loan.

1 Aprox. US$ 1.029.024 (Considering a value of $U 2,1095 for the I.U., and 20,5 $U/US$, INE 2010). 2 Aprox. US$ 7.717.683 (Considering a value of $U 2,1095 for the I.U., and 20,5 $U/US$, INE 2010).

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It is important to emphasize that “employees are all those employed at the company, including the owners and/or venture partners to which effectives are done” (CND, 2009). The Programme is administrated by the CND, and through “Uruguay Promotes” (division for attention of entrepreneurs and bussinessmen), it informs and advices “those companies interested in the credit line about requirements, conditions and documentation needed”. The CND, as administrator of the Programme, is responsible for receiving and processing the company’s credit request (CND, 2009). The minimum amount that can be requested is € 15.000, and the maximum is € 500.000. Up to 100% of the total investment may be financed excluding taxes, and as long as it isn’t greater than 60% of the company’s annual turnover. The minimum period is 12 months, the maximum 10 years, and the share and interest rate is adjusted to the company’s cash flow (CND, 2009). Investment projects for “acquisition of goods (excepting sumptuary ones), raw material and inputs, technology transfer, training, technical and comercial assistance, industrial licenses and patents” can be financed. The credit’s general terms establish that “the goods and services financed through this loan must be of Italian origin to a 50%, being admitted up to 50% of Uruguayan origin or from other Latinamerican countries”. In conclusion, this mechanism may be used by SMEs for investment in renewable energy projects, related to:

• Acquisition of renewable energy equipment and inputs. • Transfer of technology related to the area. • Training and technical/commercial assistance.

The main requirement is that the financed goods and/or services are of Italian origin to a 50%.


Mechanism Italy-Uruguay Loan Organization CND Aimed for Italian and Italian-Uruguayan SMEs.

Type of technology Introduction of state-of-the-art or updated technology.

Geographical scope The whole country.

Phase of the project Acquisition of equipment, transfer of technology, training, technical and commercial assistance.

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Available budget € 20.000.000

Type of loan Loan aimed for Italian or Italian-Uruguayan SMEs

that fulfill the stated requirements. Priority will be given to those inititatives with a high social impact.

Interest rate % 5,10 in €/US$/IU

Applying procedure

The CND, through its division “Uruguay Promotes” for attention of entrepreneurs/bussinessmen, will inform and advise those companies interested in the credit line on the requirements, procedures, conditions and documentation needed, and will receive and process the loan request presented by the company.

Date 20/09/2010

Table 7: Italy-Uruguay Loan sheet.

d. AFAP

The Pension Fund Administrators (AFAP) are the financial entities that adminstrate part of the pension contributions of Uruguayan workers. These funds are distributed between four AFAP. This distribution is, to 30th September 2010, following: República AFAP (56,53%), Afinidad AFAP (18.12%), Unión Capital AFAP (16.70%), and Integración AFAP (8.65%) (RAFAP, 2010c). In RAFAP (2010a) it is stated that “investments that can be donde with the funds are regulated by Article 123 of Law 16.713 of pension reform, and its modifications as well as the Central Bank’s Circulars contained in the compilation of AFAP’s Control norms”. According to these norms, the permitted investments and maximum limits are the ones indicated in Table 8.

Literal Description Maximum limit

A Values of the Uruguayan State and Central Bank 90%3

B Public or private Uruguayan company’s values; share certificates, debt or mix titles of Uruguayan

50%

3 “Investments mentioned in literal A) may rise to 90% in 2010, 85% from 1st January 2011, and then they

will be lowered 2,5 percentage points from 1st January each year, until 75% is reached in 2015” (RAFAP,

2010).

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financial trusteeships; unit shares of Uruguayan investment funds.

C Bank deposit certificates. 30%

D

Fixed interest values emitted by international credit organizations or foreign governments of high credit qualification.

15%

E Financial risk cover instruments emitted by Uruguayan institutions. 10%

F

Loans given to members and beneficiaries of the social security system guaranteed by public or private institutions.

15%

Table 8: Permitted investments for AFAPs and maximum limits (RAFAP, 2010a).

The forbidden investments are: “ • Values emitted by other AFAPs. • Values of insurance companies. • Values emitted by companies constitued outside Uruguay, with the exception of financial intermediation companies, authorized to operate in the country and the institutions mentioned in literal D). • Values emitted by Financial Investment Societies. • Values emitted by companies related to the AFAP” (RAFAP, 2010a). In as much as financing specifically the productive sector is concerned, AFAPs cannot give direct loans to the undertakings. Instead, following forms may be used: “ • Public limited company’s stock • PLC’s negotiable obligations • Values or unit shares of Closed Investemnt Funds • Debt titles or Participation Certificates on Financial Trusteeships” (RAFAP, 2010a). Trusteeships are mentioned in RAFAP (2010a) as a vehicle for “channeling AFAP’s funds towards financing the productive sector. The Law (of Trusteeships, A/N) presents tax benefits for certain types of trusteeships and in particular for those being acquired by the AFAPs, which strengthens even more this legal figure”. The legal or regulatory requirements that must be fulfilled by instruments being used by the AFAP for investing in the productive sector are:

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“ • Risk qualification emitted by a qualifier registered in the Central Bank greater or equal to BBB- or its equivalent. • Public offer. • Quotation in a formal market” (RAFAP, 2010a). By 30th november 2009, funds deposited in the AFAPs reached 100.135 million Uruguayan pesos (somewhat more than US$ 5.000 million, PEEU, 2009), while these funds reached US$ 6.500 million by 30th september 2010 (RAFAP, 2010b). Taking this last value, and the established percentage in Table 8 for literal B (which is the relevant for our case), the amount of available funds for financing productive undertakings is approximately US$ 3.250 million. However, besides of the already mentioned restrictions, there are further. For instance, each AFAP “can’t invest more than 5% of its Pension Saving’s Fund (FAP) in instruments of one single emitter if it has a qualification greater or equal to AA-“, or 3% if this qualification is equal or greater to BBB- and less or equal to A+. It must be pointed out that Investment Funds or Financial Trusteeships are not considered “emitters” RAFAP, 2010a). Furthermore, each AFAP can’t acquire “more than 10% of the stock emitted by a single PLC”, nor it can invest “more than 10% of its FAP in representative instruments of financial trusteeships administrated by a single fiduciary or fiduciaries members of the same private economic group” (RAFAP, 2010a). Considering these constraints, the total amount of the system’s FAP and the distribution of this fund between the different AFAPs, following table can be constructed, where the available amount for using in the productive sector is shown, by AFAP and according to the emitter’s risk (3 o 5%):

AFAP % over the

system’s total FAP

Maximum investment per emitter (5% of the

FAP) MUS$

Maximum investment per emitter (3% of the

FAP) MUS$

República 56,53 184 110 Afinidad 18,12 58,9 35,3 Unión Capital 16,70 54,3 32,6 Integración 8,65 28,1 16,9

Table 9: Maximum limits on investments per emitter, according to its risk (see text) and AFAP. The total FAP of the system is approximately US$ 6.500 million, corresponding to

30th september 2010 (see text).

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Mechanism AFAP Organization Pension Fund Administrators (AFAP) Aimed for Public or private companies.

Type of technology

None in particular. Electric generation Projects involving electric generation from non conventional renewable energy sources have the advantage of a guarantee represented by the electricity buying and selling contract signed with UTE.

Geographic scope The whole country. Phase of project Any. Available budget MUS$ Approx. 3.250

(50% of the system’s total FAP by 30/09/2010). Brief description According to Article 123 of Law 16.713, are authorized to invest in:

• Public limited company’s stock • PLC’s negotiable obligations • Values or unit shares of Closed Investemnt Funds • Debt titles or Participation Certificates on Financial

Trusteeships.

Type of loans

AFAP’s are not authorized to loan capital directly to the investor. They can participate in up to 10% of the stock of a single emitter, and they can’t assign more than 5 or 3% of the FAP to a single emitter.

Applying procedure Contact the Investment Department of one of the AFAPs. Date 28/10/2010

Table 10: Information sheet for financing undertakings through AFAPs.

e. IDB’s SCF

The Structured and Corporate Finance Department (SCF) of the IDB Group gives financial support to large banks and private investments “that operate in almost every economic sector in Latin America and the Caribbean”. Besides, the SCF “supports the development of international trade through the implementation of the Trade Finance Facilitation Program (TFFP)” (PEEU, 2009). Through “A” loans, the SCF uses resources of its own, while “B” loans are cofinanced by banks and institutional investors, together with the SCF (PEEU, 2009). Other products offered by the SCF are “partial credit guarantees and against political risk”, besides of “non refundable resources for preparing projects for financing”. The SCF

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focuses its products on “large banks, companies, as well as public companies and of mixed capital, which operate in all sectors of economy” (PEEU, 2009). When it comes to select projects, the SCF considers following general criteria: “

• The project must contribute to the development of the member country borrower of the IDB Group.

• It must be located in a member country of the IDB Group. • The majority holding of the company must belong to a national of a member

country of the IDB Group. • The private partner must show solvency, have experience in similar projects and

high standards of corporate governance. • Fulfill the social and environmental requirements of the IDB Group. • Satisfy the norms of acquisition of the IDB Group” (PEEU, 2009).

The available amounts for beneficiaries without sovereign guarantee (in general, privates) are limited: “In Uruguay, the Bank participates in up to 40% of the costs of the projects (Phase A) and finances no more than US$ 200 million, with some exceptions. The mentioned 40% can be complemented with B loans coming from commercial foreign banks, or by cofinancing it with other local institutions, or by export agencies, until an optimum financial structure is reached for the project” (PEEU, 2009). Bank sources indicated that, for operations without sovereign guarantee, there is interest in financing both corporate projects (that is, already established), as well as greenfield projects. For the recent tender of 150 MW of wind energy (see for instance the report on State of the Art of Renewables in Uruguay), several consultations were made and interest was shown in IDB’s financing products. The contact person in Uruguay is Martín Duhart ([email protected], tel. 915-4330, internal 274107).


Mechanism Structured and Corporate Finance Department Organization Interamerican Development Bank (IDB). Aimed for Large banks and private investments.

Public and mixed capital companies. Geographic scope The whole country. Project phase Technical assistance and project realization. Available budget US$ 200 million per project (for “A” loans without

sovereign guarantee). Brief description The SCF offers its products to large banks and

corporations, as well as public and mixed capital companies, that operate in all economic

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sectors.

Type of loans

Both “A” and “B” type loans are given. The latter may be an option if the requested amount is greater than US$ 200 million for borrowers without sovereign guarantee.

Applying procedure Contact Mr. Martín Duhart

([email protected], tel. 915-4330, internal 274107).

Date 28/10/2010

Table 11: SCF’s information sheet.

f. Andean Development Corporation (CAF)

The Andean Development Corporation (CAF) is “a development bank formed in 1970 and constituted nowadays by 18 countries from Latin America, the Caribbean and Europe, as well as 14 private banks from the Andean region”. CAF offers “credit operations, non refundable resources and support in the financial and technical structure of projects for the public and private sector in Latin America” (CAF, 2010a). By 30th December 2009, Uruguay participated with 4,9% of CAF’s portfolio (CAF, 2009a), while it had only 2% in 2008 (PEEU, 2009). The sector “electricity, gas and water supply” went from less than 20% of the portfolio in 2008, to 25% in 2009. “Approvals for the non sovereign sector (that is, private sector, A/N) represented 32% of the total (US$ 3.580 million)” in 2009 (CAF, 2009b). In PEEU (2009), it is stated that “its limitation may respond to the needs of the member countries to finance public projects”. The products offered by CAF include “corporate loans, structured loans with resource limited to the stockholders (Project Finance), partial guarantees, investment in patrimony, financial consultancy, etc.” (PEEU, 2009). “Under the form of Project Finance, CAF can finance up to 50% of the project’s costs, including construction and required additional finance costs. Loans are given in US dollars, at variable interest (Libor plus margin) with periods, in the long term, between 12 and 15 years and repayment adapted to the project’s cash flow” (PEEU, 2009). Through the Latinamerican Carbon, Clean and Alternative Energy Programme (PLAC+e), CAF offers three financing areas (CAF, 2010b):

• Existing financial schemes

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• Advance in future income due to emission reductions • Energy Efficiency and Alternative Energies Programme

CAF’s available financing schemes are focused on infrastructure, social and environmental development and private sector. As an additional factor specifically for renewable energy projects, “the coordination with PLAC+e permits to include as a guarantee the cash flow due to the selling of emission reduction certificates (both in regulated markets as well as volunteer ones), and generating a solid Carbon Finance component for the projects” (CAF, 2010b, Author’s highlight). Regarding the advances in future inflow due to emission reduction, “the PLAC+e makes advances in the expected income due to the selling of Certified Emission Reductions (CERs) (…) In many cases, these advances enable the project’s financial feasibility. When evaluating these advances a minimum of 150.000 tCO2e generated before 31st December 2012 is required. The PLAC+e carries out a financial, technical and legal analysis of the project’s carbon component” (CAF, 2010b, Author’s highlight). The Programme for Energy Efficiency and Alternative Energies was developed by the German bank KfW together with CAF. On PLAC+e’s website (see CAF, 2010b), it is mentioned that “the Programme’s disbursement will be done until 31/12/2009”, and so it is out of date. CAF’s contact information in Montevideo is: Adress: Plaza Independencia 710 - Torre Ejecutiva, 9th floor, Montevideo. Tel.: +598 (2) 917-8211 Fax: +598 (2) 917-8201 Email: [email protected]

g. ECA Export Credit Agencies (ECAs) are “institutions that facilitate a countrie’s export of goods and services“ (PEEU, 2009). Some of the ECA are (PEEU, 2009):

• US ExIm Bank (USA) • CESCE (Spain) • Japan Bank for International Cooperation and Nippon Import and Investment

Insurance (Japan) • Eksport Kredit Fonden (EKF, Denmark)

The US ExIm Bank has a Congressional mandate to support renewable energy by assigning 10% of its authorizations to this area. From 1994, it has increased its investment portfolio in the environment area through the Environmental Exports Programme (EEP). In

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2007 the “Renewable Energy and Environmental Exports Office” was created. “Further in 2010, the Division was expanded to include dedicated credit officers to process renewable energy and environmental transactions. As of June 30, 2010, Environmentally Beneficial authorizations reached approximately $323 million” (US ExIm, 2010). Regarding Danish EKF, “it is an institution that counts with Danish gonvernment’s full faith & credit and has supported several wind farm projects implemented by Vestas. Recently, EKF guaranteed 100% of a US$ 262 million investment by Petrobras in Brazil” (PEEU, 2009). On a regional level, Banco do Brasil (BB) and Banco Nacional de Desenvolvimento Econômico e Social (BNDES) are the most prominent. BB permits to acces its Brazilian Exports Financing Programme (PROEX), through which “up to 100% of goods and services exports from Brazil can be financed at a low interest (fixed or variable Libor) and at long periods (up to 10 years). The payment is made each six months and it includes capital repayment and interests”. As one would expect, it is mandatory that the project involves “equipment and services of Brazilian origin. On the other hand, the financial support doesn’t cover expenses outside Brazil”. However, “the bank may offer financial structuring for the bussiness, that is, to obtain financing for the items not covered by the PROEX, guarantees, fund administration, support in value emission for public auction, etc.” (PEEU, 2009, Author’s highlight). BNDES administrates funds which mostly come from “contributions made by Brazilian companies in areas associated to their payrolls”. For this reason, BNDES “must invest in projects that promote the growth of emplyment in Brazil” (PEEU, 2009). BNDES’ products are aimed for trading companies “of any size, constitued under Brazilian laws and having their headquarters and administration in Brazil”. BNDES can finance “up to 100% of the export’s value, in any INCOTERM”, at interest rates determined by the sum of the financial cost, the Bank’s remuneration and guarantee cost (PEEU, 2009). The financial cost is the LIBOR Rate corresponding to the period, while the Bank’s remunerations is established case by case. The maximum period is 12 years (PEEU, 2009).

h. Comparative analysis This section synthesizes the information relative to each mechanism. In particular, the geographic scope is indicated (whether it is national, regional or global), who it is intended for, what kind of projects/phase of projects it finances, the maximum amount assignable (in case there is such a limit), and the organization that emits it. It is also indicated whether the mechanisms has been used for renewable energy projects and if so the total amount assigned.

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1. BANDES Green Interest Rate Programme

• Geographic scope: National • Aimed for: Companies (through the FEE, and “Rate 0”) and persons (through “Rate

0”). • Phase of Project being financed: Feasibility study; project realization; buying of

solar thermal energy equipment. • Maximum assignable amount per project: Technical assistance: US$ 5000;

Investment project: according to borrower’s credit evaluation. • Organization: BANDES Uruguay Bank.

2. Green finance – HSBC

• Geographic scope: National. • Aimed for: Companies and persons. • Phase of Project being financed: buying of solar thermal energy equipment. • Organization: HSBC Uruguay Bank.

3. Italy-Uruguay Loan

• Geographic scope: National. • Aimed for: Italian-Uruguayan and Uruguayan SMEs. • Financeable : acquisition of goods (except for sumptuary goods), raw materials and

supplies, transfer of technology, training, technical and commercial assistance, industrial patents and licenses.

• Maximum assignable amount per project: € 500.000 (minimum € 15.000). • Organization: CND. • Comments: This may be an option for Uruguayan SMEs that want, for instance, to

acquire renewable energy equipment or training in this area. One of the requirements is that 50% of the financed goods and services are of Italian origin.

4. AFAP

• Geographic scope: National. • Aimed for: Companies that emit title values. • Financing mechanisms:

o Public limited company’s stock o PLC’s negotiable obligations o Values or unit shares of Closed Investment Funds o Debt titles or Participation Certificates on Financial Trusteeships

• Maximum assignable amount per project: Depends on the AFAP. Between US$ 17 million and US$ 184 million (see Table 9).

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• Organization: Pension Fund Administrators (AFAP).

5. IDB’s SCF

• Geographic scope: Regional. • Aimed for: Large banks and private investments. Public and mixed capital

companies. • Phase of Project being financed: Technical assistance and project realization. • Maximum assignable amount per project: US$ 200 million per project. • Organization: IDB.

6. CAF

• Geographic scope: Regional. • Aimed for: Sector público y privado. • Type of mechanism: “Credit operations, non refundable resources and support in the

financial and technical structure of projects for the public and private sector in Latin America” (CAF, 2010a). Besides, CAF offers specifically for renewable energy projects, advances in income generated by future emission reductions.

• Organization: CAF. • Assigned budget: For the sector “electricity, gas and water supply” more than US$

2.900 million were assigned in 2009 (CAF, 2009b).

7. ECA

• Geographic scope: International. • Aimed for: Companies that import goods and/or services from countries with ECAs. • Phase of Project being financed: Acquirement of goods and services. • Organization: ECAs. • Comments: When it comes to import goods and/or services for renewable energy

undertakings it may be convenient to consider the ECA of the good’s country of origin as a possible financing agent, particularly Danish EKF, due to its experience with wind farm projects having Vestas wind generators, as well as Banco do Brasil (BB) and Banco Nacional de Desenvolvimento Econômico e Social (BNDES).

Following tables show all financing mechanisms covered in this report, in order to make it easier to compare them.

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Organization Mechanism Public or Private

Geographic scope

Phase of Project being financed Interest rate Guarantee

Bandes Uruguay Bank

Green interest rate programme

Private National Feasibility study. Project realization.

9-9,5% Energy Efficiency Trusteeship (FEE).

HSBC Bank Green financing

Private National Acquisition of solar thermal energy equipment.

9-11%

National Corporation for Development (CND)

Italy-Uruguay loan

Public National Acquisition of goods, transfer of technology, training.

Adjusted to companie’s cash flow.

AFAP Public (República AFAP) and private (remaining AFAPs)

National Participation in: • Public limited

company’s stock • PLC’s negotiable

obligations • Values or unit shares of

Closed Investemnt Funds

• Debt titles or Participation Certificates on Financial Trusteeships


Public Regional Financing of both corporate and greenfield projects.

CAF Latinamerican Carbon, Clean and Alternative Energy Programme (PLAC+e). Project Finance.

Public Regional Up to 50% of project’s costs, including construction costs. Advances in income due to emission reductions.

Variable rate (Libor plus margin) and repayment adjusted to project’s cash flow.

Banco do Brasil

Brazilian Exports Financing Programme (PROEX).

Mixed Global Brazilian exports of goods and services.

Low interest rates (variable or fixed Libor).

Guarantee, bails, letter of credit of first line financial institutions, exports

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credit insurance.

BNDES Public Global Up to 100% of the export’s value, in any INCOTERM.

Financial cost: corresponding LIBOR rate. BNDES remuneration: established case by case.

Table 12: Comparative analysis of financial mechanisms.

Organization Mechanism Repayment period

Minimum amount being

financed

Maximumamount being financed Requirements

Bandes Uruguay Bank

Green interest rate programme

6-36 months Up to US$ 5.000 for Technical Assistance loans.

The general requirements and documentation needed are described in Bandes (2010).

HSBC Bank Green financing 18 or 24 months The equipment must be provided by certain company.

National Corporation for Development (CND)

Italy-Uruguay loan

1-10 years € 15.000 € 500.000 The financeable goods and/or services must be to a 50% of Italian origin, although up to 50% may be of Uruguayan origin or from other Latin American country. Borrowers must be SMEs (see Table 6).

AFAP Between US$ 28: and 184: (see Table 9).

Risk qualification emitted by a qualifier registered in the Central Bank (BCU) greater or equal to BBB- or its equivalent, among others.


US$ 200: The project must be located in a member country of the IDB Group, and the company must be major property of a national of a member country of the IDB Group, among other requirements.

CAF Latinamerican Carbon, Clean and Alternative Energy

For long term loans, 12 to 15 years

For advances in selling of CER’s, a minimum of 150.000 tCO2e avoided before 31st December 2012

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Programme (PLAC+e). Project Finance.

is required.

Banco do Brasil

Brazilian Exports Financing Programme (PROEX).

Up to 10 years. Up to 100% of the export.

The project must involve equipment and/or services of Brazilian origin. It doesn´t cover expenses out of Brazil.

BNDES Up to 12 years. Up to 100% of the export.

Aimed for export companies of any size, constitued under Brazilian laws and having headquarters in Brazil.

Table 13: Comparative analysis of financial mechanisms (cont.).

i. Succesful experiences and barriers

Regarding the usage of the Green Interest Rate Programme, one succesful experience was the installation of a solar thermal energy system at CAMEC’s Hospital in Rosario at the end of 2008. The total collector area is 96 m2, and the system supplies 68% of the hospital’s hot water demand (CAMEC, 2010). The project was finances through this credit line, for which, as was stated before, the Energy Efficiency Trusteeship (FEE) guarantees a part of the requested loan. However, many companies already have some credit line at their bank, and usually these lines are more favorable than the ones obtained through the FEE. As was pointed out before in this report, the IDB’s SCF received multiple consultations during the tender of 150 MW wind energy, and eventhough it is too soon to evaluate its impact, it may be an option to consider for large scale projects. For this type of projects, the participation of the AFAP may be an option, eventhough it is mandatory that the company emits private titles, and it is quite small the number of Uruguayan companies that fullfil this requirement.

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4. SUPPORTING MECHANISMS Following table summarizes the supporting mechanisms presented in this report.

Organization Mechanism Type of mechanism

Phase of project being

supported

Geographic scope

Website

CND Energy Efficiency Trusteeship (FEE)

Trusteeship Feasibility study. Realization.

National http://www.eficienciaenergetica.gub.uy/fee.htm

IDB MIF Non refundable funds

Regional http://www.iadb.org/mif/home/index.cfm?lang=es

IDB SECCI IDB Fund Non refundable funds

Previous studies

Regional http://www.iadb.org/es/temas/cambio-climatico-y-energia-renovable/iniciativa-de-energia-sostenible-y-cambio-climatico,1483.html

World Bank, UN, among others

GEF Non refundable funds

The whole project.

Global www.gef.org.uy

World Bank, UN, among others

GEF’s SGP Non refundable funds

The whole project.

Global www.ppduruguay.undp.org.uy

CDM’s Designated National Authority in Uruguay

CDM The whole project.

Global www.cambioclimatico.gub.uy

Table 14: List of supporting mechanisms.

a. Energy Efficiency Trusteeship

The energy Efficiency Trusteeship (FEE) is a “guarantee fund created to encourage companies and other energy users, to develop energy efficiency projects” (PEE, 2010a).

Investments in renewable energy are clearly among the kind of investments that the FEE intends to promote. The FEE “operates as a guarantee fund administrated by the National Corporation for Development (CND) within the National Guarantee System (SNG) in accordance with local Institutions of Financial Intermediation (IFIs), interested in developing these credit lines” (PEE, 2010a).

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The funds that constitute the FEE come from “a GEF donation received by the Ministery of Industry, Energy and Mining (MIEM) through the World Bank. The FEE’s capital is US$ 2.475.000” (PEE, 2010a).

The guarantee that is given is for 60% of the total amount being financed, and up to 80% of the total investment may be financed (PEEa, 2010).

There are to date4 two IFIs with credit lines that accept the FEE as a guarantee, Bandes Uruguay Bank and Bank of the Oriental Republic of Uruguay (BROU). The payment and interest rates depend on the loan and on each bank, but since 60% of the guarantees are given by a fund administrated by the State, the rates are relatively low, since the risk involved is also low.

The FEE guarantees Loans for Technical Assistance, that is, loans to finance “feasibility studies and other studies required for the preparation of projects”, as well as loans to carry out these projects. Both stages or just one of them may be financed.

The guarantees both for Technical Assistance and Investment Project Loans must be required by an ESCO registered at the National Direction of Energy and Nuclear Technology (DNETN). The documentation presented by the ESCO is “a letter guaranteeing technically that the Energy Efficiency project being presented fullfils the requirements established by the DNETN”. The requirements are basically the fullfilment of the Energy Efficiency condition and environmental requirements (PEE, 2010a).

An Executive Project must also be presented and it must contain following information (PEE, 2010a):

• Forecasted emission reduction in the period (in tCO2e) • Rate of Investment (in US$) / Emission reduction (in tCO2e) • Rate of Saving due to efficiency (in US$) / Total energy saving

b. IDB’s MIF IDB’s Multilateral Investment Fund (MIF), created in 1993, has as one of its general goals to “promote economic growth with inclusion through the development of the private sector, particularly SME’s”. The MIF makes donations and investments for the realization of projects having certain characteristics. “MIF’s projects intend to become autosustainable

4 September, 2010.

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and potentially reach a scale capable of changing the lives of millions of people in latin America and the Caribbean ” (FOMIN, 2010). The MIF administrates non refundable resources “for technical asistance for the development of SMEs in Latin America and the Caribbean”. The idea is also to create a community between the beneficiaries of the assistance (governments, civil societie’s organizations, private sector) that share the learned lessons during the execution of the projects, which is considered a “central part of the MIF’s work” (FOMIN, 2010). The three areas in which the MIF operates are “business frame, or the environment in which the private sector develops (…) business development, or the labor capacity of the workers and the company (…) financial democracy, or the broadest access to the financial system” (FOMIN, 2010, Author’s highlights). In March 2007 MIF II was initiated, with the corresponding resource replacement which enables the MIF to “continue financing innovative projects up to 2015”. On MIF’s website it can be read: “The most basic strategy of MIF is to finance innovative pilot projects and to develop new projects based on experiencesthat had obtained promising results and have potential to be replied at a greater scale” (FOMIN, 2010, Author’s highlights). The projects presented at the MIF must have following characteristics (FOMIN, 2010): “Innovation: The projects must introduce new and effective approaches to promote the development of the private sector and reduction of poverty. Demonstration effects: The projects must be capable of being replied in other sectors and/or other countries. Sustainability: Projects must have convincing operational plans and a great potencial of financial sustainability once the MIF’s resources have been payed out. Alliances: MIF’s projects are carried out together with local partners who contribute with 30-50% of the project’s total costs. Additional elements: MIF’s resources must be critical for the result of the project and must be the most adequate choice to finance a specific initiative”. Clearly, a renewable energy project satisfies the first three criteria. On MIF’s website one first evaluation can be done online in order to check whether the project and the organization that presents it fulfills the requirements or not. In this way, for instance, one can easily verify that projects for more than US$ 2 million are not accepted, nor are investment projects in “buying of equipment, vehicles, lands, offices or construction” (FOMIN, 2010). It must be pointed out that between 2007 to date, 6 projects cathegorized as “Clean energy markets”, in Mexico, Dominican Republic, Colombia, Perú and Paraguay have been

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approved. Particularly distinguishable are the projects implemented in Perú and Colombia, both intitled “Promotion of Clean Energy and Energy Efficiency Market Opportunities”. In Colombia, this projects is being executed by the Chamber of Commerce of Bogotá, while in Perú it’s being carried out by the National Environmental Fund (“private institution, without lucrative purpose responsible for promoting public and private investment in the development of environmental projects in Perú”, FONAM, 2010). The goal of these projects is to “increase market oportunities for SMEs and improve their competitiveness. The purpose is to promote the usage of renewable energy and energy efficiency by making it easier to access economic incentives that support the uasage of clean technologies” (FOMIN, 2010).

c. SECCI IDB Fund IDB created in 2007 a Special Programme on Sustainable Energy and Climate Change, called SECCI Funds, for “the financing of activities that will support the implementation of the Sustainable Energy and Climate Change Initiative (SECCI)”. These activities are related to following areas (IDB, 2007):

• Renewable energy and energy efficiency. • Development of biofuels. • Carbon finance. • Climate change adaptation.

The funds are non refundable, except for the cases in which they are used for “technical assistance to the private sector for project preparation and the financing of the project is provided by a party other than the IDB or the Inter-American Investment Corporation” (IDB, 2007). In the field of renewable energy following activities are financed:

• Preparation, review and development of sectoral studies required for Project development such as mapping of solar radiation, wind velocity, geotermal potential, etc.

• Required studies (pre-feasibility, feasibility, environmental and social studies, etc) to develop projects of renewable energy projects (such as small hydros, wind, solar, geothermal, wave energy, and methane recovery form landfills, among others), and energy efficiency activities.

• Energy audits for priority sectors (industry and manufacturing, housing, wáter and sanitation, public lighting), sub-national governments (states and municipalities), and public and private entities (…)

• Studies to carry out regulatory and institutional analysis as an input for improvements of current national and/or local regulatory and institutional

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frameworks to remove barriers for investments in renewable energy and energy efficiency.

• Studies for technology development and adaptation, pilot projects, and technology cooperation.

• Preparatory studies in support of loan/guarantee operations for non-sovereign operations in renewable energy and energy efficiency.

• Training and dissemination activities” (IDB, 2007). All financed activities deal with studies of some kind. Regarding specifically biofuels, the choosable studies are detailed in IDB (2007). Some of them are related to the legal framework and to economic feasibility studies. Since Uruguay has advanced much in this matter (see for instance the report “Information on the technological line and state of the art of renewable energies in Uruguay”), these activities are not explained here any further, except for the “preparatory studies in support of loan/guarantee operations for non-sovereign operations in biofuels” (BID, 2007). In as much as carbon market is concerned, following activities are financed: “

• Support IDB operation teams in evaluation of investment projects in priority sectors (energy, transport, water and sanitation, rural development-avoiding deforestation) and their eligibility for CDM.

• Assist Ministries, designated national authorities, and public/private Project developers in the identification of potential projects for carbon finance in priority sectors (…)

• For projects where upon request buyers are identified, the fund will also finance the development of the terms for the Emission Reductions Purchase Agreement (ERPA).

• Support carbon finance project cycle activities and conduct the Project development (pre-feasibility, feasibility and final designs). Financial structuring can also be included (...)

• Development of methane capture projects. • Development of baseline studies and new methodologies in priority areas that can

provide replication throughout the LAC region (...) • Development of capacity building programs for academic institutions and private

associations in the carbon finance and adaptation to climate change area. • Development of projects that contribute to the development of approaches and

methodologies related to accessing carbon finance for avoided or reduced deforestation.

• Development of training and dissemination activities (...) • Complementary activities involving regulatory and institutional analysis as an input

for technical assistance loans, policy and investment lending under a programmatic CDM approach“ (IDB, 2007).

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In general, it is clear that the Fund’s resources must be used to “hire consulting services, buy the goods needed to carry out the studies” (however, the total amount for acquiring goods cannot be greater than 30% of the project’s total amount), “complementary training activities (such as workshops, technical sessions, seminars, etc.)” Besides, “the Fund may finance equipment and services needed to increase investment opportunities, including pilot projects in technology development and adaptation (IDB, 2007, Author’s highlight). The institutions that can apply to the Fund are (IDB, 2007):

• Government ministries and climate change designated national authorities • Planning agencies • Public and private corporations • Sub-national governments (regional, provincial, state and municipal) • Private project developers • NGOs • Academic and research institutions.

No more than US$ 1.000.000 may be assigned to a single project. Furthermore, “no country can execute more than 30% of the accumulated allocation of resources allocated to the SECCI IDB Fund (…) The beneficiary entity or entities will share the financial costs of each operation by an amount to be decided on a case-by-case basis, and which shall not be lower than 20% of the total cost. The total in kind contribution can be no more than 20% of the total cost of the project” (IDB, 2007).

d. Global Environment Facility (GEF) The Global Environment Facility (GEF), “is an international association whose focus is set on environmental issues and in initiatives of sustainable development on a global scale. It is an association formes by 178 countries, international organizations, NGOs and the private sector. Created in 1991, the GEF is today the main financer of sustainable development projacts in the whole world, especially in developing countries or in countries with transition economies (...) Around 15 projects, for a total amount of approximately US$ 130 million, have been executed (in Uruguay, Author’s Note) since that year (1992, Author’s Note) and many have reached an important development and permanency, showing the pertinency of its implementation. Around 15 projects have been approved, are being executed or are about to be implemented today” (FMAM, 2010). The GEF’s fund replenishment is made every four years, having being approved this year (2010) the fifth fund replenishment, in a new resource assignment frame known as STAR (System for Transparent Allocation of Resources). For this quadrennium, Uruguay will be assigned around US$ 6.000.000. For the past quadrennium, US$ 3.100.000 were assigned to the Climate Change area (Elissalde, 2010).

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Regarding renewable energy, US$ 950.000 were used for the Wind energy Programme in the past quadrennium. The project initiated in June 2007 and has a duration of 4 years. The Programme is being executed by the MIEM, through the DNETN. The goals defined in the project pursue, among other things, to develop “a political and regulatory framework for wind energy in Uruguay”, to “increase business capacities in order to prepare and implement wind energy technologies at a public and private level”, and to remove “technological barriers through a set of actions, including the installation of a 5 MW wind farm” (PNUD, 2010). As it is clear from the section of the State of the Art Report referred to the wind farm at Sierra de los Caracoles, the goals and objectives of this Programme were reached and even exceeded, as it is the case of the wind farm’s installed power capacity. In the past quadrennium, the Energy Efficiency Programme was also financed through the GEF. This Programme “planifies and develops several actions oriented towards the generation of a conciusness on the benefits of the efficient use of energy, as well as the promotion of the incorporation into the market of a growing demand for equipment energitcally efficient”. The Programme is financed through “a donation of the GEF through the World Bank, which contributes with US$ 6.875.000 and with MIEM and UTE’s (public electriciy company, A/N) funds, that contribute with US$ 8.200.000”. As was stated before, it is in the framework of this Programme that the FEE was created (see a). Recall that the FEE guarantees part of loans for energy efficiency projects, in which renewable energy projects are included (PEE, 2010b). The two examples mentioned above are succesful cases of GEF projects related directly or indirectly to renewable energy. Today, after the STAR has been adopted, countries like Uruguay do not have upper limits on the focal areas, that is, the distribution of the global amount assigned to the country among these areas is flexible (Elissalde, 2010). According to the new executive direction of the GEF, the project cycle will not last more than 22 months. This cycle starts with the elaboration of the PIF (Project Identification Form). The project must be first approved by the GEF’s Focal Point in Uruguay, who, in order to evaluate it, must consult the different state dependencies related to some of the areas covered by the project, in order to confirm that the project is in accordance to the government’s strategic goals in the area. The project cycle was revised in November 2010, and the document titled “GEF Project and programmatic approach cycles” was approved. This document establishes the procedures to be followed by the four different types of projects: full sized projects, or FSPs, which are those requesting more than one million USD in GEF resources; medium-sized projects, or MSPs, which require a funding less or equal than one million USD; programmatic approaches, or PAs, which tend to achieve larger scale impacts through medium- and long term strategies; and finally enabling

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activities, or EAs. The cycle for each of these modalities are described in detail in the above-mentioned document, which is available in the web (see GEF, 2010b).

e. GEF’s Small Grant’s Programme - Uruguay The Small Grant’s Programme (SGP) is financed by the GEF and implemented by the United Nations Development Programme (UNDP). It is aimed for organizations from the civil society that wish to implement environmental projects in general, among which projects on climate change adaption are included, in which, in turn, renewable energy projects are included. “The Programme’s fundamental principles are participation, democracy, flexibility and transparency. It promotes and supports community participation, local inhabitants, NGOs, Base Community Organizations (BCO), and other institutional actors involved in all aspects regarding planification, design and implementation” (PPD, 2010a). With the adoption of STAR, the SGP in Uruguay, which was previously funded only with Uruguay’s GEF resources, can now access the resources that STAR assigns to the country specifically for the SGP. The annual amount will be US$ 200.000 plus what the Uruguayan government eventually assigns the SGP with resources from what STAR determines for Uruguay (Sena, 2010b). The amount available for each project is between US$ 5.000 and US$ 35.000, and a monetary or in species counterpart equal to or greater than the solicited amount is required. “A counterpart in species can be infrastructure, vehicles, lands, volonteer labor, etc., to be used during the project’s development” (PPD, 2010b y 2010c). The request process starts with the opening of calls for projects made once a year, normally by the middle of the year, eventhough two calls have been made in one year, since the SGP was put in practice in Uruguay in 2005 (Sena, 2010a). From 2006 to date 59 proyects have been approved, for a total amount of US$ 1.167.519 (PPD, 2010d).

f. Clean Development Mechanism (CDM) The Clean Development Mechanism (CDM) was created by the Kyoto Protocole in its 12th Article. Since this Protocole establishes goals for emission reduction for developed countries –and not for developing countries-, the CDM makes it possible for these countries to reach part of their goals by buying Certified Emission Reductions (CERs). These certificates can be obtained by projects located in developing countries. The organizations that execute these projects and obtain CERs, may then sell them to developed countries, and so making the project economically feasible (UNFCC, 2010a). The CDM’s project cycle involves following phases (Kasprzyk, 2010):

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1. National approval. 2. Validation process. 3. Registry at the CDM’s Executive Board (EB). 4. Emission monitoring and calculation of baseline emissions. 5. Generation of CERs.

For the first point, the project must be presented at the CDM’s DNA, which in the case of Uruguay is the Climate Change Unit of the Ministry of Housing, Territorial Order and Environment (MVOTMA). The DNA approves the project or not depending on whether it contributes to the countrie’s sustainable development or not. The validation process (phase 2) may be initiated paralell to the first phase. The latter implies that an external agent, known as Designated Operational Entity (DOE), analyzes the Project Design Document (PDD) and verifies that (Kasprzyk, 2010):

a) The project is additional: this means that if it wasn’t for the CDM, the project wouldn’t be executed, that is the CDM improves the project’s profitability to the point that it becomes economically feasible.

b) The baseline being used is correct. c) The methodology and procedures used for monitoring the undertaking’s

emissions are correct. A list of DOEs may be found in UNFCC (2010b). Once the DOE has verified that the items a, b and c are fulfilled, a Validation Report is made, which is presented before the CDM’s EB, in order to register the project. Once the EB approves the Final Report, phase 4 is initiated, and it must be executed by other DOE than the one that made the Validation Report. The goal of this monitoring phase is to measure the undertaking’s emissions, to calculate the baseline’s emissions and to obtain the avoided emissions by their subtraction. Once the reductions have been effectively determined, CERs are emitted and are ready to be commercialized. There are in Uruguay and to date (October 2010) 12 projects that have national approval, but only one has obtained CERs. It must be kept in mind when evaluating the inclusion of the CDM in a renewable energy project, that the hiring of a DOE as well as the registry request at the CDM imply costs that must be taken into account (Kasprzyk, 2010).

g. Succesful experiences and found barriers Perhaps the most paradigmatic examples of the usage of international support mechanisms are the Energy Efficiency Project and the Wind Energy Programme, financed through the GEF. The CDM implies a relatively slow process which involves costs associated with the obtention of CERs, and this is why CDM is suitable in general only for large scale

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projects. As it follows from the “Report on Information on the Technological Line and State of the Art of Renewable Energies in Uruguay”, most of these large scale projects are relatively recent (after 2005), and only one has been registered at the CDM. As it was pointed out in 3.f, it is interesting to combine the advances in income due to emission reduction contained in CAF’s PLAC+e with the CDM.

5. CONCLUSIONS Many of the mechanisms mentioned in this report haven’t been used specifically for renewable energy projects in Uruguay, and this is why it was of fundamental importance to include them in this report, in order to contribute to their usage for these type of projects. Eventhough the development of renewable energy is very recent in Uruguay, there are already emerging financial products in the local market specifically aimed for this type of investments, such as the “green lines” of Bandes Uruguay Bank and HSBC Bank, directed both to corporations and persons. As it follows from this report, there is a relatively broad spectrum of financial mechanisms, aimed for different types of organizations, for different project phases and even for different types of projects within the field of renewable energy, not only in the national plane but also regionally and even globally. Some of these mechanisms have been used succesfully in Uruguay for renewable energy projects. The CDM, for instance, was successfully used to finance a biomass project (see the report on the Technological Line and State of the Art), the GEF was used to finance the Wind Energy Programme and the Energy Efficiency Programme, the former being of fundamental importance to achieve the goals on wind energy contained in the Energy Policy. Others mechanisms have also been used succesfully but in other areas (SGP, CAF’s products, MIF), and there are even some that have not yet been used (SECCI Fund, for instance). In these last two cases new possibilities and perspectives are open for the development of renewable energy projects. The knowledge of the involved actors on the financial mechanisms available for renewable energy undertakings is of fundamental importance to overcome some of the barriers encountered by the project developers.

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