UN Division for Sustainable Development

Case Study Detail Record

Organization type:	Intergovernmental Organization

Name of Organization:	The Renewable Energy and Energy Efficiency Partnership (REEEP)

Name of Focal Point:	Binu Parthan

Initiative Title:	Support for Establishing a Renewable Energy/Energy Efficiency Finance Facility in Brazil

Internet links:	http://www.reeep.org/index.cfm?articleid=1393

Scope:	National: - Brazil

Status:	Completed

Timeframe:	Start: 2005 End: 2006

Lead Institution:	LaGuardia Foundation

Stakeholders/Partners:	REEEP, Blue Moon Fund

Relevent issues:	- Renewable energy including hydro power

Objectives/Challenges:

Objective:
To establish a dedicated private equity investment fund for renewable energy and energy efficiency.
Challenge:
A requirement for the investment fund to limit its activities to a certain geographical area within Brazil, corresponding to the concession area of the distribution utility.

Lessons Learned:

The local electricity utilities should have an interest and stake in the power project to ensure its success;
While the fund is set out to make investments in biomass, energy efficiency and hydro power, it has since focused on hydro power to take advantage of the current opportunities in Brazil.

Policy Options:

A fund was established with about $ 97 million investments which will invest in hydro power projects to implement projects that will add 198 MW of hydro generation capacity.

Summary:

To meet environmental and energy goals, Brazil needs to establish more small-scale renewable and energy efficiency projects, an objective supported by the REEEP and its co-funding partners, the Blue Moon Fund and local consulting companies. The REEEP thus provided seed funds to support the establishment of a dedicated private equity investment fund to the La Guardia Foundation to provide financing for clean energy in Brazil.
The project identified potential sources of capital, promoted the involvement of national and local investors and financial institutions, and supported the adaptation of orthodox financial mechanisms and business structures. The project reduced issues of risk and contributed towards their mitigation through training, guarantees and bundling.
The project built on lessons already learned from a feasibility study carried out in Brazil in 2004-2005.The project team recognised that the main activities necessary to establish a renewable and energy efficiency fund in Brazil were the preparation of a project pipeline, the involvement of financial advisory services, the preparation of consistent legal documents, the raising of funds and the overall coordination of the project. These activities were cost shared with local fund managers experienced in renewables. Debt in local currency was available at attractive rates of interest for investors in renewable energy thanks to provisions made by the National Development Bank – the BNDES.
The output is a first-of its-kind $70 million equity and guarantee facility to finance small hydropower, with a total leverage of $280 million. Based on average construction costs of small hydropower plants in Brazil, at least 200 MW of new, installed capacity of renewable energy generation could be built within the first three years of the fund.