Tessa Williams-Robertson presented on innovative financing mechanisms to unlock capital for sustainable energy needs in the Caribbean region. An estimated $10-20 billion is needed for renewable energy and energy efficiency projects over the next decade to transition away from expensive imported fossil fuels. Concessional financing from climate funds and development partners can help bridge this financing gap by making projects more viable given regional constraints like small markets and high perceived risk. Public-private partnerships require careful due diligence and appropriate risk allocation to succeed. The CDB is utilizing blended resources including grants, loans, and interest subsidies to fund initiatives like geothermal energy assessment, streetlight retrofits, and a 150kW solar plant.

1. Tessa Williams-Robertson
Head, Renewable Energy and Energy Efficiency Unit
Innovative Financing Mechanisms & Tools:
How to unlock the appropriate quantity and
quality of capital for the Region’s sustainable
energy needs
Fifth Caribbean Sustainable Energy Forum
British Colonial Hilton Hotel, Nassau, The Bahamas
January 23-25, 2017

2. The macro-economic impact of the high cost of imported fuel and the
consequential high electricity price are reflected in deteriorating performance
indicators in most BMCs. High levels of debt to GDP and depletion of foreign
reserves are directly related to this dependence on imported oil. High
electricity prices erode the competitiveness of the regional economies and,
therefore, their ability to earn the required foreign exchange to pay for imports,
including oil. Unless, therefore, we can reduce our dependency on imported
fossil fuels, and unless we can substantially reduce energy costs, we will not
succeed in improving our competitiveness and reducing our vulnerability to
external shocks. – DR. WILLIAM WARREN SMITH, CDB PRESIDENT (2014)
The Energy Sector is important
“
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3. High-level estimates of financing the gap
RE Plant Investment
Estimate
next 10 years
low high
USD8 billion to USD11 billion
Other Costs
infrastructure & implementation costs
+10%
Rough estimates for RE are already › USD10 billion.
20% EE target by 2027 (electricity sector) approx. USD4 billion
We are not too far from USD20 billion estimates!

4. Private Sector
• Typical Debt: Equity - 70:30
Guarantees: MIGA; EDC-Canada; EX-IM Bank; OPIC
Equity: IFC
Developmental/concessional financing
• Multilaterals
• Donors/bilateral
• Blended Resources with MFIs; Global Climate Funds
• Financial Intermediaries - Development Banks
Commercial banks
• Lower perceived risk
• May benefit from Partial Risk Guarantee Schemes
Financing to bridge gap

5. Why concessional financing?
Regional Constraints
– Mostly small domestic markets, no interconnection
– Governments unable to provide subsidies
• High indebtedness
• Fiscal constraints
• Low growth
– High price of electricity impacting competitiveness – FDI, trade
– Vulnerability to climate change impacts, disaster-prone
– Perceived high risk of investment

6. CDB financing innovation through
resource mobilization
Global climate change
concessional resources
Green Climate Fund, Adaptation Fund: CDB accreditation
EIB Climate Action Line of Credit: interest rate subsidy
Sustainable Energy in the Eastern Caribbean: EU-CIF/DFID
GeoSmart Initiative: Geothermal energy development in the
Eastern Caribbean: DFID, EU-CIF
IDB/CDB Sustainable Energy Facility: now + GCF USD80
million for geothermal
Loans: blended grants / loans Investment projects
Technical assistance:
capacity-building, institutional
strengthening, energy audits
Canadian Support to Energy Sector in the Caribbean
GIZ-REETA support for financial institutions
Sustainable Energy in the Eastern Caribbean: EU-CIF/DFID

7. Consider these first!
• Integrated Resource Plan done for the Energy Sector?
– Government-driven; solicited vs. unsolicited
• Does the Legal Framework allow or support investment?
• Feasibility established -technical, financial, ESIA?
• Appropriate mechanism for financing
– Government/public sector ownership
– Private sector: equity + debt – IPP + adequate PPA, off-taker risk?
– PPP – credible investor as partner; adequate PPA, off-taker risk?
• Financial viability of investment
– Terms of financing: price, term, grace – impact on tariff to consumer?
• TA or Capacity building required? Focal Point?
• Transparent Procurement Process?

8. Independent Power Producers (IPPs)
Governed by binding legal agreements
• PPAs, competitive tariff/price
• reasonable return guaranteed – ‘take-or-pay’ if to be financed;
non-recourse financing
IPPs selected competitively, transparently in response to RFP
• For example: Jamaica auctions for RE
Inadequate response = Risk perception
• Is risk appropriately residing with entity best placed to take it
on? Re-examine.

9. Public Private Partnerships (PPPs)
A long-term contract between a private party and a government entity, for
providing a public asset or service, in which the private party bears significant
risk and management responsibility, and remuneration is linked to
performance. – World Bank PPP (ppp.worldbank.org)
““

10. PPPs: A cautionary tale
• Capacity issue
- Advisory services available: MFI-supported
Regional PPP Support Unit in CDB
• Solicited vs. Unsolicited Proposals
- What do you compare it to?
• Due diligence checks on prospective
developers
- credible vs. incredible
- TRY GOOGLE FIRST!
- Professional services; e.g. Thompson Reuters
World Check
• Appropriate risk allocation

11. PPP Lessons Learned
Post-closing fiscal
surprises
Endless
delays
Failure to close
• Inappropriate risk allocation
• Inadequate due diligence and preparation
• Insufficient fiscal oversight
• Flawed transaction processes
• Gaps in due diligence and preparation
• Lack of capacity
• Insufficient project preparation
• Lack of awareness of PPP potential
• Lack of Regional support mechanisms
Risks Reasons

12. Small-scale interventions also help
• Even small interventions contribute to
targets and culture shifts
- BNTF-type interventions
• Mainstreamed Interventions across
Sectors upgraded
- audits to inform designs, RE/EE components
included
- maintenance capacity assessments for
sustainability
- Climate Vulnerability Assessments for RE
investments
- Insurance?
BNTF solar-powered water system, Belize

13. Energy Performance Contracting
• ESCO contracts with consumer
to deliver a level of energy
savings/energy service
• ESCO paid and project costs
covered by income from EE
savings or RE output
• Transfer technical risk from
client to ESCO
• Clients may be cash poor but
creditworthy
Source: Berliner Energieagentur GmbHF from European Commission Joint
Research Centre

14. An Example: CDB GeoSmart Initiative
Mobilising suitable resources for geothermal energy
• Responds to need for risk mitigation in GE dev.
• Resources address specific risks at each stage of GE dev.
• Resources mobilized include:
– Technical assistance grants
– For investment:
• grants (parallel financing development partners)
• contingently recoverable grants
• concessional loans
• loans at market terms

15. Typical Risk-Cost Profiles for Geothermal &
Appropriate Financing
Source: ESMAP; & IDB/CDB elaboration

16. Street light retrofitting instrument
CDB blending various resources for 100% change-out of streetlights
on the national network
> 50%
savings
Antigua &
Barbuda
St. Kitts & Nevis Saint Lucia
• SEEC (grant and
loan)
• EIB CALC (max.
50% loan + interest
subsidy)
• Executed by APUA
• EIB CALC (interest
subsidy) + CDB
Loan
EIB CALC (interest
subsidy) + CDB Loan
• Negotiating additional CALC resources to satisfy demand.
• Private utilities eligible to access theses resources.

17. THANK YOU
reee@caribank.org
www.caribank.org
Ground-mounted section of CDB’S 150kW Solar PV Plant