Thursday, 16 February 2017

Colombian bank gears up for renewables with green bond issue, by Alexandre Spatuzza, Recharge News, Feb 16, 2017

 As Colombia’s energy regulator CREG finalises rules for renewable energy tenders, local finance house Bancolombia is ready to lend around $55m to clean-energy projects with money raised via Latin America’s first international green bond issue by a commercial bank.

“We have started disbursing the money and by May we will...announce the projects financed,” Bancolombia’s finance chief Jose Humberto Acosta told Recharge.

Bancolombia finalised the issue of 350bn Colombian pesos ($115m) in January. The bonds were all bought by the World Bank’s International Finance Corporation (IFC) as part of a programme to bolster green bond issues worldwide and help Colombia meet its greenhouse gas reduction target of 20% by 2020.

“About 50% of the issue will be directed to renewable energy,” said Acosta without giving details. The rest will go to other green industries in fields such as construction and sanitation, he added.

The green bond issue comes ahead of the implementation of Colombia’s revamped renewable energy policies, expected to be finalised this year. The country’s power agents, government officials and the energy regulator CREG have until the end of February to conclude a public consultation process to finalise tender rules to contract renewables under 15-year PPAs

Colombia’s Caribbean Sea region of La Guarija has huge wind and solar power potential, but the lack of clear regulations in the 2014 renewable energy bill and the absence of grid connection in the region have delayed the country’s entry onto the global renewable energy scene.

The country has 19MW of wind installed – out of a 16GW of total capacity – but has more than 2GW of wind projects in place, according to the newly-created Colombian Renewable Energy Association (SER). At the same time the government’s 2030 power expansion plan points to around 1GW of wind to be installed and some 300MW of solar.

For Bancolombia, the green bond issue and the partnership with IFC aim to get its clients ready for a growing green technology market.

“For our clients it’s a learning curve and the bank together with IFC will advise its clients on how meet compliance requirements for green projects,” said Acosta.

Another aim of the issue is to mitigate foreign exchange risks for renewable energy projects since the lending will be done in Colombian pesos. Although the government wants renewable energy tenders to be in pesos, energy market players prefer US dollar-denominated auctions.

Even so, Acosta said that the finance will not be significantly cheaper than other loans in Colombia.

For the IFC, Bancolombia’s green bond issue is part of the institution’s programme to support renewable energy and green technology financing in Latin America. Since 2010, the IFC has issued $5.6bn in green bonds worldwide.

The IFC’s manager for the Andean region, Carlos Leiria Pinto, said at the time of the issue that “by investing in the first green bond issued by Bancolombia, we hope to pave the way for other issuers and investors and contribute to the development of the green bond market in Colombia”.

Acosta agreed: “Other banks will follow our footsteps and we ourselves could hold another issue in three years.

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