Financing of Renewable Energy Projects and Associated Transmission (BNDES)

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Country Brazil
Sector Renewable Energy; Sustainable Development
Approval Date 26 April 2017
Total Project Cost USD 600 million
Loan Amount USD 300 million
Borrower Banco Nacional de Desenvolvimento Econômico e Social
Implementation Agency Banco Nacional de Desenvolvimento Econômico e Social

Project SummaryExpand All

- Introduction

Brazil is the largest economy in South America. Brazil’s share of GDP in South America accounts for more than 55%. In recent years, Brazil’s economic development has been volatile. Domestic demand has been contracting and investments are falling. Brazil is also experiencing a significant drop of investment in infrastructure. This negatively impacts the energy sector, which is a critical part of the country’s overall infrastructure. Current energy structure heavily depends on hydel power, with 61% of the country’s total energy power generated by hydel capacity. Volatility in hydel generation has an amplifying effect on the country’s entire energy capacity, due to the excessive reliance on hydel. Alternative renewable energy resources haven’t been fully explored, constrained by financing. In this context, the project is designed with financing facility provided by the New Development Bank (NDB), to enhance the capacity of Brazil’s alternative renewable energy. The project is in alignment with the NDB’s objective to accelerate green financing and promote renewable energy development.

- Project Description

The NDB will support the Banco Nacional de Desenvolvimento Econômico e Social (BNDES) with a two-step loan to on-lend to renewable energy projects and associated transmission projects. The objective of the NDB’s financing is to provide an alternative financing source for BNDES to facilitate development of infrastructure. BNDES is a 100% state owned national bank for economic and social development. BNDES is the main financier for infrastructure projects.

BNDES will finance at least 5 sub-projects under the proposed loan. The proposal for sub-loans will be subject to eligibility criteria and the NDB’s appraisal, where the sub-loan financing is in excess of USD 70 million or assessed as an Environmental or Social Category A. The aggregate exposure for projects in any one of alternative renewable energy areas will not exceed 60% of the total loan amount, to diversify the development. Sub-loan for any single sub-project will be limited to maximum 25% of the total loan.

- Environmental and Social Aspects

The project contributes to a diversified renewable energy portfolio for Brazil’s energy sector, to reduce reliance on hydel and increase the country’s resilience in energy supply. It aligns with the NDB’s focus to support projects that aim at developing renewable energy sources. BNDES will ensure compliance with the country’s legislative requirements and the NDB’s environmental and social framework.

- Financials

The total amount of the loan is USD 300.0 million. For each project, BNDES will finance from its other sources an amount equal to or higher than the sub-loan disbursed by the NDB. Up to 20% of the loan amount can be used by BNDES for financing debentures or bonds for the renewable energy projects.

Financier Amount ($ million)
New Development Bank USD 300.0
BNDES USD 300.0 (Minimum)
- Implementation

The BNDES will be responsible for the assessment of the sub-loans for each renewable energy project. Where the NDB’s approval is required, BNDES will submit due diligence documents, procurement terms, environmental and social assessment, economic and financial analysis and other relevant project reports.