Cornerstone Conversation: Bernie Sheahan, Director, International Finance Corporation

by Terrence Murray - February 15, 2011

Cornerstone Conversation: Bernie Sheahan, Director for Latin America Infrastructure Investment, International Finance Corporation (IFC).

Green Energy Reporter: Are renewables an important part of the IFC’s financing activity?

Bernie Sheahan: Renewable energy is a good business for the IFC, generating return on capital of about 20 percent. Under-performing green loans only account for about two percent of our total loan portfolio. About three years ago renewables accounted for just 25 percent of our engagements, compared to 75 percent this year. In 2010 we invested about $900 million in the power sector, a little more than half, or $460 million, supported renewable projects, largely in Asia and Latin America.

G.E.R.: Could you tell us about the green energy market in Latin America, the region you oversee at the IFC?

BS: Until recently Latin America lagged behind Asia or Europe in deploying solar or wind farms, and its green infrastructure consisted of hydro projects, mostly in Chile or Brazil. That’s changing. A country like Mexico makes up for its thin green regulations with its rich wind resources, which provide developers record-levels of wind efficiencies. Last year we helped finance the 250 megawatt Eureus wind project in southern Mexico, which to date is Latin America’s largest wind power plant. Further south, Brazil has been drawing lots of interest as it is looking to tap its offshore wind potential.

G.E.R.: Do you think developers will have an easier time securing financing this year?

BS: Looking back, 2008 and the years leading to the financial crisis were definitely overheated. I think securing funding has become easier and will continue to improve this year. Interestingly, capital is now not just available at large Asian or European project finance banks. Local banks in East Asia or in Latin America are also now also arranging large project finance loans. Over the past couple of years we’ve seen large banks in Colombia, Chile and Peru arrange some of these types of loans.

G.E.R.: What are some of your lending requirements for clean energy projects?

BS: We look at a lot of the same factors commercial banks look at when arranging loans: Does the country have friendly regulations like a feed-in tariff system or long-term off-take agreements. We also look at the country’s overall political stability and if the fundamentals of the project seeking financing offer a good return on capital. I would say we greenlight about 10 percent of all of the projects that we evaluate. Now, unlike private banks, we tend to support projects in developing markets. In effect we take a first-mover risk that a commercial bank might not typically want to take. By entering new markets, like we are currently doing, and arranging financing for pioneer projects, we create a precedent for commercial banks to then step in and finance projects down the line.

G.E.R.: Is the IFC increasing green energy investments this year?

BS: We’re looking to invest somewhere in the mid $500 million range this year to support green energy projects. We are largely supporting hydro, solar and wind projects in Latin American, with some in Africa and Asia.




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