Energy Efficiency-Renewable Energy Fund Structuring and Technical Assistance

This project consisted of two activities. Activity 1: Fund Structuring Services for Fondo de Energías No Convencionales y Gestión Eficiente de la Energía of the Republic of Colombia (FENOGE). In 2014, the Government of Colombia enacted new legislation to promote renewable energy (RE) and energy efficiency (EE), as well as regulate the integration of non-conventional renewable energy sources (FNCEs) into the national energy system. It also foresees the creation of a national fund (FENOGE) to specifically promote investments in FNCEs and EE measures. Consequently, MinMinas approached KfW for support in structuring FENOGE based on existing regulations. Thus, KfW mandated Econoler to help develop financial products for FENOGE and then design and draft the Operations Manual and other documents. Activity 2: Development of New EE/RE Financial Product for Financiera del Desarrollo Territorial S.A. (FINDETER). FINDETER is one of the national development banks to potentially implement an intended operation in the context of the FENOGE and to draw financing for Technical Assistance (TA) from FENOGE. The success of potential FNCE/EE credit products implemented by FINDETER much depends on market demand and the capacity to overcome identified market barriers. KfW mandated Econoler to develop a new financial product dedicated to FNCE/EE for FINDETER.

Econoler carried out the following tasks under Activity 1:

• Provided feedback on the scope of the draft Presidential Decree;
• Developed a fund concept for FENOGE;
• Developed an Operations Manual outlining the fund concept and provided detailed guidelines to administer and operate the FENOGE, namely:
  • Objectives and principles of operations;
  • Institutional setup, organizational structure and staffing;
  • Policies, products and eligibility criteria to support projects and programs;
  • Project and program investment cycle with detailed internal processes;
  • Detailed guidelines for relationship with project developers, program operators and intermediaries, as well as for contracting of counterparties and monitoring support programs;
  • Templates of key internal documents.

 Econoler carried out the following tasks under Activity 2:

• Conducted a market analysis on priority areas and the types of potential project investments, more specifically:
  • Reviewed and updated information on Colombia’s legal and institutional frameworks, with a special focus on all secondary legislation developed or being developed pursuant to the decree; conducted interviews with key policymakers; identified, characterized and evaluated potential EE/RE investment opportunities;
  • Identified a potential pipeline of EE/RE projects;
  • Identified principal market barriers (financial, regulatory, technical, market and cultural) and, based on lessons learned, proposed ways to overcome these; defined various EE/RE investment scenarios to mitigate barriers;
  • Located and conducted interviews with key market players qualified for alternative financing/technical assistance programs and estimated the likely levels of involvement of multilateral and bilateral lenders;
  • Reviewed the added value of FINDETER compared to other players;
  • Developed market transformation strategies for developing EE/RE with clear understanding of the technical assistance required to open up and foster this market.
• Designed detailed EE/RE Credit Products: an iterative process that requires coordination and cooperation among FINDETER departments:
  • Consulted with relevant FINDETER units to draft product proposals that define terms and conditions such as the financial structure of products, market scope, target clients, risk range and pricing;
• Designed a Technical Assistance (TA) Package:
  • Assessed FINDETER capacity and one of its partner banks to determine the type of support necessary;
  • Recommended the necessary support;
  • Developed guidelines on how to deliver TA services for the following critical areas: FINDETER capacity; partner banks capacity; client capacity; and financial support.

 Econoler provided FINDETER and partner banks with the necessary TA and Fund structure to overcome capacity gaps at intervenor level and helped develop the capacity to independently identify bankable eligible projects.