Description: 

The proposed IDB/CTF MiRiG program aims to combine resources from the IP and DPSP to support investment needs of projects that have already completed some exploratory drilling but require concessional risk mitigation support to advance with additional drilling and plant construction, and before they can access commercial debt financing

Background:

Chile’s projected energy demand growth until 2020 is 5.5-6.5 percent per year, with an additional 7-8 GW of installed capacity required by then. Hydropower expansion could meet an important percentage of the expected demand, but some projects have been put on hold because of environmental concerns.

Given that Chile is a net importer of energy resources and dependent on fossil fuels, whose costs have been continuously rising, the GoC has been promoting the development of non-conventional renewable energy (NCRE) to diversify its energy sources in a sustainable way, contributing to a diversified, clean and safe energy matrix. The GoC recently approved legislation to increase the percentage of NCRE to 20 percent of all new contracts by 2025.

Chile also encourages clean energy through total exemption of transmission charges to renewable projects up to 9MW, and partial exemption for projects between 9MW and 20MW.

Objectives and outputs:

Located in the Pacific Ring of Fire, Chile is one of the countries with the highest potential for geothermal energy development in Latin America, with up to 16 GW domestic capacity. Although geothermal developers have increasingly arrived in Chile since 2005, the market remains untapped.

The program intends to support up to three geothermal projects in Chile with the potential to become the first in the country (and at this point in South America), demonstrating the viability of this technology. The program expects to directly enable a minimum of 100-150MW of installed capacity. CTF resources will be used in structuring financial solutions that will mitigate the effects of resource and other project development and operation risks, and incentivize project developers to make the significant additional investments necessary to allow production drilling campaigns and plant construction to go forward.

The project will have demonstration effects proving the technical and economic viability of geothermal technology in Chile, which will increase the confidence of off-takers in subsequent projects. CTF and IDB will leverage the capabilities and resources of the private sector. This program will support projects where private developers have invested a significant amount of seed finance to fund the early stages of exploration (including drilling) and resource confirmation. The program will capitalize the geothermal project development expertise of the seasoned international geothermal developers behind the prospect projects, such as Enel (Italy), Mighty River Power (New Zealand) and EDC (Philippines), as well as knowledge of the local market and business environment.

Geothermal project development costs in Chile are expected to decrease over the years as the first few projects provide demonstration and investment and drilling start to increase, further developing local capacity and contributing to reduction of future cost.

This project summary is drawn from draft project proposals [such as the PAD, PID, SAR, and country investment plan] and may not contain the most up-to-date information.

Project Details:
Cover Note | Project Document | Independent Review | Proposed Decision 
Approved on April 15, 2014 (Approved Decision)
Approved amount(s):
USD 27.7 million (concessional loans/guarantee)
USD 1.05 million (grant funding)
USD 20.0 million (concessional loan/guarantee under DPSP)
USD 52,000 (MPIS technical assistance on grant funding)
USD 1.2 million (MPIS on concessional loan/guarantee)