| 

Financial Advisers are Key Players in Early NAMA Design

As CCAP continues its work developing nationally appropriate mitigation actions (NAMAs), it has become increasing clear that successful implementation requires early integration of both policy initiatives and financial mechanisms. These efforts should be advanced in tandem to ensure that policy actions and financial mechanisms are mutually supportive. In this effort, financial advisers have proven to be essential players in the initial NAMA design process as they help calibrate the best means of mobilizing private sector resources consistent with proposed NAMA policy initiatives.

There are countless examples where policy initiatives designed to stimulate clean energy investments do not result in project implementation due to lack of financing. In one Latin American country, for example, all government buildings of a particular size were required to have an energy audit which in theory should have led to the identification of multiple opportunities for financing energy efficiency projects. However, while hundreds of audits were produced, no projects moved forward because government facility managers could not sign contracts for more than one year, while financeable energy savings contracts usually run from 5-10 years. In some countries, partial credit risk guarantees were established for local bank financing of energy efficiency and renewable energy projects, but the guarantees were never utilized because in spite of their existence the commercial bank lending rates were higher than project developers could afford.

A comprehensive review of existing financial market conditions is a crucial first step in designing a NAMA financial mechanism.

This assessment should include current commercial bank lending terms and conditions such as interest rates, loan maturities, and collateral requirements.  It should also review local capital market conditions, as bond financing may offer longer-term maturities than commercial bank loans. Local pension funds are also a potential source of long-term funding, as pension fund managers in several countries are now seeking to diversify their portfolios and make investments in projects that improve the quality of life for their members.

Apart from commercial banks, many countries also have special financial intermediaries or funds dedicated to the financing of local infrastructure and related investments. They may serve as a source of financing and potentially leverage private sector co-financing for NAMA projects without the need to establish new entities. FINDETER in Colombia, BNDES in Brazil, MDFO in the Philippines, and various state development banks in India are good examples.  Discussions with these financial institutions should be included in the financial assessment report.

The financial adviser should work closely with host government officials, donors, local financial institutions and the business community on the design of a financial mechanism. CCAP is serving as a facilitator and financial adviser for these consultations through the operation of special working groups. The goal of these working groups is to ultimately produce NAMA financial mechanisms that have host-government support, donor acceptance, and financial credibility.

CCAP has highly qualified legal/financial experts on our team with extensive experience in designing financial programs that successful utilize donor resources to leverage private sector financing of clean energy projects.  Within CCAP’s MAIN program, we are currently working with several countries on the design of financial mechanisms in concert with consideration of NAMA policy initiatives. Lessons learned from this process will be posted periodically throughout CCAP’s blog and website.

[subscribe2]

Brad joins CCAP as a consultant with 25 years of experience in international finance. He currently serves as President of Resource Mobilization Advisors, an international consulting firm dedicated to facilitating private sector financing for local infrastructure projects in emerging markets. Prior to establishing Resource Mobilization Advisors, Brad was a partner in a Wall Street law firm that specialized in project finance.

As a CCAP consultant, Brad is focused on the MAIN initiative, working closely with developing countries to design financial mechanisms and secure funding for nationally appropriate mitigation actions (NAMAs) and sustainable development projects.

Over the past 25 years Brad has assisted dozens of NGOs, including the United Nations Development Programme, Asia-Pacific Economic Cooperation, the U.S. Agency for International Development and the Inter-American Development Bank. His contracts ranged from presenting financing mechanisms for potential carbon credits, to analyzing the framework of municipal finance in Romania. Prior to coming onboard, Brad was under contract with the Asian Development Bank, working to evaluate the legal and regulatory framework for local governments in Thailand in order to recommend modifications to existing laws that facilitated bond offerings.
Brad holds a Juris Doctorate from Georgetown University of Law and a Bachelor of Science from Minnesota State University.

Tags , , ,

LEAVE A COMMENT