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Monica_55905 Jul 16

LAEF 2021 - The Future of US Investment

LAEF 2021 - The Future of US Investment image
Summary of LAEF's Boardroom 2, moderated by Marco Biersinger, Director Oil and Gas Corporate Finance, Duff & Phelps, with key participants Aparna Shrivastava, Deputy Chief Climate Officer, U.S International Development Finance Corporation, and Craig O'Connor, Director - Project Finance Division, Export-Import Bank of the United States
Energy and power generation in Latin America and the Caribbean is quite varied, having large hydrocarbon producers like Colombia and Brazil, heavy users of fossil fuels in the Southern Cone such as Bolivia or Mexico, and copious renewable generation. Balancing that mix over the next couple of years will dictate where energy in the region is heading towards, or so are the expectations of Chairperson Marco Biersinger, Director Oil and Gas Corporate Finance, Duff & Phelps.

The session kicked off alongside key participants Aparna Shrivastava, Deputy Chief Climate Officer, U.S International Development Finance Corporation (DFC) and Craig O'Connor, Director - Project Finance Division, Export-Import Bank of the United States (US EXIM Bank), who give overviews on their respective organisations, in light of the new White House administration.

DFC have taken some big steps towards addressing the climate crisis. On April 22nd President Biden convened a climate leaders’ summit to put forth important commitments relating to the climate crisis, and as part of this the Development Finance Corporation promised to adhere to a few key things, starting with a net zero portfolio target by 2040, with a third of their portfolio investments to be climate-linked by 2023 onwards. To top this, a 50-million-dollar technical assistance facility has been set up specifically to support the building of a robust pipeline of investments relating to climate change, supporting projects to help them become investment-ready. DFC’s broader portfolio is at 30 billion USD, and per year they're investing approximately between 4 and 5 billion dollars in new commitments. The plan, according to Ms. Srivastava, is to be increasing that to 6 billion, so they’re looking to deploy approximately 2 billion dollars of capital towards climate investments globally.

Ms. Shrivastava was asked to describe the ideal investment candidate that organizations like DFC look for, as well as the general investment process.

“Latin America specifically is a very high priority region for us and it makes up 30% of our portfolio. When it comes to the ideal project, there's not one single recipe that we're following,” she stated.

Their continuing support of the private sector in different economies is combined with an eagerness to work with innovative partners that are aligned with their climate change goals, whether is energy food security, water stewardship, coastal resilience, or e-mobility.

As for Exim Bank, what’s their general approach to lending and project finance? As expressed by Craig O’Connor, their focus is on providing bankability to projects, which in Latin America and the Caribbean might be challenging at times, but those challenges are not unsurmountable. They expressed a similar approach to DFC towards greener investment.

“Exim Bank should increase its support for renewable energy and environmentally beneficial exports and so, similar to Aparna's point, that’s a type of transaction favoured by us,” commented Mr. O’Connor. “But ultimately we are demand driven and part of my role is to increase the probability of demand.”

“The funds are there, all we need is a reasonable assurance of repayment, and bankability.”

Exim Bank is close to announcing a project they supported in Central America where the investment is not only providing resilience in standby power, but also reducing purchases from the grid that will save this facility a hundred thousand dollars over 30 years, which illustrates the economic rationale in place.

Exim Bank is also looking at renewable fuels, wind projects, solar mini grids and storage, among other similar ventures, making this an interesting environment.

“It all depends on the viability of the project, the full assessment of the risk,” Mr. O’Connor said.