Green bonds set to grow in Colombia

Green bonds set to grow in Colombia

Bonds Debt Capital Markets Corporate & Sovereign Strategy Economy & Policy Fixed Income Funds Loans Project & Infrastructure Finance Energy Electricity Renewable Solar Regulation Colombia Brazil Mexico Peru

Colombia could be the next growth market for green bonds in Latin America, followed by Brazil and Mexico, a project finance banker told LatinFinance.

Before the market can take off, however, governments in the region need to implement clearer regulations to persuade more banks and investors to finance green energy projects, he said.

"There is a huge infrastructure gap in these countries that needs to be solved, but we need more clarity on the regulatory framework and the conditions in which renewable energy auctions take place," the banker said.

Latin American governments could include termination payment clauses in renewable energy contracts to protect lenders in case a project falters. They could also make payments in US dollars, rather than local currencies, to get more international investors involved, the banker said.

In Peru, for example, the government set up a fund to reimburse lenders if Ergon Perú cannot make the payments on the green bonds that it issued in late July, the banker said.

Ergon, a division of the Italian renewable energy company Tozzi Green, sold $222m in 15-year notes through a private placement with nine investors. SMBC arranged the deal and also provided a letter of credit. Ergon used the money to pay off a loan from SMBC and the national development bank Cofide.

Ergon has three 15-year contracts to install and operate 213,441 solar kits in north-central and southern Peru. It receives $28m per year from the grid operator COES for the program.

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