Clean Technology Fund (CTF)

CIFs Monitor 12

4 November 2015

Read a pdf version of CIFs Monitor 12

Concerns over resource shortfall

Responding to the CTF April semi-annual operational report’s concern over an impending resource shortfall (see CIFs Monitor 11), the May trust fund committee meeting noted “the importance of understanding the expected shortfall of resources and its potential impact on projects and programmes under development in the CTF pipeline”. The committee “urged the MDBs to effectively utilise existing allocations and provide realistic assessments of delayed implementation”. Furthermore, it “requested the CIF administrative unit, in collaboration with the MDBs, to conduct a thorough review of the pipeline, including expected timelines of projects and any potential withdrawal, and present a clear picture on resource availability and the scale of the expected shortfall of resources”. It also requested that the unit explore new elements for the pipeline management process, such as a “potential cancellation policy”. The committee asked them to present options on alternative financing models and options to increase resource availability at the next meeting.

The October semi-annual operational report further underlined the seriousness of the shortfall: “resource availability – and the future of the CTF – has become an issue of strategic importance.” It found that with all active projects and resources considered, the shortfall would amount to $647 million ($818 million should all donor pledges not materialise). The report estimated that a shortfall of resources is likely to take place in December this year. It noted that in anticipation of the shortfall the MDBs have started to “slow down pipeline development or reshape their project origination approaches”, with no new projects or programmes having been added to the pipeline since June 2014. The MDBs have also worked to identify CTF resources that are committed to projects and programmes “that are unlikely to materialise in the short term”. As a result, 10 stalled projects totalling $246 million were dropped from the pipeline, however, the report concluded that the amount of resources that could be released would still “be far from sufficient to meet the resource requirements to fully fund the remaining CTF pipeline.”


Risk management

An April paper reviewing the “minimum threshold margin between CTF projected net income and projected losses as a key risk indicator” was discussed at the May committee meeting (see CIFs Monitor 11). The committee asked the CIF administrative unit to continue the work on the enterprise risk management dashboard, with a view to operationalise it by November. While it was tasked to “closely monitor and report on the projected net income and projected losses on outgoing CTF financial products on a regular basis”, commence “stress testing” and report back on a quarterly basis through the dashboard, they agreed to not set a target minimum threshold for the margins “at this time”. Furthermore, an April paper on CTF pricing policies, examining “whether the CTF’s current lending terms remain appropriate” (see CIFs Monitor 11), was discussed at the May committee meeting. The meeting agreed not to change the lending terms, but continue to monitor them and conduct another review in two years’ time.


Updates on investment plans

India’s investment plan revised

India’s investment plan, originally approved in 2011, has been revised. Four new projects were approved, with funding reallocated from one project ($50 million) and from four projects totalling $400 million, which were dropped from the plan (three ADB and one IBRD project). In its approval, the trust fund committee noted that the total indicative allocation for India under the CTF after the revisions remains at $775 million.


Revised investment plan Amount and date approved MDB services Key project documents
India $450 million reallocated
14 October 2015
Revised investment plan
Solar parks infrastructure IBRD $50 million
ADB $50 million
Solar rooftop PV IBRD $125 million
ADB $125 million
Solar park transmission IBRD $30 million
ADB $50 million
Solar PV Generation by SECI IBRD $20 million


Key donor questions and concerns prior to approval

The UK raised a number of questions regarding the reallocated funding, including whether any of the funds for the projects that were cancelled from the plan had been used. It also asked for an elaboration of the developmental impacts of the projects, including: “are the solar panels manufactured in India? If so, how many jobs will this create?” Furthermore, it asked about safeguards: “The envisaged solar parks will occupy large tracts of land … with significant environmental and social costs. Has the MDB triggered any of their social and environmental safeguards? If so, what are the envisaged social and environmental implications of the projects? If the safeguards have not been triggered, why not?” Furthermore, it asked: “Can the project team provide us with details and outcomes of the stakeholder engagement, in particular, with any affected communities?”


The IBRD and ADB confirmed that no funds for the cancelled projects had been used. However, on development impact they admitted that the solar panels “will be sourced competitively by private developers, and could be domestically manufactured but not necessarily so.” They confirmed that jobs will primarily be created through increased need for operation and maintenance technicians. They are also expecting that the improved energy supply will benefit small and medium-sized businesses and allow them to hire more staff. They further noted that “all MDB social and environmental safeguards will be followed”, and argued that “the preferred sites for solar parks are areas where land is not being utilised for other productive purposes and which are not host to sensitive ecosystems.” They were not able to provide any details on stakeholder engagement, since these will be “developed on a project specific basis during preparation”.


Indonesia’s investment plan revised

Revisions to Indonesia’s investment plan, originally approved in 2010, were approved in May. The plan was also revised in 2013. In the new revision an ADB project on energy efficiency was dropped, with $50 million reallocated to the IBRD Geothermal energy upstream development project.


Key donor questions and concerns prior to approval

The UK commented that the investment plan is now “very much dominated by geothermal [energy], and that emission reductions and cost effectiveness are both slightly lower than in [the] previous [investment plan].” It asked why an energy efficiency project had been dropped, adding: “The ADB has spent nearly $0.5 million in project preparation and is now unable to mobilise the project. We would like to see some lessons learnt from this experience”.


CTF civil society observer Transparency International also submitted comments. It noted that the project document referred to “considerable delays in implementing geothermal projects in Indonesia” and asked “why the geothermal programme is expected to perform better in the future” and thus justify additional funding. Given that the document “indicates that geothermal locations are frequently situated in environmentally sensitive areas”, it asked whether affected stakeholders have been consulted. It also questioned why corruption risks were not mentioned in the risk mitigation plan.


Selected project updates

Caribbean: debt sustainability questioned


Project name Amount and date approved MDB services Key project documents
Dedicated Private Sector Program:
Utility scale renewable energy: geothermal – sustainable energy facility for the eastern Caribbean
$19.05 million (grant)
16 September 2015
Project document


Project details

The sustainable energy facility (SEF) aims to “contribute to the diversification of the energy matrix in an effort to reduce the cost of power generation, as well as greenhouse gas (GHG) emissions and electricity tariffs. This should be achieved through the following components: (1) energy efficiency; (2) regulatory framework, institutional strengthening and capacity building; and (3) renewable energy”, which includes support for geothermal energy. The programme will target public-private partnership projects (PPPs). Out of the six countries included, two are not CIF pilot countries, whilst the remaining are pilot countries under the PPCR.


Key donor questions and concerns prior to approval

Germany commented that Saint Kitts and Nevis (SKN) “is a non-CIF country and highly indebted”, and therefore a macro-economic analysis to evaluate the potential impact of the project on the country’s debt sustainability is required.

The IDB responded: “It is expected that there will be no serious impact to the country’s debt sustainability by the CTF-supported project due to the fact that a public private partnership (PPP), most probably in the form of a Special Purpose Vehicle (SPV) with a majority owned by a private sector consortium, will be the one that takes debt, with no sovereign guarantee required by the country.” It promised to ensure “that loans provided by SEF will not have a negative impact on SKN’s debt sustainability.”


South Africa: no measure of energy access


Project name Amount and date approved MDB services Key project documents
Expansion of the approved South Africa sustainable energy acceleration program (SEAP) $57.5 million reallocation
16 January 2015
IFC Decision
Project document


Project details

In 2010 $85 million was approved for SEAP, to be implemented by the IFC and AfDB. The 2013 update of South Africa’s CTF investment plan released $57.5 million, with an agreement that it would be reallocated to either the IFC private sector element of SEAP or a public sector vehicle efficiency programme under the AfDB. The new proposal aims to transfer the funds from AfDB to the IFC to “enable CTF to support the momentum of innovation in solar power technologies in South Africa”.

Key donor questions and concerns prior to approval

The UK noted that the market analysis of self-supply renewable energy in the original approval in 2010 had not been updated. It also questioned lack of mention of energy access: “one could … expect that there might be an increase in energy access because the additional power generated would make power somewhere else on the grid available.”

The IFC responded that while SEAP is expected to help “improve power reliability for those already connected to the grid, impact can only be expressed in terms of the power output achieved by the new facilities built.”


Turkey: question on support for mining extraction


Project name Amount and date approved MDB services Key project documents
Dedicated Private Sector Program:
Turkey geothermal development project
$38 million (contingency recovery grant)
$1.8 million (technical assistance grant)
8 September 2015
$200,000 request noted
Project document


Project details

The objective of the project is to scale-up private sector investment in geothermal energy development in Turkey. This includes a risk sharing mechanisms (RSM) for resource validation, which will be capitalised by the CTF contingency recovery grant. The RSM “aims at reducing the risks taken on by the private sector covering a pre-defined percentage of the drilling expenditure incurred by the license holder during exploratory phases. In the case of success, the license holder will be required to contribute a ‘success fee’ to the RSM as a way to reduce the rate of depletion of the RSM capital and maximise the number of projects to be supported.” It will also set up a loan facility for resource development and power plant development stages.

Key donor questions and concerns prior to approval

The UK raised concerns that the CTF funds “are effectively replacing subsidy/support previously provided by the MTA [General Directorate of Mineral Research and Exploration of Turkey], and that CTF funds will effectively be freeing up MTA resources for mining extraction”. It asked for information on why the MTA is no longer providing this support.


The IBRD responded that “MTA used to take significant early stage geothermal risk by carrying out exploratory drilling, but since 2007 their mandate has changed … since MTA only carries out limited exploration and drilling activities to identify geothermal sites … there will be no diversion of MTA resources to other activities.”


Clean Technology Fund (CTF) explained

The objective of the CTF is to use minimum levels of concessional financing to catalyse investment opportunities that will reduce emissions in the long term. The CTF focuses on financing projects in middle-income and fast-growing developing countries.

The CTF is piloted in 15 countries and one region. In Phase I (2008-2010) 13 investment plans were endorsed: Colombia, Egypt, Indonesia, Kazakhstan, Mexico, Morocco, South Africa, Thailand, Turkey, Ukraine, Vietnam, Philippines; and the Middle East and North Africa (MENA), covering Algeria, Egypt, Jordan, Morocco and Tunisia. A further three plans have been endorsed in Phase II (after 2010): Nigeria, India and Chile. Furthermore, expressions of interest to join CTF have been received from Costa Rica, Jordan, Pakistan, Peru and Uruguay.

As of end June 2015, $5.3 billion had been pledged to the CTF. A total of $6.1 billion has been allocated for 134 projects and programmes, including $508.5 million for 23 sub-projects and programmes under the CTF Dedicated Private Sector Program (DPSP). Out of this $4.2 billion has been approved for 84 projects and programmes.

Donors: Australia, Canada, France, Germany, Japan, Spain, Sweden, UK, US