Emiliano Detta
Sustainable Energy Expert
KfW
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View from the Top

Innovative Projects Key for Sector Development

Fri, 02/01/2019 - 10:05

Q: What role does each KfW Group unit play in Mexico?

A: KfW Development Bank focuses on financial and technical cooperation as a second-tier bank. We work with development banks and sometimes with the Ministry of Finance to support the national government in the funding of projects. KfW Development Bank has the largest portfolio in the energy sector in Mexico, representing almost US$1 billion approved in loans. IPEX is a first-tier bank that works directly with developers for large projects with tickets of US$50 million or over that have an export component with Europe. For smaller tickets, we have another first-tier bank called DEG that works with the private sector directly and can work with several instruments, such as loans and equity contributions.
Q: What are the main risks of funding a project in Mexico and how do you handle these?

A: On a broader scale, we work with sovereign guarantees, which means the risk we take is directly linked to Mexico’s economic position as a country. Another large risk for us is reputational. We therefore analyze each project in which we might participate with a view of ensuring high quality in its execution. We mostly focus on environmental or social issues, as well as serious technical issues that could impact the financial viability of the project.
Q: What are the main initiatives that KfW is developing and how are they evolving?

A: We are working on the re-funding of large projects, mostly in the wind and solar power segments. At the same time, we participate in programs like EcoCasa, where we have invested over US$250 million, and Eco Crédito Empresarial, where we have US$100 million. Both projects have been successful and we want to increase our investment in 2019. EcoCasa focuses on supporting low-income housing projects and developing energy-saving initiatives linked to these. Meanwhile, Eco Crédito Empresarial funds SMEs through a financing scheme operated by FIDE and linked to CFE’s receipt. The idea is for these companies to upgrade their equipment and services in such a way that their energy savings can gradually pay off the loan. The next step with Eco Crédito Empresarial is to escalate this business model to distributed energy with solar PV. This will allow FIDE to offer longer term loans so companies can install solar panels to power their facilities without requiring large down payments.