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B E R K A N A Private Equity Fund Creating innovative financing for clean energy solutions in LAC

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Page 1: Berkana Linkedin

B E R K A N A PrivateEquityFund

Creating innovative financing for clean energy solutions in LAC

Page 2: Berkana Linkedin

WhatisBerkana?•  Pla0ormforinves5nginLACcleanenergysector

• WeareLa5nAmericanprofessionalswithdeepcommercialrela5onsinthelocalmarketsandinterna5onalinves5ngexperience

•  Investmentfocus:Distributedgenera5on(DG)solu5ons,smallandmedium-sizedprojects(<10MW),investingrowthoflocalenergycompanies

•  Raisinga$100Mblendedfund(65%debt:35%Equity)forcleanenergyprojectsandcompanies(solar,wind,co-genera5on);averageinvestment$10M

•  Inparallel,structuringa$10MfacilityforColombiansolarsolu5ons

BERKANAPE.COM

Page 3: Berkana Linkedin

GlobalDriversforCleanEnergy•  Globalwarming,theensuingeffortsbytheinterna5onalcommunity,andtheUNParisandMarrakeshmee5ngsaredrivingtheworld’sini5alpledgestoreduceCO2emissions

•  Significantdecreaseincleanenergytechnologycosts(e.g.-67%insolar;-30%inwindover5years)1

•  DGdisruptstradi5onalmodelofu5lity-scalegenera5on;residen5al,industrialandcommercialen55esarenowabletogeneratetheirownelectricity

© OECD/IEA 2015

Climate pledges decouple power sector emissions from electricity demand

World electricity generation

The share of low-carbon power generation grows to almost 45% in 2030 so that power emissions remain flat, while electricity demand grows by more than 40%

10

20

30

40

Gene

ratio

n (th

ousa

nd T

Wh)

and related CO2 emissions

1990 2000 2010 2020 2030

Emiss

ions

(Gt)

5

10

15

20

CO2 emissions

Electricity generation

Electricity generation

CO2 emissions

Source:Interna-onalEnergyAgency,2016

1.Interna-onalEnergyAgency(iea),2016

BERKANAPE.COM

Page 4: Berkana Linkedin

NewYork,June23rd,2016,FrancescoStarace,ENELCEOandGeneralManagerattheOpeningSessionofUNGlobalCompactLeadersSummit2016

“ … The world is rapidly changing and facing a number of immense challenges: there are enormous disparities of opportunity and wealth among people, while the planet is threatened by environmental degradation and climate change. The energy sector, which is at the heart of the UN agenda, is also undergoing a significant shift to a new paradigm dominated by renewables and distributed generation (DG), and this change will continue regardless of what individual companies choose to do. This is why we have decided to swim with the tide instead of against it: we have changed to embrace the future, because it is only by being open to the change that this will turn into many exciting opportunities…”

BERKANAPE.COM

Page 5: Berkana Linkedin

World’sNon-HydroelectricRenewablesGenera5on

Source:adaptedfromUSEnergyInforma-onAdministra-on(EIA),November2016Note:(CAGR)es-matedfrom2010-l2014

Africa(16.9%)

Asia&Oceania(17.3%)

Central&SouthAmerica(11.3%)

Eurasia(12.5%)

Europe(11.2%)

MiddleEast(39.8%)

NorthAmerica(11.1%)

0

100

200

300

400

500

600

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Billion

KWh

•  Africa,EurasiaandMiddleEasthavethesmallestamountofRE;however,highgrowthrates

•  LACisgrowingataveragerates

BERKANAPE.COM

Page 6: Berkana Linkedin

HowareCleanEnergyProjectsFinanced?

GreenBonds–$65B(3Q-2016);$128B(2007-2016)

ClimateFunds+GCF+IFI’s+LocalDevBanks+Co-financing–$84B(2014);$577B(2007-2016)

InfraFunds,Banks,PensionFunds,TechDevelopers,Yieldcos

LocalInst.Investors,BanksandPensionFunds

Venture+PrivateEquity

Funds

LargeU5lity-scaleProjects

Mid-sizedandCommerceProjects

Residen5al

Source:Berkanaanalysis,2016.

BERKANAPE.COM

Page 7: Berkana Linkedin

RenewablesInves5ngbyLACCountry

92

RENEWABLE ENERGY MARKET ANALYSIS : L ATI N AM ERI C A

04

USD 0.5 billion for the second consecutive year due to the country’s solar PV feed-in-tariff.

In addition to these investment figures, IRENA estimates regional investment in large hydropow-er at around USD 9 billion in 2015 and USD 37 bil-lion cumulatively since 20102.

By technology, the trend over the past years re-flects a decrease in investment in liquid biofuels, compensated by remarkable growth in invest-ment in wind and, more recently, solar (see figure 4.2). Investment in liquid biofuels in Brazil, which has the largest country share in the region for this technology, tends to fluctuate according to vari-ous factors including sugar prices, weather con-ditions and petrol prices in the national market. A combination of adverse conditions across these factors have contributed to the decline in invest-ment since 2008.

Lower in investment in liquid biofuels since 2008 is one of the reasons for the decline in aggregate investment until 2013. The gap was progressive-ly compensated by a surge in wind investment, which in the past three years represented about

two-thirds of total renewable energy investment in Latin America, excluding large hydropower. In 2015, the Brazilian Development Bank (BNDES) provided USD 1.4 billion for wind energy projects, up 85% from 2014, as part of the bank’s Green Economy initiative (BNDES, 2016). Mexico’s De-velopment Bank Nacional Financiera (NAFIN) has invested an estimated USD 2.2 billion in a wind farm portfolio (Frankfurt School-UNEP Centre/BNEF, 2016).

The past couple of years have seen the rapid emergence of solar PV as a significant focus of investment, mainly in Chile, Brazil and Mexico. In Chile, 2014 saw a record USD 2.4 billion invest-ment in solar with Abengoa’s notable USD 1 billion Atacama 1 solar hybrid complex combining both PV and CSP, which will be Latin America’s largest solar thermal project once completed. The trend was stable in 2015, with solar representing two-thirds of the total investment in renewable ener-gy, amounting to USD 2.3 billion (BNEF, 2016).

Brazil is resolutely expanding its nascent solar in-dustry aiming to replicate the successful develop-

USD billion

BrazilMexicoPeru Uruguay ChileHonduras

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

4.6 6.8 12.7 15.0 10.4 13.1 13.1 12.4 10.4 15.0 16.4100%

80%

60%

40%

20%

0%

Others

Figure 4.1 Investment in renewable energy by country in Latin America, 2005-2015

Source: BNEF, 2016

2. This estimate adopts IRENA’s definition of large hydropower, which refers to plants larger than 10 MW. Some overlap exists with the BNEF figures (in particular, for hydropower plants between 10 and 50 MW), although this investment is estimated to be small (around USD 500 million in 2014) in comparison with the reported investment numbers and therefore does not affect the overall estimate, which is in the same order of magnitude as the estimates provided by Global Data (2016) and IEA (2014).

Source:IRENA,2016

BrazilisbyfarthelargestinvestorinREMexico,ChileandUruguayhavealsomadesomeREinvestmentsTherestofLACcountrieshavedoneverylittleinvestmentsinREBERKANAPE.COM

Page 8: Berkana Linkedin

ChallengesforCleanEnergyinLAC•  Lackofknowhowaboutcleanenergytechnologies(bybanks,regulators,suppliersandclients)

•  Lackoffinancialproductstailoredtocleanenergyprojects- Projectfinance,speciallyforsmallprojects- Energycontracts- Somepublicfundingavailable,butneedtoapractprivatefinancing

•  Fragmentedsupplychain- Liplesupportforearlydevelopmentstageofprojects- Localengineeringcompaniessmallandundercapitalized

BERKANAPE.COM

Page 9: Berkana Linkedin

KeyImprovementAreasforLACCleanEnergy

• DevelopastrongerSupplyChain- Investinlocaldevelopers:engineeringfirms,ESCO’s,EPC’s,etc.- Encourageventurecapitalforearlystagedevelopmentprojects- StrengthenlocalFI’sandPrivateEquityFundstoacquireandbuildprojects- Clarifynormsandcleanenergyregula5ons- Transferandsharetechnologyknow-how

•  ThesupportofGlobalFunds,IFI’sandbilateralbankswillbenefitthelocalcleanenergysector

BERKANAPE.COM

Page 10: Berkana Linkedin

WhatisBerkana’sStrategy?•  Berkana’sflexiblesolu5onscanaddressfinancinggaps,speciallyfor:

-  Smallprojects(<10MW)byaggrega5nginvestmentsinpor0oliosthatapractins5tu5onalfunding

-  Inves5nginthegrowthoflocalengineeringfirmstobecomeleaders-  Createcustomizedsolu5ons(e.g.solarforoff-gridremoteareas)

•  Op5mizefundingbyblendingdebt+equity- Generatecurrentincometooffsetfinancingcost-  Clientsmakeadownpaymentintheprojects- Whereavailable,channelconcessionalfundingtolocalprojects

•  Diversifyinginvestors’base-  Educa5ngfirst5melocalpensionfundstoinvestincleanenergy- Workingwithglobalfunds,IFIs,bilateralsandothercapitalsources

BERKANAPE.COM

Page 11: Berkana Linkedin

ConclusionsofRenewablesinLAC•  Hugepoten5al,butremainsuntapped•  CleanenergyandDGoffersolu5onsforSMEandcommerce•  Cleanenergyrequires:1)affordablefinancing,2)capabledevelopers,3)smartregulators,4)technologytransfer,5)governments’commitment•  Berkanais:

- Aggrega5ngsmallprojectsintopor0oliosthatareaprac5vetoins5tu5onalinvestors

- Professionalizinglocalengineeringfirmsanddevelopers- Mobilizinglocalandinterna5onalins5tu5onalinvestors

•  GlobalFundsandIFI’sshouldconsiderincreasingitssupporttolocalFI’s,ventureandprivateequityfunds•  TheLACopportunityincleanenergyandDGisnow!

BERKANAPE.COM

Page 12: Berkana Linkedin

Thank you! ContactUsSergioA.Pombo1.202.471.0428sergiopombo@[email protected]