Climate Finance:The Case of Nicaragua

Dr. Paul OquistNicaragua

Member of the Standing Committee of Climate Financefor Latin America and the Caribbean

Manila, Philippines, 16 July, 2013 1

EXPANSION AND CONVERSION OF THEENERGY MATRIX: 25% RENEWABLE IN 2007 TO

90% IN 2020

-

1,000

2,000

3,000

4,000

5,000

6,000

2007 2012 2017 2022

Hydro, 10.8% Hydro, 8.0%

Hydro, 40.7%

Hydro, 47.3%

Geo, 6.1%Geo, 14.3%

Geothermal, 35.7%

Geothermal, 27.5%

Wind, 6.6%

Wind, 12.1%

Wind, 9.8%

Biomass, 8.4%

Biomass, 6.8%

Biomass, 5.1%

Biomass, 4.2%

FUEL OIL, 66.6%

FUEL OIL, 64.2%

FUEL OIL, 6.4%

FUEL OIL, 10.2%

DIESEL OIL, 8.0%

Gene

raci

ón e

léct

rica

(GW

H)

Non

ren

ewab

le:

75%

Non

rene

wab

le: 6

4%

No

reno

vabl

es: 6

%

Rene

wab

le: 3

6%

Reno

vabl

es: 9

4%

Rene

wab

le: 9

0%N

on r

enov

able

s: 1

0%

Rene

wab

le:

25%

3

NICARAGUA'S ENERGY PROJECTS

TUMARÍN HYDROELECTRICPLANT, RAAS

253 MW; US$ 1,100 Billion(2018)

Other Hydroelectric Projects:

Larreynaga(17.2 MW, US67.9 mill)Hydropantasma (12MW, US$37.4 mill)El Diamante (5MW, US$13.4 mill)

(34MW, US$118.7 million)Eolo (Rivas) (44MW,US$105.9 mill)Blue Power (Rivas)(40MW, US110mill)ALBA Rivas (Rivas)(40MW, US$87 mill)(124 MW; US$ 302.9 million)

GEOTHERMALSan Jacinto-Tizate (72MW)

Casita-San Cristóbal(35MW)

(107MW; US$ 585.59 mill)

SOLAR PANELSMICRO AND SMALLHYDROELECTRICPROJECTS FORISOLATED AREAS

San Jacinto-Tizate

Solar Project in LaTrinidad, Diriamba

BIOMASS

• CASUR –Benjamín Zeledón Sugarmill(2015): 24MW; US$24.8 millons

• Montelimar Sugarmill (2016): 30MW;US$27.8 millons

2012-2016: 54MW* y US$52.6 Millones

• Projects based on agribusiness plantsresidues :

• Sugarcane• Oil palm (oil)• urban waste

*on season

Presentcontribution

Netgeneration in

2012Ingenio Nicaragua SugarEstate 30 MW 77.3 MWIngenio San Antonio 30 MW 48.5 MW

INVESTMENT OPPORTUNITIES IN HYDROPOWERINVESTMENT OPPORTUNITIES IN HYDROPOWER

Volcán Casitas San Cristóbal. Fuente: INETER

5

Centrales en Operación-Santa Bárbara-Centroamérica-Las Cañas-El Sardinal-El Wawule-Siempre Vivas-Salto Grande

Proyectos en Construcción-Pantasma-Larreynaga-Tumarín

Proyectos con Licencia- Salto Y-Y- Piedra Puntuda- El Diamante

Proyectos Candidatos-Boboké-Copalar Bajo-Consuelo-Pajaritos-La Estrella-Valentín-Piedra Fina-Brito-Corriente Lira

GEOTHERMAL POTENTIAL ESTIMATED AT 1,500 TO 2,000 MWGEOTHERMAL POTENTIAL ESTIMATED AT 1,500 TO 2,000 MW

6

WIND POTENTITAL IN NICARAGUAWIND POTENTITAL IN NICARAGUA

INVESTMENT OPPORTUNITIES INWIND PROJECTS

INVESTMENT OPPORTUNITIES INWIND PROJECTS

MAP OF SOLAR RADIATION IN NICARAGUAMAP OF SOLAR RADIATION IN NICARAGUA

Noth Sector1600 projectsNoth Sector1600 projects

RAAN & RAAS 120projects

RAAN & RAAS 120projects

Managua 200projects

Managua 200projects

Eastern Sector640 projects

Eastern Sector640 projects

WesternSector700 projects

WesternSector700 projects

South Sector360 projectsSouth Sector360 projects

Rural Electrification by Extension of NetworksRural Electrification by Extension of Networks

North 90 (14%)SettlementsNorth 90 (14%)Settlements

RAAN & RAAS 18 (3%)RAAN & RAAS 18 (3%)West 100 (16%)West 100 (16%)

Managua 360 (56%)Managua 360 (56%)

South 40 (7%)South 40 (7%)

Oriente 22 (3%)Oriente 22 (3%)

Standardization of electrical serviceStandardization of electrical service

Sites in studiesfor SmallHydroelectricPlants (SHP)

Sites in studiesfor SmallHydroelectricPlants (SHP)

9

57.660.4

63.465.6

68.5

72.475.4

79.481.6

83.185.1

50

55

60

65

70

75

80

85

90

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Increase in the coverage of electricityservice in Nicaragua (%)

SAVING BY REDUCING OIL IMPORTS FOR ENTRYOF RENEWABLE ENERGY PROJECTS

2013-2020

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2013 2014 2015 2016 2017 2018 2019 2020

Barriles

Millones US$

• Brasil presenta la puntuaciónmás alta con 2.64.

• Nicaragua ocupa el segundolugar con una puntuación total2.13, en gran medida debido aque encabezó la lista entérminos de inversiones enenergía limpia y disponibilidadde microcréditos verdes.

• Panamá fue tercero con unamarca de 1,97, gracias a unimportante esfuerzo en lagestión de las emisiones degases de efecto invernadero ypor tener un marco facilitadoracogedor.

11

Global Climate Risk Index GERMANWATCH

12

CLIMATE VARIABILITY AND LOSSES

NIÑA-NIÑO ALTERNATION

• 2005: Niña. Damages and losses.

• 2006: Niño. Losses by drought

• 2007: Niño Transition. Drought in thefirst crop, rainfall deficit in June andJuly.

• 2007: Niña. Losses due to excessivemoisture.

• 2008: Niña. Rainfall excess and floods.

• 2009: Niño. Losses and damages insecond crop.

• 2010: Niña. Losses due to rainfallexcess.

• 2011: Tropical Depresion12E13

Agricultural losses 2005-2010

392,000 ha. Planted areas lost 9% of the total area planted US$ 206.3 million, equivalent to 2.68%

of GDP

ECLAC on Tropical Depresion12-E(October 2011)

• 148,530 people affected, including 16deaths

• US$ 445.4 million, equivalent to 6% ofGDP, in damages

• Nicaragua requires US$ 1,963.1 millionfor rehabilitation, reconstruction andadaptation

PETROCARIBE MECHANISM

Nicaragua has a guaranteed supply100% of its oil needs, with 25years deferred payment with two-year grace period and 2% interestthan half of the oil bill.

With half deferred funds invested62% in socio-productive projectsthat stimulate the economy andallow the returns to amortizepayments in the form and time.

The other 38% is used to fundsocial projects not returnable, fullyor partially.

BANK OF ALBA(Venezuela)

CORRESPONDENT BANK OF ALBA

(CARUNA R.L)

Cooperación Venezolana a Nicaragua

2007 2008 2009 2010 2011 2012Anual 184.9 461.0 443.0 533.0 609.3 765.6Acumulado 184.9 645.9 1,088.9 1,621.9 2,231.2 2,996.8

Cooperación Venezolana en el marco del ALBA-TCP (millones de dólares)

184.9

461.0 443.0

533.0

609.3

765.6

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012

Cooperación Venezolana en el marco del ALBA-TCP(millones de dólares)

Fuente: BCN

INVESTMENT PORTAFOLIOUS$ 10.9 BILLION IN 2012-2016

HIGHER ECONOMICGROWTH TO REDUCE

POVERTY ANDERADICATE EXTREME

POVERTY

HIGHER ECONOMICGROWTH TO REDUCE

POVERTY ANDERADICATE EXTREME

POVERTY

EXPANSION ANDTRANSFORMATION OFTHE ENERGY MATRIXUS$ 1,742.0 MILLION

REFINERY “SUPREMEDREAM OF BOLÍVAR”US$ 3,880.4 MILLION

TELECOMUNICATIONSUS$ 2,018.3 MILLONES

TOURISMUS$ 555 MILLION

ELECTRONICSMANUFACTURINGUS$ 600 MILLION

MINING EXPLORATIONUS$ 359.4 MILLION

OIL EXPLORATIONUS$ 353.6 MILLION

PORTS US$ 281 MILLION

AGROINDUSTRYUS$ 334.3 MILLION

FREE ZONESUS$ 644.6 MILLION

OTHERSUS$ 121 MILLION

16

THE GRAND INTEROCEANIC CANAL OF NICARAGUA US$ 40 BILLION:Wet and Dry Canal, Airport, Railway, Free Zones in the Caribbean and Pacific, and Pipeline

THE GRAND INTEROCEANIC CANAL OF NICARAGUA US$ 40 BILLION:Wet and Dry Canal, Airport, Railway, Free Zones in the Caribbean and Pacific, and Pipeline

INVESTMENT PORTAFOLIOUS$ 9.8 BILLION IN 2012-2016

HIGHER ECONOMICGROWTH THAT

CONTRIBUTES TOERADICATE EXTREME

POVERTY

HIGHER ECONOMICGROWTH THAT

CONTRIBUTES TOERADICATE EXTREME

POVERTY

EXPANSIÓN ANDTRANSFORMATION OFTHE ENERGY MATRIX

US$ $ 1,742.0 MILLION

REFINERY “SUPREMEDREAM OF BOLÍVAR”US$ 3,880.4 MILLION

TELECOMUNICATIONSUS$ 2,018.3 MILLON

TOURISMUS$ 555 MILLION

ELECTRONICSMANUFACTURINGUS$ 600 MILLION

MINING EXPLORATIONUS$ 359.4 MILLION

OIL EXPLORATIONUS$ 353.6 MILLION

PORTS US$ 281 MILLION

AGROINDUSTRYUS$ 334.3 MILLION

FREE ZONESUS$ 644.6 MILLION

OTHERSUS$ 121 MILLION

17

THE GRAND INTEROCEANIC CANAL OF NICARAGUA US$ 40 MIL MILLONES:Wet and dry Canal, Airport, Railway, Free Zones in the Caribbean and Pacific, and Pipeline

THE GRAND INTEROCEANIC CANAL OF NICARAGUA US$ 40 MIL MILLONES:Wet and dry Canal, Airport, Railway, Free Zones in the Caribbean and Pacific, and Pipeline

SUPERCARGUEROS DOMINARÁN EL COMERCIOMARÍTIMO MUNDIAL

18

Se proyecta que los buques post-Panamax representarán el 30% deltota de buques 2030; y 62% de lacapacidad total de TEUs de la flota deportacontenedores en ese momento.

US Army Corps of Engineers, 2012

Se proyecta que los buques post-Panamax representarán el 30% deltota de buques 2030; y 62% de lacapacidad total de TEUs de la flota deportacontenedores en ese momento.

US Army Corps of Engineers, 2012

La principal limitaciónde Panamá para unaampliación mayor es lafalta de agua.

La principal limitaciónde Panamá para unaampliación mayor es lafalta de agua.

• 400 metros de largo , 59 metros de ancho y 73 metros de altura• Calado demasiado profundo para canal de Panamá y otros puertos en

América.

• 400 metros de largo , 59 metros de ancho y 73 metros de altura• Calado demasiado profundo para canal de Panamá y otros puertos en

América.

DISEÑO DE BUQUE MAERSK TRIPLE E

BUQUES DE CONTENEDORES DEL TIPOMAERSK TRIPLE E

19

Ambas vías, Panamá yNicaragua seríancomplementarias.

INTEROCEANIC GRAND CANAL OF NICARAGUA: MAIN ECONOMIC IMPACTSEXPECTED IN NICARAGUA

20

Beginsconstruction

+6.3 +10.4 +7.7 +6.7 +5.2 -

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2012 2013 2014 2015 2016 2017 2018

623,458 662,992848,630

1,018,581

1,303,783

1,608,402

1,927,527

FORMAL EMPLOYMENT IN NICARAGUA 2012-2018

+185

,638

+355

,589

+640

,791 +945

,410

+1,2

64,5

35

5th year (2018)• More formal jobs than

casual ones.• 51.10% in 2018• 20.79% in 2012

The increase in revenue, would be a source of funding tofight poverty.

The increase in revenue, would be a source of funding tofight poverty.

201216.46% of GDP

2013Estimated

income US$1,897.40million

2018ProjectedIncome

US$ 4,081.25million

+115.10% more than 2013+115.10% more than 2013

We are working with ECLAC to estimate the effects of the Grand Interoceanic Canal on all sectors of the Nicaraguan economy, onCentral America and South America.We are working with ECLAC to estimate the effects of the Grand Interoceanic Canal on all sectors of the Nicaraguan economy, onCentral America and South America.

5.04.0

-2.2

3.6

5.4 5.24.2

10.8

15.1

12.6

10.79.2

5.04.0

-2.2

3.6

5.4 5.24.2 4.5 4.7 4.9

4.0 4.0

-4-202468

10121416

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Nicaragua (con Canal)

Nicaragua

Nicaragua's Economic Growth with and without Canal(Percentage Points)

Source: PEF, IMF & Own estimates

General Poverty in Nicaragua(Percentage points)

Extreme Poverty in Nicaragua(Percentage points)

403.583 people out ofgeneral poverty by2018

403.583 people out ofgeneral poverty by2018

The multiplier effectwill further reduceextreme poverty inlater years

The multiplier effectwill further reduceextreme poverty inlater years

353.935 peopleout of extremepoverty by 2018

353.935 peopleout of extremepoverty by 2018

COMPANIES CONTRACTED BY HKND

21

HKND

CHINA RAILWAYCONSTRUCTIONCORPORATIONLIMITED (CRCC)

ENVIRONMENTAL RESOURCESMANAGEMENT

(ERM)

McLarty

HARBOURGROUPKIRKLAND &

ELLIS LLP.

Eutelsat

MCKINSEY &CO.

BANK OF ALBA

PRIVATE EQUITY FUNDS

HKND

PRIVATE INVESTMENTBANK

MULTILATERAL BANKS

OTHERS IN FUTURE, WHENFEASIBILITY STUDIES ARE

COMPLETED

POVERTY ANDINEQUALITYREDUCTION

MACROECONOMICSTABILITY AND

ECONOMIC GROWTH

SOCIAL COHESIONAND DYNAMIC,

POSITIVEINVESTMENT

CLIMATE

JOB CREATION PRODUCTIVE INVESTMENTS

LOWER COST OF LIVING

PUBLIC SAFETY

MODEL BASED ON CHRISTIAN VALUES, SOCIALIST IDEALS AND SOLIDARITY PRACTICES

CHALLENGE:CLIMATECHANGE

CHALLENGE:WORLD

ECONOMY

RECOVERINGVALUES

CAPACITY BUILDING

PROGRAMS,CAPITALIZATIONAND SUBSIDIES

CITIZEN POWERAND PUBLICPARTICIPATION

GRAND ALLIANCEWORKERS-PRODUCERS ANDENTREPRENEURS-GOVERNMENT

WAGECONSENSUS; 1DIGIT INFLATION;HIGH RESERVES,FREE EXCHANGEAND DEBTSREDUCTION

22PROTECTION OF MOTHER EARTH AND

ADAPTATION TO CLIMATE CHANGE

OVERCOMINGVICIOUSCIRCLES

BUILDINGVIRTUOUS

CIRCLES

ENERGY INVESTMENTS

INFRAESTRUCTURE

RESTORATIONOF RIGHTS

TRAINING ANDSKILLSDEVELOPMENT,TECHNOLOGY ANDLANGUAGES

KNOWLEDGE ANDSKILLS FOR

DEVELOPMENT SCIENCE,TECHNOLOGYAND INNOVATION

• Economic growthabove 5% in 2011 and2012

Nicaragua leading economicgrowth in Centralamerica

High export growth:+19% in 2012/2011

Exports doubled between2012 and 2006

Investment record: Morethan 3 times that in 2006

Good recovery in2010 and economicgrowth in 2011 and

2012

Good recovery in2010 and economicgrowth in 2011 and

2012

1 digit inflation

23

Sustainable fiscal deficit

Fewer unemploymentMore work: 48.2% morethan in 2006

Formal employmentgrowth: 52.8% more people

registered than in 2006

Constant reduction ofnational debt

Fiscal stabilityIncreased workFiscal stability

Increased work

High International Reserves: 2.4 timesthe monetary base, allows free exchange

and currency stability

24

SURVEY OF COST OF LIVING IN WORLD: MANAGUA,NICARAGUA (POSITION 213) THE CITIES WITH THE

SECOND LOWEST COST OF LIVING

25

THE BEST PUBLIC SAFETY IN CENTRAL AMERICA

8,095

3,130

5,222

1,035366 387

7,334

5,475

3,8002,811

720 272

Guatemala Honduras Costa Rica El Salvador Panamá Nicaragua

Vehicular theft in Central America

2010 2011

Honduras Guatemala El Salvador Panamá Nicaragua Costa Rica

91.6

38.5

69.2

15.412.6 10.0

84.0

34.030.0

18.0

11.0 8.9

Homicide Rates in Central America(per 100,000 inhabitants)

2011 2012

Fuentes: UNODC; OEA; Policía Nacional

Nicaragua is the second safest country in CentralAmerica and the third in Latin America (Indicators:armed conflict, organized crime, kidnapping, etc.)Fuente: Economist Intelligence Unit (EIU), 2012 SecurityRisk Report

8.8 (Global Rates-WHO)26 (Latin American Rates – UNDP)

In 2012, vehicular theftin Nicaragua continuesto low at 218 vehicles

(30% less than in 2011)26

THANK YOU

27