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CASE STUDY 23:                 CHILE – CHILEAN ECONOMIC DEVELOPMENT
                              AUTHORITY CREDIT LINES
 Barriers               Lack of project finance

 Instrument             Partial credit guarantee and credit lines to commercial banks

 Application            CORFO provide credit guarantees to FIs, or provide credit line for on-lending to RE
                        projects

 Amount                 n/a


PROJECT BACKGROUND AND OBJECTIVES                          The partial credit guarantee program appropriation is
                                                           US$70 million, and CORFO is able to leverage this
Chilean Government has enacted legislation to promote
                                                           amount five to one, leading to a US$350 million total
the use of renewable energy sources. Interests in
                                                           liability. If losses are greater than US$70 million, they
investing in renewable energy projects are high, and
                                                           will be full recourse to CORFO. Loans are guaranteed up
there are plenty of opportunity and RE sources available
                                                           to 50% pari-passu, with a maximum terms of 12 years,
in Chile. However, FIs in Chile are very conservative in
                                                           and the guarantee fee is 1% per year.
their lending and has very low risk tolerance.
                                                           INSTITUTIONAL ARRANGEMENTS
To overcome this barrier, the Chilean Economic
Development Agency (CORFO) has since 2005 been             Donor agencies provide funding to CORFO, which will
offering credit lines to commercial banks for on-lending   administer the funds and on lend the credit lines or
to RE projects. CORFO also offers partial credit           partial credit guarantee to local FIs. Local FIs then
guarantees for some hydro and wind development             provide loans for RE projects. CORFO may also provide
projects.                                                  funds to be used for project preparation, such as
                                                           resource assessment, feasibility study, environmental
INSTRUMENTS USED
                                                           studies or CDM documentation.
The credit lines provided by CORFO offer FIs a 30
                                                           OUTCOMES
months grade period and repayment terms of up to 12
years, allowing FIs to on-lend up to US$5 million per      In 2008, CORFO has approved a portfolio of around 150
project. To ensure uptake of the FIs financing, CORFO      renewable energy projects, and about 15 projects being
also offers project preparation matching funds for early   in construction or already operational.
stage project development. In addition, advanced
project development activities are eligible for cost-
sharing up to a maximum of 5% of the estimated
investment.




1 | R E F I N e www.worldbank.org/energy/refine