2. 2
Issues for Discussion
1. Update on Project Activities
2. Progress on Port-of-Entry Study
3. The Future of NADB – Options for a General
Capital Increase; and the case for NADB-BECC
institutional merger
2
3. 3
Established in 1994 to develop and
finance infrastructure projects that
protect, preserve and enhance the
environment and promote
sustainable development along the
U.S.-Mexico border.
The Bank provides financing to
projects located within 100 km
north and 300 km south of the
border that have been certified by
the Border Environment
Cooperation Commission (BECC).
Overview
Mandate Ownership Structure
NADB is 100% owned by the United
States and Mexican Governments in
equal shares.
50% 50%
USA MEXICO
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4. 4
NADB and BECC share a ten-member Board of Directors, with an
equal number of representatives from the U.S. and Mexico.
U.S. Members Mexico Members
Secretary of the Treasury Secretary of Finance and Public Credit (SHCP)*
Secretary of State Secretary of Foreign Affairs (SRE)
Administrator of the Environmental
Protection Agency
Secretary of the Environment and Natural
Resources (SEMARNAT)
U.S. Border State Representative Mexican Border State Representative
U.S. Border Public Representative Mexican Border Public Representative
*Current chair; chairmanship rotates annually between U.S. and Mexico.
Overview
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5. 5
Loans Grant Administration
Technical Assistance
and Training
Market-rate lending
Financing up to 85% of project cost
with terms as long as 25 years in
dollars and pesos
Focus on financial feasibility of the
projects (credit & risk analysis,
payment source and structure, and
credit support)
BECC and NADB technical
assistance grants and training
programs for project
development and institutional
strengthening of borrowers or
potential borrowers
Product Portfolio
Eligible Sectors
Water, Wastewater &
Storm Drainage
Solid, Industrial &
Hazardous Waste Air Quality
Clean/Renewable
Energy Energy Efficiency
Water supply, treatment
and distribution
Wastewater collection,
treatment and reuse
Water conservation
Storm drainage
Sanitary landfills
Collection & disposal
equipment
Dumpsite closure
Recycling
Site remediation
Toxic waste disposal
Street paving and
roadway improvements
Ports of entry
Public transportation
Emissions reduction
Solar
Wind
Biofuels
Methane capture
Waste-to-energy
Hydro
Geothermal
Public lighting
Building retrofits
Equipment
replacement
Water utilities
Grants allow NADB to expand
the pool of eligible borrowers in
border municipalities where
debt financing options are often
limited
EPA-funded Border Environment
Infrastructure Fund (BEIF)
NADB-funded Community
Assistance Program (CAP)
Overview
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6. 6
Jurisdiction
Projects eligible to receive BECC-NADB financing must be located within 100 kilometers north
and within 300 kilometers south of the U.S.-Mexico border (the “border region”).
Geographic Jurisdiction
U.S. Border:
37 counties in four states
Population: 9.6 million
(3.1% of U.S. population)
Mexican Border:
213 municipalities in six states
Population: 16.6 million
(14.8% of Mexican population)
Population within Jurisdiction
Mexico
State Population
Baja California 3,155,070
Chihuahua 3,094,944
Coahuila 1,832,232
Nuevo Leon 4,610,918
Sonora 1,650,527
Tamaulipas 2,243,135
Total 16,586,826
United States
State Population
Arizona 1,354,780
California 5,459,482
New Mexico 268,736
Texas 2,559,239
Total 9,642,237
Source: U.S. Census Bureau, 2010 census Source: INEGI, 2010 census
Overview
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7. 7
Operating Environment
The ten states of the U.S.-Mexico border comprise a vibrant economic region with a GDP
of almost US$5 trillion.1
Trade of goods between the U.S. and Mexico reached over $500 billion in 2013, which
represents an increase of about 118% since 2002. Of this trade, surface trade (land modes)
accounts for over 86% of total trade.2
Mexico’s economy grew at 2.2.% in 2013, and is expected to grow at 3.0% in 2014, and
3.5% in 2015. In the U.S., growth is expected at 2.8% for 2014 before rising to 3% in 2015.3
Rapid demographic growth continues to
impact the region, with the population
projected to grow at rates exceeding
anticipated national averages, in some cases
by more than 40%. The border population
is expected to increase by 4.6 million people
by the year 2020.4
Mexico is projected to be the 7th largest
economy by 20505
7
1 Colegio de la Frontera Norte, “Indicadores Prioritarios Transfronterizos,” 2010
estimate.
2 Office of the United States Trade Representative.
3 International Monetary Fund.
4 EPA/SEMARNAT, “State of the Border Region: Indicators Report,” 1st edition
(2011).
5 PwC
8. 8
Operating Environment (continued)
Climate Change: A Driving Factor
Reduction of greenhouse gas emissions has emerged as a central point of U.S.-
Mexico bilateral cooperation, as evidenced by the 2009 Bilateral Framework on
Clean Energy and Climate Change, positioning the NADB as a project leader and
expert in the border region.
Mexico’s General Law on Climate Change is one of the strongest national climate
change laws to date, establishing reduction goals of 30% by 2020 and 50% by
2050.
Impact on border:
Several cities in the NADB region in Mexico are considering implementation
of modern mass-transit systems, particularly Bus Rapid Transit, which may be
subsidized by the federal program, FONADIN, and require capital and debt
components for project implementation.
Paving and the construction of thoroughfares to improve traffic flows will
continue to generate potential projects in Mexico in the coming years.
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9. 9
Operating Environment (continued)
Clean/Renewable Energy and Energy Efficiency
United States: Renewable Portfolio Standard requirements and the extension of
federal PTCs, coupled with the resource potential for solar and wind energy in
the border region, will continue to drive renewable energy growth for the
coming years, despite the termination of some fiscal incentives.
Mexico:
Mexico’s electricity needs are
expected to grow 5.2% annually, with
even higher rates in certain population
centers. 1
With grid parity in Mexico, the 2008
Law for Renewable Energy, and the
continued downward trend in costs
per megawatt for wind and solar
energy, important growth is expected
in the NADB’s region.
9
1 Instituto Nacional de Ecología
10. 10
Operating Environment (continued)
Water and Wastewater
The water stressed conditions in the
border region will generate demand for
substantial investments in water supply,
water efficiency, and wastewater reuse
projects in urban and rural areas.
These investments will be in addition to
those driven by projected population
growth in the region.
Diminishing grant funds to subsidize water/wastewater infrastructure
will compel communities to finance needed improvements with debt.
BECC estimates current basic infrastructure needs in the border
region at over US$8.6 billion.
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19 new projects certified by BECC
✓ Water: 2 drinking water, 5 wastewater and 1 storm drainage
✓ Air quality: 1 paving and 1 basic urban infrastructure project
✓ Clean Energy: 7 solar energy, 1 wind energy and 1 landfill gas-to-
energy
US$359.7 million in new financing contracted
✓ US$349.9 million in loans for 11 projects
✓ US$9.8 million in grants for 9 water/wastewater projects & 1 storm
drainage project
US$232.9 million in funding disbursed to 28 projects
✓ US$215.0 million in loans
2013 Results
✓ US$17.9 million in grants
1
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13. 13
Cumulative Financing
As of February 28, 2014
US$2.22 billion contracted to support 192 projects representing
an investment of more than US$5.67 billion
✓ US$1.53 billion in loans ✓ US$0.69 billion in grants
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14. 14
Project Outcomes
As of December 31, 2013
US$1.98 billion disbursed to support 175 projects
Of the 192 certified projects financed by NADB to date:
✓ 140 – have been fully implemented
✓ 41 – are in various stages of construction
✓ 11 – are at the bidding or design stage
✓ 1 – has been cancelled
These projects include…
✓ 22 WTP & 39 drinking water distribution systems
✓ 177,112 households with first-time/improved water services
✓ 58 WWTP & 94 WW collection systems
✓ 294,829 sewer connections to treatment systems that will
prevent discharge of untreated sewage into rivers and
streams
✓ Wastewater treatment coverage in Mexican border region
increased about 27% to over 80%
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15. 15
Project Outcomes
As of December 31, 2013
9.3 million square meters of dirt roads paved and
187 km of roadway improvements, resulting in better traffic circulation
and reduced CO2 emissions
1 port of entry reducing idling times, fuel consumption and exhaust
emissions
16 landfills built/expanded & 12 dumpsites closed
759.7 MW of new solar and wind energy capacity installed, which will
contribute to the displacement of an estimated 1.5 million metric tons/yr.
of CO2 emissions
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16. 16
International Crossing Study
In the context of the U.S.-Mexico High-Level Economic Dialogue
(HLED), the BECC-NADB Board adopted a resolution in November
2013 direct the Bank to support the two governments in mapping
priority points-of-entry (POE) infrastructure projects and identifying
potential financing structures for them.
General Scope:
Gather and organize existing information on all international
crossings/bridges between Mexico and the U.S., as well as those
currently being implemented and those proposed in the future.
Evaluate current financing mechanisms and identify new options.
Create a permanent IT system for follow-up on the projects, which
would be the exclusive property of the two governments.
Funding: Equally funded by NADB and the Mexican Government,
through FONADIN, US$300,000 each.
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17. 17
International Crossing Study
Study Status:
Two project managers, one from each country and experts in the
field, have been hired to oversee the procurement and performance
of the study
Various binational and inter-agency meetings in Mexico City and
Washington, D.C., both in person and by teleconference, have been
held with the participating federal agencies, as well as other
institutions and experts on border crossings.
The terms of reference of the study are under development and will
be finalized in April.
Procurement is scheduled to begin April 15th, with contract award in
May.
The study will be completed in October 2014
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18. 18
General Capital Increase
Since 2009, NADB’s project financing has grown at an average
annual rate of 40.2%, disbursing over $1.3 billion to support
communities in the border region.
Over the past several years, NADB has made significant strides in
diversifying the sectors in which it operates, and the borrowers to
which it lends. The Bank has expanded its portfolio to include
basic infrastructure other than water and renewable energy.
Due to its strong capitalization, NADB has maintained a high
credit rating which has played a crucial role in its ability to access
the capital markets at relatively low interest rates.
The benefit of those low rates has been transferred to project
sponsors and hence to the development of environmental
infrastructure.
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19. 19
General Capital Increase
Due to significant growth in recent years, NADB’s capital adequacy
ratios have deteriorated to the point of compromising future
growth.
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20. 20
General Capital Increase
As a result of the deterioration of its capital adequacy ratios,
NADB’s credit rating was downgraded by S&P in 2012 and by
Moody’s in 2014.
These credit rating downgrades have increased the interest rate
at which NADB borrows funds.
A general capital increase in the near future is critical to:
Prevent a further increase in NADB’s cost of funding and,
therefore, in the interest rates offered to project sponsors.
Preserve the Bank’s capacity to promote the development of
environmental infrastructure.
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21. 21
Completed Projects in 2013
21
‘Los Alisos’Nogales, SON
‘Alcatraces’ Tijuana, BC
WWTP Playas de Rosarito, BC
San Luis RC, SON
El Centro Solar, CA
Ramona Solar, CA
Ocotillo Wind, CA
Rio Grande City, TX
Editor's Notes
MEG to discuss 2010 certifications.Project Financing Notes:NADB contracted $165 million in new project financing (both loans and grants) during 2010. The vast majority of this --$129 million--was in loans, with $36 million in new grant agreements. In terms of disbursements, we saw a record-year for NADB. $172 million was disbursed in loans, and $24 million in grants for a total of $196 million, the highest single-year level of disbursements for the Bank to date.
Looking at cumulative financing figures, as of December 31, 2010 NADB has contracted a total of $1.2 billion in financing for 149 projects throughout the border region.These 149 projects represent a total investment in border infrastructure of $3.2 billion.This pie chart shows the distribution of NADB financing among the various sectors we operate in. As you can see, water and wastewater projects continue to make up the majority of our financing portfolio. However, as you are aware, in recent years we have become increasingly active in projects aimed at improving air quality, particularly street paving projects. We can expect this trend to continue as the BECC and NADB look at projects related to ports-of-entry, public transit, etc.We also anticipate greater involvement in clean and renewable energy projects toward the future.
Gerónimo to discuss project implementation:US$1.13 billion disbursed to support 135 projectsOf the 149 certified projects financed by NADB 102 – have been fully implemented 41 – are in various stages of construction 5 – are at the bidding or design stage 1 – has been cancelledMEG to discuss project benefits:These projects include… 19 WTP & 32 drinking water distribution systems 52 WWTP & 75 WW collection systems 16 landfills built/expanded & 16 dumpsites closed 26,964,000 square meters pavedOver 12 million people in the border region are benefiting from BECC-NADB projects.Projects certified by the BECC and financed by the NADB are helping prevent the discharge of the equivalent of 300 M/Gallons per day of untreated sewage into rivers and streams like the Rio Grande, Colorado and Tijuana Rivers, and Nogales stream. Equivalent of the discharges of a city of 7 million residents.