This document discusses mobilizing institutional investors for emerging market climate finance through a solar energy project in a lower middle-income country. The project involves setting up a holding company and special purpose vehicles to purchase a $250 million project bond. The project companies would obtain a $500 million loan from multilateral development banks and development finance institutions to finance construction of multiple solar fields with electricity sales under long-term power purchase agreements. Key risks to debt repayment include the creditworthiness of the electricity off-taker, government interference, project performance issues, and unpredictability of the legal framework in the event of stress.

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Mobilising Institutional Investors for EM Climate Finance
Operating Solar Fields – Lower Middle-Income Country (Single-B rated)
Investors
Project
Holding
Company
SPV
(Luxembourg)
SPV Note
$250mn
Purchase price
Investors
20yr Project Bond
Green bond label
Credit rating
National
Electricity
Grid
Offtake agreements
(PPA)
Electricity
$500mn
Loan
1 2 3
Project Companies
(cross-guarantors)
Green Project Bond
MDB 1
Complementary MDB
Credit Enhancement
Facilities
$250mn
Loan
DFI Lenders
DFI Lenders
Objective: Extend debt financing post-construction to the full term of the PPA
MOF
Guarantee
MDB 2
Fundamental challenge
• New jurisdiction for all non-EM investors
Project strengths
• Globally known sponsor / O+M
• Established technology (PV)
• Fixed tariff / kWh generated
• Solar fields just started operations
Key risks for repayment of debt to investors
• Creditworthiness of off-taker
• Direct or indirect interference by the government
• Project performance (irradiance / technical delivery)
• Predictability of legal framework in the event of stress
• Structural limitations of MDB risk-mitigation instruments
Risk