Clifford Chance has partnered with Greenmap (Global Renewable Energy Mass Adoption Program) to provide advice and assistance on a pro bono basis in respect of the design and implementation of the International Guarantee Trust Fund for Renewable Energy (iTrust), which officially launched at COP26 on November 4.
Greenmap is an independent non-profit organization whose aim and focus is to accelerate deployment of renewable generation in developing economies by directly supporting governments in the design and implementation of stable regulatory frameworks, competitive procurement processes and new financial and credit enhancement tools.
Energy & infrastructure partner and Latin American practice head Fabricio Longhin commented: "Supporting the growth of renewable energy sources is one of the pillars of Clifford Chance's Energy Transition Initiative, and we are therefore delighted to be working with Greenmap on the design and implementation of a guarantee program to facilitate the deployment of renewables on a large scale, which is a must on the path to net zero."
The iTrust is intended to become a bridge between the growing availability of ESG-driven capital and the need to develop renewable energy generation at scale to make energy transitions accessible for all. With funding to be provided by donors, governments, multilateral and bilateral agencies, institutional investors, financial institutions and other sources, the iTrust will be set up with the specific purpose of providing program-based guarantees to all renewable energy projects awarded through public auctions by emerging countries that meet certain eligibility criteria.
The scheme will include: a revolving guarantee to cover ongoing payments by the offtaker under the relevant power purchase agreements; and a guarantee to backstop the obligation of the relevant offtaker or governmental agency to make early termination payments. The implementation of the iTrust is expected to significantly improve the projects’ bankability, reduce the cost of financing and expand the universe of local and international investors participating in the auctions, all of which would result in lower electricity prices for end users.
Differently from other guarantee products available in the market, the iTrust will couple its offering with a full documentation package, including a power purchase agreement template to be tailored to the specific requirements of each participating country while adhering to certain non-negotiable structuring principles.
Longhin added, "this will ensure a balanced risk allocation up front and avoid lengthy and costly discussions on bankability down the road. It truly has the potential to be a game changer for the energy industry."