The Overseas Private Investment Corporation (OPIC) is the US government’s development finance institution. It has just issued $47.3m of something called “Green Guaranties”, also known as government-guaranteed Certificates of Participation (CoP)". The interest rate is 3.28%, tenor is 15 years and Bank of America Merrill Lynch was the underwriter.
This is essentially a project bond with an OPIC (US Government) guarantee - the investor is paid from project revenues, with an OPIC guarantee that they will be paid, hence the low interest rate.
With this bond, interest payments come from the revenues stream of the Luz del Norte solar project in Chile. Investors have some risk in that project as revenue streams can be volatile and it would take time to make a claim against the OPIC guarantee.
This is a very good example of how a rich country can "buy down" interest rates in an emerging market, making it more viable to go high capex green over low capex brown - in places like India interest costs can make up two-thirds the lifetime cost of a solar project, so getting interest rates down in the way OPIC has done can have a huge impact, yet not involve handing over any cash unless the project fails entirely.
On green credentials, all is cool. The Luz del Norte project is photovoltaic power plant with a total capacity of approx. 141 MW.Once up and running it will be the largest Solar Photovoltaic power plant in Latin America. Although there is no second party opinion, all the proceeds are going to the Luz del Norte solar project which complies with IFC Performance Standards, so we think investors can be confident in the green credentials of the issue. Bravo OPIC!