NEWSLETTER 33 / 2 0 1 0N o r d i c D e v e l o p m e n t F u n d

ProClimate Facility offersguarantees and technical assistanceThe NDF Board has approvedfinancing of EUR 10 mil-lion for the ProClimateFacility (ProCF) which estab-lishes and pilots a partialclimate guarantee and tech-nical assistance facility tosupport small and medium-sized investments in climatechange mitigation and adap-tation projects, includingthose eligible for Clean Deve-lopment Mechanism (CDM).

“The aim is to reach proj-ects which are now largelybeing overlooked mainlydue to their size”, says Ms.Leena Klossner, DeputyDirector at NDF.

There is common recog-nition that private financeis an important contributorin combating climate change.However, increased privatefinancing in climate proj-ects in developing coun-tries still faces severalimpediments. Awareness

needs to be raised amongthe investor communityand financing institutions,the gap between financeand projects needs to bebridged, risk mitigationschemes need to be identi-fied to encourage invest-ment and public financeneeds to help spread pri-vate finance to the least de-veloped countries. As anorganisation specialised inclimate-related finance indeveloping countries, NDFis well-positioned to iden-tify and pilot ways forusing concessional financeinstruments to leveragemore private financing forclimate-related projects inhigh-risk countries whichare currently outside themajor private financingflows. ProCF is an exampleof this support.

ProCF can extend partialloan guarantees, technical

and operational guaranteesas well as technical assis-tance to selected projects.As an innovative elementthe facility can enable dif-ferent kinds of advancepayments on deliveries andsupplies, such as energyand Certified EmissionReductions (CERs) under theCDM. Attaching technicalassistance to the selectedprojects is expected to fur-ther enhance the efficiencyof the facility.

“The main purpose of thetechnical assistance is toavoid project developmentrelated factors which mayprevent project realization,”says Ms Klossner.

ProCF builds on NDF’sexperiences from theMekongEnergy and EnvironmentPartnership (EEP), theNordic Climate Facility(NCF), and the recently-launched GreenPyme en-

ergy efficiency programmeof the Inter-American In-vestment Corporation (IIC).All three programmes oper-ate between the public andprivate sectors. The ProCFsupplements the alreadyavailable financing by es-tablishing a possible sourcefor further support for vi-able projects developed underthese seed-fund facilities.

ProCF will be imple-mented in partnership withNEFCO. NEFCO’s extensiveexperience in CDM projectsand the private sector ingeneral will form a solidbase for collaboration withNDF in ProCF.

“NEFCO’s experiencecombined with fundingfrom NDF offers a uniquepossibility to leverage moreprivate sector funding toclimate projects in develop-ing countries,” concludesMs. Klossner.

NCF proposalevaluationnearlycompletedNDF to support project

for energy sustainabilityin Senegal“Deforestation, overgrazing,soil erosion, desertificationand inefficiency in thehousehold energy sector areamong Senegal’s major chal-lenges in mitigating climatechange. Wood accounts forapproximately 60 per centof Senegal’s energy con-sumption, and the currentuse of wood-based energy ishighly unsustainable,” saysMs MMaarrttiinnaa JJääggeerrhhoorrnn,Country Program Managerat NDF.

In June, the NDF Boardapproved grant financing ofup to EUR 3 million, for aproject that will addressthese problems by improv-ing the management of localbiomass resources and sup-porting the efficient use anddiversification of householdenergy. The Government ofSenegal has requested thatNDF and the World Banksupport PROGEDE II, thecontinuation of a previoussuccessful intervention fi-nanced by the World Bank.The current second phasewill be implemented over aperiod of six years and the

total project costs amountto over EUR 11 million.

“The overall objective isto increase the availabilityof diversified householdfuels in a sustainable andgender-equitable way, andto increase the income ofparticipating communitieswhile preserving the forestecosystems,” says MsJägerhorn.

The proposed NDF-fi-nanced activities will, forexample, help to preventforest fires, establish 20forest nurseries and re-plant and protect degradedforest lands.

The proposed activitieswill also support the pro-duction and marketing ofefficient stoves, promote ef-ficient charcoal productionmethods and promote newCO2 neutral biomass en-ergy sources.

“Both supported areas—sustainable wood fuel sup-ply and promotion anddiversification of modernhousehold energy—have adirect impact on green-house gas emissions. Accor-

The first call for projectproposals was based ontwo themes: water re-sources and energy effi-ciency. A total of 138initial applications werereceived by the end of January 2010 and theywere almost equally dividedbetween adaptation to andmitigation of climatechange. Some combinedboth elements. There werealso several interestingproject proposals relatingto renewable energy. Thesecould, however, not be ac-cepted since they did notrelate to water resourcesor energy efficiency.

Thirty shortlisted com-panies submitted theirfinal proposals in the be-ginning of May. The eval-uation is expected to becompleted in June. NCF(Nordic Climate Facility)plans to sign most of thegrant agreements in thethird quarter of 2010. Thetotal funding is EUR 6million for the first projects.

NCF provides grant financing to innovativeclimate projects in devel-oping countries to be im-plemented in co-operationbetween a Nordic and alocal partner. The NordicClimate Facility is fundedby NDF and administeredin partnership betweenNEFCO and NDF.

Further calls for proposalsare under consideration.

ding to a climate screening,the CO2 emission savingsduring the six-year proj-ect period are in the rangeof 3 million tons,” MsJägerhorn concludes.

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NDF grant financing will pro-mote efficient stoves in Senegal.

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The Bangladesh Road Transport Co-operation BRTC purchased 100 gas-driven buses from China in March.NDF will finance the replacement of 190 more diesel-fuelled buses by gas-driven vehicles.

NDF supports the transferfrom polluting diesel buses to gas-driven buses in thecity of Dhaka in Bangladesh.The Government of Bangladeshhas embarked on a programto replace old buses runningon diesel with new vehiclesrunning on gas to decreasecosts and improve air quality.Bangladesh has its own re-sources of natural gas, acheaper energy source thandiesel or petrol. The poor air

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quality in Dhaka causes ahigh rate of diseases likeasthma, chronic bronchitis,decreased lung functionsand heart attacks.

“The project may alsohave a beneficial climateimpact, the primary effectbeing derived, not from thefuel substitution, but fromits contribution to the in-creased efficiency of theoverall transport system in Dhaka, in particular

Bangladesh gets cleaner busesthe reduction in traffic congestion”, says Mr BjörnMöller, Country ProgramManager at NDF.

NDF provided a credit ofEUR 10 million in 2003 forthe purchase of 100 CNGbuses. In June the NDFBoard approved the pur-chase of the same make ofbuses to add to the existingfleet for the remainingamount of the credit.

Ghana landfill gas to be studiedIn Ghana, NDF will supportan international consultancycontract for landfill gas (LFG)capture and utilisation with agrant of a maximum of EUR 2million. The initiative is partof the Ghana Second UrbanEnvironmental SanitationProject, with the World Bankas the lead agency. The studywill pave the way for privateinvestments in LFG systemsunder the Clean DevelopmentMechanism (CDM) frameworkor a similar mechanism inplace after 2012.

The main aim of the projectis to mitigate climate changethrough decrease of landfillgas emissions by at least120,000 CO2 per year over aperiod of about twenty years.The study will analyse thecurrent situation at threelandfills: Kumasi, Tamale andTema. It will also develop theCDM project design, preparethe bidding documents for theLFG systems and facilitate in-vestment agreements and theprocedures to secure carboncredits. The obvious profitabil-ity of the landfill gas as a re-newable energy source forelectricity generation is likelyto attract enough investorsfor the project. Furthermore,sale of carbon credits is ex-pected to generate substantialincome to be used for landfillsite operations and for payingback the investments.

The study is expected totake 18 months. LFG systemscould then be operationalfrom 2013 onwards.

Flooding created by in-creasing annual rainfall isa primary concern for pro-tecting the existing roadnetwork and a threat for future investments in thetransport sector in Cambo-dia. NDF will support aproject aimed at reducingthe road network vulnera-bility to climate changewith a grant of EUR 4 mil-lion.

“The NDF interventionis part of a larger project,including the upgrade of500 kilometres of ruralroads through pavement,road asset managementand capacity developmentand road safety measures.The climate change adap-tion activities integrated inthe project will strengthenthe overall objectives of theproject by providing pro-tective measures for the

infrastructure and bystreamlining adaptationmeasures for future invest-ments,” says Ms LLeeeennaaKKlloossssnneerr, Deputy Directorat NDF.

The climate changeadaption measures aim toreduce the severity of cli-mate change impacts onthe infrastructure and toimprove planning to pre-vent and respond to cli-mate change effects.

“For example, the plannedactivities include vulnera-bility mapping of ruralroads as well as designingand introducing adaptionstrategies for roads to im-prove flood and droughtmanagement. Throughcivil works the resilience of infrastructure can beimproved significantly. The plan is also to introduceclimate monitoring sys-

tems to improve roadmaintenance and manage-ment and to develop pilotprograms for early warn-ing systems and emer-gency management plan-ning for rural roads,” saysMs Klossner.

The objective is to estab-lish a model for an adap-tion strategy which canalso be used in other coun-tries in Southeast Asia.

“The intervention has a large demonstration impact,” Ms Klossner concludes.

The project will be im-plemented from 2011–2014 by the Ministry ofRural Development ofCambodia. The Asian De-velopment Bank will act aslead agency and the totalproject cost will amount toUSD 66 million (EUR 46.6million).

Cambodia adapts road network to climate change

NDF will finance climatechange adaptation measuresin the transport sector inCambodia.

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NDF finances disaster management in Nicaragua

The Nordic Development Fund (NDF) provides grant financing for climatechange interventions in low-income developing countries. NDF is the joint development finance institution of the Nordic countries—Denmark, Finland, Iceland, Norway and Sweden—and finances projects in cooperation with otherdevelopment institutions.

GRANT FINANCING FOR CLIMATE CHANGEPROJECTS IN LOW-INCOME COUNTRIES

NORDIC DEVELOPMENT FUND, P.O. Box 185, FIN-00171 Helsinki, Finland (Visiting address: Fabianinkatu 34), Tel: +358 10 618 002, Fax: +358 9 622 1491, E-mail: info.ndf@ndf.fi, www.ndf.fi

Nordic Development Fund

NDF promotes sustainableelectrification and renewableenergy in Nicaragua with agrant of EUR 4.5 million.

The NDF grant will bechannelled to studies relatedto hydro power developmentplans, wind power feasibilitystudies and geothermal in-vestigations.

“Nicaragua has one of thelowest electrification levelsin Latin America and theCaribbean. A large share ofthe population lacks accessto electricity, which consti-tutes a serious obstacle toeconomic and social develop-ment. In spite of a consider-able potential for powergeneration from renewableenergy sources, in particularfrom geothermal plants,

Nicaragua developssustainable energy

NDF supports GreenPyme programme

NDF Newsletter presents NDF's operations. The newsletter is published as needed. Layout Kubik, print Erweko Oy, pictures Jørgen Schytte, Björn Möller, IDB / Arlette Marie Pedraglio and Dreamstime.

In Nicaragua, storms and floodshave had great human impactin recent years. In addition, economic losses for the period1997 –2006 averaged 2.7 percent of GDP annually. Highertemperatures associated withclimate change will likely exac-erbate this situation and will increase both frequency and intensity of severe weather conditions and related naturaldisasters. The 2010 Global Climate Risk Index (CRI) ratesNicaragua as the fifth most vul-nerable country to impacts ofextreme weather events. NDFwill provide a grant of EUR 2.5million for a project that will re-duce the vulnerability of ruralpopulations to disasters associ-ated with climate change andincrease the resilience of ruralcommunities by improving dis-aster risk management, preven-tion and mitigation in prioritywatersheds.

“The aim is to reduce vulner-ability and future risks for thelocal population, particularlysmall and medium-sized agri-

cultural producers. Also, the project puts emphasis oninstitutional and managerialstrengthening at the locallevel in watershed manage-ment and climate change associated actions. This iscomplemented by a range ofstudies of future risks relatedto climate change and develop-ment of strategic approachesto adaptation actions. Specialattention is given to womenand their vulnerability in disaster situations,” says MrAAaaggee JJøørrggeennsseenn, Country Program Manager at NDF.

The lead agency of the proj-ect, implemented by the localMinistry of the Environmentand Natural Resources, is theInter-American DevelopmentBank. The project will be im-plemented over a five-year pe-riod and the total project costamounts to EUR 11 million.The intervention will build onresults and lessons learnedfrom the Environment and So-cial Forestry Program, previ-ously supported by NDF.

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hydro and wind turbines,Nicaragua continues to behighly dependent on fossilfuels,” says Mr HHaannnnuuEEeerroollaa, Country ProgramManager at NDF.

The NDF intervention is part of the SustainableElectrification and Renew-able Energy Programmefunded by several donors.The programme aims at reducing poverty by in-creasing access to efficientand sustainable energyservices as well as at miti-gating climate changethrough a structural changein the sources used for en-ergy generation. The Inter-American DevelopmentBank is the lead agency for the programme.

Satu Santala, Member of the Board of Directors of NDF, and Jacques Rogozinski,Managing Director of the Inter-American Investment Corporation (IIC), signedan agreement regarding NDF’s grant contribution for the GreenPyme pro-gramme in Mexico in March.

The programme will promote energy efficiency among small and medium-sized enterprises in Central America. NDF’s grant amounts to EUR 2.2 million.IIC, a member of the Inter-American Development Bank Group, is the imple-menting agency of the programme.

Climate change is a threat to food security in rural Nicaragua.

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