Transition Finance Case Studies: Tocopilla Units 14 and 15 — Results-Based Loan Incentive

This case study examines a results-based loan incentive used to accelerate the retirement of units 14 and 15 of the Tocopilla coal plant in Chile. In 2021, IDB Invest and Engie Energia Chile (EECL) closed a deal to finance the 151 MW Calama wind farm, utilizing a blended finance package that reduced the interest costs for EECL based on the volume of carbon emissions abated through the early decommissioning of the coal units.

• In 2021, IDB Invest and Engie Energia Chile (EECL) implemented a blended finance package to fund the 151 MW Calama wind farm and incentivize the early retirement of units 14 and 15 of the Tocopilla coal plant.
• The financing structure for the Tocopilla transaction totaled $125 million, consisting of a $74 million senior loan from IDB Invest, a $36 million loan from the China Fund for Co-financing in Latin America, and a $15 million concessional loan from the CTF, all managed by IDB Invest.
• The concessional loan from the CTF utilized a carbon payment mechanism where the interest payable at maturity was reduced based on a pre-agreed carbon price of $3/ton multiplied by the volume of abated carbon emissions.
• Preliminary calculations by RMI estimate that the early retirement of unit 14 in June 2022 and unit 15 in September 2022 abated between 500,000 and 700,000 tons of carbon, potentially reducing EECL's interest repayment by $1.5–$2.1 million.
• Several enabling factors contributed to the success of the Tocopilla retirement, including Chile's top-down coal phaseout policy, the proactive role of IDB Invest, and a market environment where renewable energy (RE) generation economics were more favorable than coal power.
• The transaction was supported by the fact that new renewable energy Power Purchase Agreements (PPAs) were cheaper than legacy coal PPAs, providing incentives for generators and industrial customers—primarily copper mining companies—to renegotiate terms.

APA

RMI (2024). Transition Finance Case Studies: Tocopilla Units 14 and 15 — Results-Based Loan Incentive. https://rmi.org/resources/transition-finance-case-studies-tocopilla-units-14-and-15-results-based-loan-incentive/

Chicago

RMI. Transition Finance Case Studies: Tocopilla Units 14 and 15 — Results-Based Loan Incentive. 2024. https://rmi.org/resources/transition-finance-case-studies-tocopilla-units-14-and-15-results-based-loan-incentive/.

Wikipedia

{{cite report |author=RMI |title=Transition Finance Case Studies: Tocopilla Units 14 and 15 — Results-Based Loan Incentive |date=25 June 2024 |url=https://rmi.org/resources/transition-finance-case-studies-tocopilla-units-14-and-15-results-based-loan-incentive/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2024transition, author = {{RMI}}, title = {{Transition Finance Case Studies: Tocopilla Units 14 and 15 — Results-Based Loan Incentive}}, institution = {RMI}, year = {2024}, month = jun, url = {https://rmi.org/resources/transition-finance-case-studies-tocopilla-units-14-and-15-results-based-loan-incentive/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }