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

In 2021, IDB Invest and Engie Energia Chile (EECL) implemented a blended finance package to retire two coal units at the Tocopilla plant early and finance the 151 MW Calama wind farm. The deal utilized a results-based concessional loan where interest payments at maturity are reduced based on verified carbon emissions abated through early retirement, using a pre-agreed carbon price of $3/ton. This transaction was enabled by Chile's top-down coal phaseout policy, the lower cost of renewable energy compared to legacy coal Power Purchase Agreements (PPAs), and the involvement of the Climate Investment Funds (CIF).

• IDB Invest structured a $125 million blended finance package for Engie Energia Chile (EECL) that combined a $74 million senior loan, a $36 million loan from the China Fund for Co-financing in Latin America, and a $15 million concessional loan from the CTF.
• The financing mechanism incentivized the early retirement of Tocopilla units 14 and 15 by tying interest reductions on the concessional loan to carbon emissions abated, calculated at a price of $3 per ton.
• Preliminary estimates indicate 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.
• The transaction was supported by a market environment in Chile where renewable energy generation had become cheaper than high-priced legacy coal Power Purchase Agreements (PPAs), encouraging generators and customers to renegotiate terms.
• Key enabling factors for the Tocopilla transition included Chile's top-down coal phaseout policy, the proactive role of IDB Invest as a multilateral development bank, and the provision of a concessional tranche by the Climate Investment Funds (CIF).
• The loan includes a mechanism to handle future regulated carbon markets: if a market prices credits higher than $3/ton, EECL will share a fraction of the additional profits with the CTF; otherwise, the $3/ton floor price is secured.

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} }