Guarantee Fund for Biogas Projects

About

OVERVIEW

The Guarantee Fund for Biogas Projects is the first guarantee mechanism that will provide financial guarantees on credit lines for biogas projects in Brazil, leveraging lending by private and public banks. Biogas is a renewable energy source that can produce electricity, heat, or fuel in off-grid areas that currently rely on high-polluting fossil fuels.

THE PROBLEM

The biogas industry is not new but has not taken off in Brazil partially because of a high-risk perception from funders. To secure credit, biogas projects must comply with a high level of guarantees, preventing access to affordable credit lines, even for projects with strong economics.

THE SOLUTION

A guarantee fund for private and public banks–specifically for biogas projects–would reduce the risk for financial institutions, therefore increasing access to credit.

“Brazil has the highest potential in the world for biogas. However, due to a lack of knowledge about the financial aspects of biogas projects, the perception of risk by banks and financial institutions is too high. The Lab’s expertise will help us design and launch an attractive, workable financial product,” – Alessandro Gardemann, President, ABiogas

TARGET IMPACT

The proponent estimates that a USD 20 million fund will leverage five times the amount in investments in biogas projects, adding an additional 60 MW of renewable electricity or more than 130 million m³/year of biomethane, which can replace more than 130 million liters per year of fossil fuels in thermal power plants or as vehicular fuels. This will replace planned or projected thermal plants fueled by natural gas and provide a better destination for agricultural and sanitation waste.