Project Description:
This summary covers an application made by Corporación Nacional del Cobre de Chile (CODELCO) related to proposed non-shareholder loans to be provided by lender(s) yet-to-be identified.
MIGA is considering issuing guarantees covering non-shareholder loans of up to US$1,200 million. MIGA’s guarantees would be for up to an estimated US$2,000 million for a period of up to 15 years and 6 months against the risk of Non-Honoring of Sovereign Financial Obligations by a State-Owned Enterprise (NHFO-SOE).
MIGA’s NHFO-SOE instruments will be used to support payments under renewable energy power purchase agreements (PPAs) with third-party producers that supply electricity to CODELCO (the Project). The PPAs are instrumental in decarbonizing CODELCO's electricity supply by transitioning from coal and other fossil fuels to renewable energy sources and contribute to the Company’s ongoing efforts to reduce its carbon footprint.
CODELCO is set to meet 85% of its energy consumption from renewable sources by 2026, with a further aim of achieving 100% by 2030. This shift not only helps CODELCO reduce its environmental impact but supports the introduction of new renewable energy generation in Chile’s energy matrix, thereby contributing to the diversification and greening of the country's energy sector.
In December 2020, CODELCO announced its commitment to become a carbon neutral company by 2050. In support of this goal, the Company also announced six Sustainable Development Commitments that expects to reach by December 2030: (i) 70.0% reduction of greenhouse gas (GHG) emissions from 2019 levels; (ii) 60.0% reduction of unitary continental water consumption from 2019 levels; (iii) recycling 65.0% of industrial waste; (iv) implementation of online monitoring and infiltration control systems to all tailing storage facilities; (v) 60.0% increase of goods and services provided by local suppliers from 2019 levels; and (vi) 25.0% reduction of particulate matter emissions from 2019 levels.
Environmental Categorization:
The Project is a category B under MIGA’s Policy on Environmental and Social Sustainability. Click here for the project’s Environmental and Social Review Summary.
Development Impact:
The Project is expected to contribute to the reduction of GHG emissions in Chile as a result of CODELCO’s replacement of carbon intensive energy sources with renewable energy sources, as well as to the Government of Chile’s decarbonization strategy. Furthermore, the Project has the potential to trigger the adoption of climate mitigation measures given CODELCO’s importance in the sector, serving as an example to other companies in the industry and in other energy-intensive sectors.
The Project is consistent with Chile’s CPF for FY24-FY27 which is structured across two High-Level Outcomes (HLOs): (i) Improved quality and inclusiveness of social and financial services; and (ii) Improved environmental sustainability and climate change resilience. The Project is particularly aligned with the second HLO, specifically with Objective 4: Promote decarbonization of the energy, transport, and industrial sectors, since it will support the decarbonization of the energy and mining sectors and advance the implementation of sustainable mining exploration and production practices. The CPF discusses Chile’s goal to achieve GHG neutrality by 2050, emphasizing the need to intensify its energy transition through massive expansion of renewable energy as a substitute for fossil fuels in key energy-intensive sector, such as mining.
The Project is also consistent with the WBG’s “Green Resilient and Inclusive Development” (GRID) response and the WBG Road Map for Climate Action in Latin America and the Caribbean since it contributes to increased investments towards the decarbonization of Chile’s energy sector and mining sectors. Furthermore, the Project is aligned with Chile’s ambitious climate change mitigation and adaptation plans laid out in the Climate Change Framework Law and cascaded down to the energy and mining sectors through Chile’s Energy Policy 2050 and the National Mining Policy 2050, respectively.
The Project is also aligned with MIGA’s FY24-26 Strategy and Business Outlook under its strategic direction of tackling global challenges, as part of its objective of addressing climate change and building resilience. The Project is expected to yield climate co-benefits that will contribute towards MIGA’s climate finance targets set under the WBG Climate Change Action Plan (CCAP) of 2021-25, as the proceeds of the MIGA-guaranteed loans are expected to be 100% towards climate finance.
