Ecuador to Spur Energy Transition and Investments with IDB Support

The Inter-American Development Bank (IDB) has approved a $500 million loan that, along with an additional $100 million in financing from the Korea Infrastructure Development Co-financing Facility for Latin America and the Caribbean-which is administered by the IDB- aims to galvanize the energy transition and public and private investment in Ecuador.

The program will advance a fair and sustainable energy transition that incorporates non-conventional renewable energy sources, boosts energy efficiency, increases the participation of women and people with disabilities in the electrical power sector, and stimulates electric mobility.

This operation is the second of two programmatic policy-based loans that are contractually independent but technically linked.

The program's reforms are expected to significantly reduce greenhouse gas emissions and provide major progress towards the Sustainable Development Goals. An estimated 80,000 homes, especially in rural areas and marginalized urban neighborhoods, will enjoy improved access to electricity. Beneficiaries include communities in the Galapagos Islands and shrimp farm operators that can replace fossil fuel with electrical energy by connecting to the grid. The operation will also create new jobs in the private sector by expanding renewable energy and electric mobility.

The program will advance with the consolidation of the Andean Interconnected System - SINEA, particularly the development of the 500kV electrical transmission system for the exchange of electrical energy between Ecuador and Peru.

The program will also develop and implement innovative technologies like distributed generation and electric mobility that will simultaneously strengthen the country's energy infrastructure and further its shift to more sustainable and efficient practices.

Furthermore, the operation will offer public commenting processes and training and educational programs for local communities to ensure that its benefits are spread equitably across Ecuadorean society, as well as to boost engagement and effective implementation. The program will also put in place sound transparency and accountability mechanisms to ensure efficient, effective, ethical, and responsible use of both project funds and public resources.

The $500 million loan has a 19.5-year repayment term, a six-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR). The $100 million in financing from the Korea Facility has a 15-year repayment term, a three-year grace period, and a 2.5 percent annual interest rate.