Mexico: World Bank Approves $25 Million for Renewable
Energy Development
Contacts:
In Mexico: Gabriela Aguilar (5255) 54-80-4252
Gaguilar2@worldbank.org
In Washington: Alejandra Viveros (202) 473-4306
Aviveros@worldbank.org

WASHINGTON, June 29, 2006—The World Bank’s Board of Directors approved today a $25 million grant from the Global Environment Facility (GEF) for
Mexico, in order to reduce greenhouse gas emissions by removing barriers to the development of renewable energy technologies and markets.

“Mexico needs to develop domestic sources of renewable energy to complement fossil fuels in power production,” said Anna Wellenstein, World Bank
Sector Leader for Finance, Infrastructure and Private Sector in Mexico. “The development of these sources will benefit both the economy and the
environment.”

The Large-Scale Renewable Energy Development Project seeks to assist Mexico in developing initial experience in commercially-based, grid-
connected renewable energy applications. It will do so by supporting the construction of an approximately 101 megawatt independent power producer
(IPP) wind farm, designated as La Venta III, which will build on the Federal Electric Commission’s 2 Megawatt demonstration plant (La Venta I) and the
85 Megawatt La Venta II, which is a public sector project currently under construction.

“The objective of this project is not simply to build an independent power producer wind farm, but rather to launch a sustainable private wind farming
industry in Mexico that will have broader environmental and local development benefits,” said Charles Feinstein, World Bank task manager for the
project.

According to the project documents, Mexico is an oil-exporting country rich in fossil fuel resources, which has not been able to exploit these natural
resources at a sufficient rate to ensure future economic growth and macroeconomic stability. Natural gas production, for instance, has been insufficient
to satisfy domestic demand affecting the power sector. By some estimates natural gas imports are likely to rise by 500 percent over the next few
decades. As a result, it is key to develop domestic sources of renewable energy to complement fossil fuels in power production.

Specifically, the project will support three main components to remove policy, financial and transactional cost barriers for this type of renewable energy
investment:

       A financial mechanism to stimulate organizational learning and cost reduction that will provide US$20.4 million in energy production incentives
       on an output-based aid basis (1.1 US cents per kilowatt-hour for the first 5 years of generation);
       Technical assistance activities valued at US$3.9 million to address analytical and policy barriers, and provide business development assistance
       to stimulate and facilitate project investment in both independent power producers and renewable energy self-supply markets; and
       Project management support in the amount of US$0,7 million to assist the Ministry of Energy, in coordination with the Mexico State
       Development Bank, NAFINSA, in the management of both of the above components, and to fulfill oversight, monitoring and evaluation, and
       reporting responsibilities.

                                                                            ###

The Global Environment Facility (GEF) is a mechanism for providing new and additional grant and concessional funding to meet the agreed incremental
costs of measures to achieve agreed global environmental benefits in the six focal areas - climate change; biological diversity; international waters;
persistent organic pollutants; land degradation; and ozone layer depletion. GEF also supports the work of the global agreements to combat
desertification.

The World Bank Group is one of GEF’s implementing agencies and supports countries in preparing GEF co-financed projects and supervising their
implementation. The Bank plays the primary role in ensuring the development and management of investment projects. The Bank draws upon its
investment experience in eligible countries to promote investment opportunities and to mobilize private sector, bilateral, multilateral, and other
government and non-government sector resources that are consistent with GEF objectives and national sustainable development strategies. For further
information on GEF, please visit www.theGEF.org

For more information on this project, please visit the project web site.

For more information about the World Bank’s work in Mexico, please visit: http://www.worldbank.org/mx