The World Bank Group has approved a US$200 million loan to stabilize electricity costs and tariffs in the event of droughts in Uruguay, with the aim of avoiding financial pressures that might affect the government's ability to provide services to the poor.
The loan will contribute to providing insurance coverage to support the Energy Stabilization Fund in mitigating climate shocks while helping to diversify the country's energy sector.
2 December 2014: The World Bank Group has approved a US$200 million loan to stabilize electricity costs and tariffs in the event of droughts in Uruguay, with the aim of avoiding financial pressures that might affect the government’s ability to provide services to the poor. The loan will contribute to providing insurance coverage to support the Energy Stabilization Fund in mitigating climate shocks while helping to diversify the country’s energy sector.
Mario Bergara, Uruguay’s Minister of Finance and Economy, reiterated that the Energy Stabilization Fund would help cover any deficit caused by additional costs in energy generation, in the event of any adverse climate event. In the past, when droughts have occurred, Uruguay has had to switch to thermal energy sources, with increased production costs. This Drought Event Impact Mitigation project will allow for managing risks in a way that avoids increasing tariffs or affecting public services.
This loan represents the first time the World Bank Group is using investment project financing to support risk management in the energy sector. It is expected that other countries facing similar risks will soon be able to take advantage of this programme. [World Bank Press Release]