Geothermal handbook: PlanninG and Financing power Generation t e c h n I c a L r e p o r t 2 / 2

role of donors, IFIs, and Climate Finance
It should be clear from the previous discussion that scaling up geothermal power development 
requires active participation from both the public and private sector. In developing countries, however, 
despite some encouraging examples, such as the recent project by Chevron in the Philippines, the 
LaGeo venture in El Salvador, and the projects guaranteed by the Multilateral Investment Guarantee 
Facility (MIGA) in Kenya (Box 3.12 on the recent investment by Ormat), private sector investment in 
major geothermal projects in the developing world has been limited thus far. 
International development banks and other donor agencies have a very important role to play in 
catalyzing investment in the sector. The Philippines offers a telling example of the powerful impact 
of development assistance in building up the geothermal sector in a developing country. In the 
1970s, the Philippine government put PNOC EDC, a subsidiary of the national oil company PNOC, in 
charge of geothermal exploration in several geothermal fields. However, because of limited financial 
resources, financing the exploration, development and commissioning of the geothermal projects of 
PNOC EDC was a great challenge initially. With initial capitalization and advances from PNOC, the 
mother company, PNOC EDC was able to carry out its mandate to explore, develop, and put into 
production the country’s geothermal resources. The major advantage that the company enjoyed was 
its ability to access loans from IFIs that were guaranteed by the government (Box 3.13). Similarly, 
development financing enhanced the viability of geothermal power plant construction projects 
implemented by private investors under BOT contracts and by the national electric power utility, NPC. 
Climate Finance (including CIF and carbon finance) has a key role to play in supporting geothermal 
energy development. Carbon finance mechanisms initially established under the Kyoto Protocol of 
the United Nations Framework Convention on Climate Change (UNFCCC) remain available, whereby 
geothermal projects can benefit from supplemental cash flows due to GHG emission savings (Annex 
4). However, the cash from carbon credits is typically not available upfront and there are uncertainties 
surrounding the future market structure when the current Kyoto Protocol commitment period ends