SAO PAULO, Jan 27 (Reuters) - Itaú Unibanco SA, Brazil’s largest private-sector bank, borrowed a combined $400 million from the World Bank’s International Finance Corp and a group of commercial lenders to help fund renewable energy projects in drought-stricken Brazil.
The transaction comes as Itaú steps up lending to projects that reduce costs related to energy generation and usage at factories, implement more efficient water treatment and stifle the emission of greenhouse gases, executives at both Itaú and the IFC said early on Tuesday.
The amount is the largest ever raised by a Latin American bank to fund efforts to cope with climate change in the region, said Ariane Di Iorio, head of financial institutions for Brazil at the IFC.
Over the past three years, Itaú’s wholesale and investment banking unit, Itaú BBA, was involved in the structuring and financing of 42 renewable energy projects. Soaring demand for credit in this segment is expected as Brazil’s most populous region grapples with the worst drought in 80 years.
Blackouts are affecting dozens of cities because of weak power generation and record air conditioning usage as temperatures soar in Brazil’s Southeast. The government, which is even buying power from Argentina to ease the shortfall, is worried utilities will be forced to burn more fossil fuels, which will in turn drive energy costs and greenhouse gas emissions higher.
“The deal has a clear focus of bringing energy efficiency to the forefront, as more of our clients are increasingly conscious of the importance of using their resources in the best way possible,” said Carolina Camargo, head of international financial institutions at Itaú BBA.
The São Paulo-based lender borrowed $100 million from the IFC, as the World Bank’s unit is known, for five years at an interest of 1.40 percentage point above the benchmark Libor interbank rate, Camargo said.
For years, Itaú has strengthened ties with multilateral lenders such as the IFC and export credit agencies for loans that often offer better conditions than market-based alternatives. In recent months, the IFC has extended funding to help Itaú step up credit for small- and mid-sized companies and women-owned ventures.
The remaining $300 million, three-year loan was obtained from a group of banks led by Japan’s Mizuho Financial Group Inc , Bank of America Corp’s BofA Merrill Lynch unit, and Germany’s Commerzbank AG at 1.2 percentage point above the Libor, she added. (Reporting by Guillermo Parra-Bernal. Editing by Andre Grenon)