Financing and supporting the transition to clean public transporation in Colombia

REGARDING THE DEVELOPMENT OF SUSTAINABLE URBAN MOBILITY, PARTICULARLY ELECTRIC MOBILITY, WHAT ARE THE MAJOR CHALLENGES FACED BY COLOMBIAN CITIES?

Public transportation in Colombia is managed independently by each city. This reality has led to cities’ transportation systems operating under different models, making the transition towards fleet electrification more complex. Furthermore, public transportation systems, except for Bogotá’s, have significant structural problems. Most of them have not fully become integrated transportation systems. Today, they coexist alongside traditional public transportation and compete for the same routes and passengers. This redundancy has lowered their utilization and their revenues. It has also led to financial problems and has limited access to financing sources. Currently, Colombia’s public transportation systems operate at a deficit. Transitioning to electric systems (buses and metros) is costly, and covering this higher cost through tariff increases is not feasible. This would leave the cities to bear the costs. Yet, this would not be sustainable, due to their limited budgets. Thus cities and the Government must work together to identify additional sources of funding, and implement them to enable the transition.

IN RECENT YEARS, WHAT HAS THE ROLE OF FDN, AS A PUBLIC DEVELOPMENT BANK, BEEN IN THE DEVELOPMENT OF SUSTAINABLE AND INCLUSIVE URBAN MOBILITY SYSTEMS IN COLOMBIAN CITIES?

FDN has been supporting the development of urban transportation for several years, especially projects and programs aimed at promoting clean technologies. Some examples are as follows. We restructured several concession contracts for the public transport system in Bogotá (Transmilenio), allowing this segment to access finance through bankable contracts and to renew 1600 buses with cleaner technologies. We also recently restructured the transportation system for the city of Cartagena, involving new contracts with private operators, a new remuneration scheme, and new commitments and contributions from the city. Additionally, we conducted the technical, legal, and financial structuring of the first and second lines of the Bogotá Metro, two of the largest infrastructure projects in Latin America. Both are expected to have important benefits, like a reduction of nearly 300,000 tons/year of CO2 emissions, a decrease of about 40 million gallons of fuel used, and a saving of nearly 400 million hours of travelling time each year. Also, we structured the extension of Transmilenio to Soacha (a city neighboring Bogotá), the commuter train of Valle del Cauca, and the light rail on Calle 80, in Medellín.

In terms of project financing, we, along with Proparco, financed the concessionaires Electribus and Green Movil with nearly USD 250 million, for the purchase of almost 700 electric buses for the Transmilenio system in Bogotá. These long-term loans were significant because, in addition to consolidating our role as the largest financiers of electric buses in Colombia, they were disbursed at a time when local banks were not interested in the sector. As a development bank, we renewed confidence among members of the sector and gave them an opportunity to grow. Additionally, we participated in financing the city of Medellín for the construction of the USD 250 million light rail on Calle 80; for Sotramac, in Cartagena; and for the construction of Transmilenio Soacha.

WHAT NEEDS HAVE THESE URBAN MOBILITY SYSTEMS MET, AND WHAT CHALLENGES HAVE THEY FACED?

The major organizations in many cities are serious about bus electrification. This acknowledgment is the starting point: migrating towards electrical systems requires political will. Also to be emphasized is the need for new funds and technology cost reductions. Both could improve cities´ access to electric buses, without deepening their deficits or leading to cuts in their priority investments.

HOW DO YOU SEE URBAN MOBILITY IN COLOMBIA DEVELOPING IN THE UPCOMING YEARS, AND WHAT SUPPORT DOES FDN INTEND TO PROVIDE, FOR BOTH PRIVATE AND PUBLIC ACTORS?

I believe that urban mobility in Colombia will continue to diversify towards clean technologies. This is quite common in many other countries, but our cities developed primarily around bus systems. Nowadays, we are finally promoting metro lines, light rail systems, and commuter trains to connect smaller cities; cable cars for mountainous areas; and bicycles to cross cities through exclusive lanes. But to properly embrace these new opportunities, cities must prioritize solving their transportation systems´ structural problems. They must work together with Governments to identify and incorporate additional sources of payment, to cover the additional CAPEX required for electric alternatives. On the other hand, Governments should explore establishing permanent low-cost financing facilities and encourage banks to participate with more creative financing solutions. This involves every party being part of the solution.
 
We are perhaps one of the most experienced entities in structuring and financing urban mobility projects in Colombia. We know how to help cities to make their systems viable and how to successfully structure and finance new projects through creative, bankable and replicable long-term solutions. Sustainable mobility is a condition precedent for cities’ development, and FDN will continue supporting Colombia’s transition towards it. We have been working with the AFD Group for several years, especially with Proparco, with whom we have had the pleasure of consolidating an extraordinary partnership. The quality of their team and their level of commitment and focus on win-win solutions have been remarkable. To continue our support, we recently signed a credit agreement with AFD; these resources will be key to enabling us to provide financing for electric buses in smaller cities.