with the Corporación Andina de Fomento (CAF) for Republic of Chile 16 March 2017 Entity Support & Strategic Frameworks

with the Corporación Andina de Fomento (CAF) for Republic of Chile 16 March 2017 Entity Support & Strategic Frameworks

READINESS AND PREPARATORY SUPPORT PAGE 1 OF 14 ver. 19 August 2016 Readiness and Preparatory Support Proposal How to complete this document? - A readiness guidebook is available to provide information on how to access funding under the GCF Readiness and Preparatory Support programme. It should be consulted to assist in the completion of this proposal template. - This document should be completed by National Designated Authorities (NDAs) or focal points with support from their delivery partners where relevant. - Please be concise. If you need to include any additional information, please attach it to the proposal. - Information on the indicative list of activities eligible for readiness and preparatory support and the process for the submission, review and approval of this proposal can be found on pages 11-13 of the guidebook Where to get support? - If you are not sure how to complete this document, or require support, please send an e-mail to countries@gcfund.org. We will aim to get back to you within 48 hours. - You can also complete as much of this document as you can and then send it to countries@gcfund.org. We will get back to you within 5 working days to discuss your submission and the way forward. Note: Environmental and Social Safeguards and Gender Throughout this document, when answering questions and providing details, please make sure to pay special attention to environmental, social and gender issues, in particular to the situation of vulnerable populations, including women and men. Please be specific about proposed actions to address these issues. Consult page 4 of the readiness guidebook for more information.

READINESS AND PREPARATORY SUPPORT PAGE 2 OF 14 ver. 19 August 2016 SECTION 1: SUMMARY 1. Country submitting the proposal Country name: CHILE Name of institution (representing National Designated Authority or Focal Point): Ministry of Finance Name of official: Marcela Palominos Position: Head of Sustainable Development and Natural Resources Area Telephone:+56-2-28282392 Full Office address: Teatinos 120, piso 11, Santiago, Chile Email: mpalominos@hacienda.gov.cl 2. Date of initial submission 3. Last date of resubmission (if applicable) 4. Which entity will implement the Readiness and Preparatory Support project? (Provide the contact information if entity is different from NDA/focal point) 5. Title of the Readiness and Preparatory Support Proposal 09/11/2016 20/02/2017 National Designated Authority Delivery partner x Accredited entity Name of institution: CAF Name of official: Antonio Garcia Position: Environment and Climate Change Executive Telephone: 57-1-7437369 Email: agarciap@caf.com Full Office address: Carrera 9 76-49 Bogotá, Colombia Readiness proposal Chile 2016 The following proposals were identified and were prioritized through a participatory process. This process included different stakeholders in order to distribute the support offered by the GCF among the largest number of beneficiaries and generating the greatest impact. All this work was channeled through the Technical Secretariat. The Technical Secretariat is a public body composed of the Ministry of Finance, Ministry of Environment and Ministry of Foreign Affairs, whose main function is to support the NDA in the performance of its functions. 6. Brief summary of the request (200 words) These proposals seek the technical strengthening of a portfolio of prioritized projects through prefeasibility studies, financial structuring, national social and environmental safeguards guides Specifically, 3 proposals are presented: a) Support for the design of financial structuring for prioritized proposals One of the main barriers during the formulation of local projects is the design of financial structures that assure a sustainable financing with minimal concessionality in the long term. Thus, the objective of this proposal is to support the design of financial structuring of a group of prioritized projects at national level. This work will be coordinated by the Corporación de Fomento Productivo (CORFO) and will enable the strengthening of private financing involvement. b) Concept Note preparation support The proposal seeks to support the development of three projects / programs that are located in areas prioritized by the GCF, and have the potential for replicability, not only in different regions and municipalities of the country, but also in other developing countries. During the development of

READINESS AND PREPARATORY SUPPORT PAGE 3 OF 14 ver. 19 August 2016 each Concept Note, the analysis of a gender action plan will be considered to ensure that the proposed activities will be as inclusive as possible. c) Development of a National Social and Environmental Safeguards Policy Framework The objective of the proposed consultancy is to elaborate National Social and Environmental Safeguard Policies existing in the country that enable any/all institutions, irrespective of their nature or type of project that they may implement, to adopt these policies and therefore allow Chile to comply with this GCF requirement for the accreditation process. This policy will also serve as a guide to future projects submitted to the Green Climate Fund. Annex is attached with the detail of each one. 7. Total requested amount and currency US$700.000 8. Anticipated duration 12 months 9. Is the country receiving other Readiness and Preparatory Support related to the GCF? Yes x No If yes, please attach the relevant scope of work, and briefly (100 words) describe the scope of support provided by other institutions To date, Chile has received approval from the Readiness Working Group (RWG) to execute Readiness Areas 1 and 2 with a total of US$300,000. Currently, this application/request is undergoing final stages of the legal review focusing on contracts associated to the Grant Agreement. This proposal was submitted in November 2015 This proposal was submitted in November 2015. The current proposal seeks to complement the previously postulated activities.

READINESS AND PREPARATORY SUPPORT 2016 PAGE 4 OF 14 ver. 19 August SECTION 2: COUNTRY READINESS LOGICAL FRAMEWORK Please complete the table below, which enables a country to assess its readiness for the GCF and set targets for strengthening its readiness, including proposed outputs and activities to improve the country s readiness. For further guidance on completing the table, please refer to the guidebook Accessing the GCF Readiness and Preparatory Support Programme. OUTCOMES 1 BASELINE TARGET ACTIVITIES (including key outputs or deliverables where applicable) 1. Country capacity strengthened 4-8 4-8 1.1 NDA/focal point lead effective 0 x1 2 0 x1 2 coordination mechanism 1.2 No objection procedure established and 0 x1 2 0 x1 2 implemented 1.3 Bilateral agreements between the country x0 1 2 x0 1 2 and the GCF executed 1.4 Monitoring, oversight and streamlining of climate finance x0 1 2 x0 1 2 2. Stakeholders engaged in consultative 1-8 1-8 processes 2.1 Stakeholders engaged in consultative 0 x1 2 0 x1 2 processes 2.2 Country programmes, including x0 1 2 x0 1 2 adaptation priorities, developed and continuously updated 2.3 Stakeholder consultations conducted with 0 x1 2 0 x1 2 equal representation of women 2.4 Annual participatory review of GCF x0 1 2 x0 1 2 portfolio in the country organized 3. Direct access realized 3-8 5-8 3.1 Candidate entities identified and nominated for accreditation 0 1 x2 0 1 x2 3.2 Direct access entity accredited 0 x1 2 0 1 x2 1. Development of a National Social and Environmental Safeguards Framework (NSES) 1 Based on decisions: B.08/10, annexes XII, XIII & XIV; B.08/11; B.11/10, annex I; B.12/20, annex I

READINESS AND PREPARATORY SUPPORT 2016 PAGE 5 OF 14 ver. 19 August 3.3 Entity/ies annual/multi-annual work x0 1 2 x0 1 2 programme developed 3.4 Funding proposals through enhanced x0 1 2 x0 1 2 direct access modality approved 4. Access to finance 3-8 7-8 4.1 Structured dialogue between the NDA/Accredited Entities and the GCF Secretariat organized 0 x1 2 0 x1 2 4.2 Country programmes, concept notes, x0 1 2 0 x1 2 Concept Note preparation support: including on adaptation, developed that implement high-impact priorities identified in a) Strengthening of Chile s national program Comuna Energética (Preliminary Concept Note attached) INDCs and other national strategies or plans b) Reuse of treated wastewater in Chile (Preliminary Concept Note attached) c) Sustainable Heating (Preliminary Concept Note attached) Support for the design of financial structuring for prioritized proposals a) Strengthen the Financial Analysis Framework of the DNA, in order to strengthen the Financing Strategies of the prioritized proposals b) Strengthen the national process of prioritization of proposals through the use of quantitative analysis tools. 4.3 Project/programme preparation support, x0 1 2 0 x1 2 including for adaptation, to develop funding proposals provided 4.4 Funding proposals, including for 0 x1 2 0 x1 2 adaptation, that are aligned with country priorities approved 5. Private sector mobilization 2-8 2-8 5.1 Private sector engaged in country consultative processes 0 x1 2 0 x1 2 c) Strengthen Chile's alliances with Latin American countries, in order to identify opportunities for joint climate actions.

READINESS AND PREPARATORY SUPPORT 2016 PAGE 6 OF 14 ver. 19 August 5.2 Enabling environment for crowding-in 0 x1 2 0 x1 2 private sector investments at national, regional and international levels exists 5.3 Funding proposals for private sector 0 x1 2 0 x1 2 projects/programmes, including for adaptation, approved 5.4 Funding proposals under the Private x0 1 2 x0 1 2 Sector Facility programmes (small- and medium-sized enterprises and mobilizing funds at scale) submitted and approved TOTAL 13-40 19-40

READINESS AND PREPARATORY SUPPORT PAGE 7 OF 14 ver. 19 August 2016 SECTION 3: ADDITIONAL INFORMATION Please explain how this grant will help deliver on the country s readiness needs as identified above and build on institutions, processes or existing work already underway in the country (maximum 500 words) Support for the design of financial structuring for prioritized proposals It is a priority to strengthen local capacities to develop an ambitious portfolio of projects / programs and thereby accelerate the transition towards a low-emission, climate resilient development model. One of the main barriers during the formulation of local projects is the design of financial structures that assure a sustainable financing with minimal concessionality in the long term. Thus, the objective of this proposal is to support the design of financial structuring of a group of prioritized projects at national level. This work will be coordinated by the Corporación de Fomento Productivo (CORFO) and will enable the strengthening of private financing involvement. Three lines of action are proposed: 1. Strengthen the Financial Analysis Framework of the NDA, in order to strengthen the Financing Strategies of the prioritized proposals 2. Strengthen the national process of prioritization of proposals through the use of quantitative analysis tools. 3. Strengthen Chile's alliances with Latin American countries, in order to identify opportunities for joint climate actions. Concept Note preparation support The proposal seeks to support the development of three projects/programs that are located in areas prioritized by the GCF and have the potential for replicability, not only in different regions and municipalities of the country, but also in other developing countries. Moreover, these three projects were prioritized by the NDA, through a participatory process, given that they represent relevant issues for the country. All this work was channeled through the local Technical Secretariat. The proposals include the development of different studios as well as the coordination with public institutions and different stakeholders, both in order to identify barriers and continue the factibility process of these projects. a) Strengthening of Chile s national program Comuna Energética b) Reuse of treated wastewater in Chile c) Sustainable Heating During the development of each Concept Note, the analysis of a gender action plan will be considered to ensure that the proposed activities will be as inclusive as possible. Development of a National Social and Environmental Safeguards Policy Framework One of the major gaps identified for the fulfillment of (accredited entities) application requirements has been the adoption and/or strengthening of Social and Environmental Safeguards Policies that enable these agencies to identify, categorize, evaluate, mitigate, manage and monitor social and environmental risks associated to projects that these may implement in the future, and/or for risks related to other relevant types of activities that these develop. In addition, it has been identified that these entities, as well as potential project/program, public and private proponents, require an Environmental and Social Management System that details the procedures that incumbent institutions must follow in order to ensure that such risks are identified, evaluated, managed, mitigated and monitored adequately, and that grievance mechanisms become available to resolve issues that may emerge. The objective of the proposed consultancy is to elaborate National Social and Environmental Safeguard Policies related to engagement with the GCF that enable any/all institutions, irrespective of their nature or type of project that they may implement, to adopt these policies and therefore allow Chile to comply with this GCF requirement. This policy will also serve as a guide to future projects submitted to the Green Climate Fund.

SECTION 4: BUDGET, PROCUREMENT, IMPLEMENTATION AND DISBURSEMENT PAGE 8 OF 14 ver. 16 August 2016 READINESS AND PREPARATORY SUPPORT OUTCOMES ACTIVITIES TOTAL COST EXPENDITURE AND IMPLEMENTATION COST CATEGORIES SCHEDULE (same as in section 2) (same as in section 2) (per activity) (add columns if >24 months) Support for the design of financial structuring for prioritized proposals 1. Strengthen the Financial Analysis Framework of the DNA, in order to strengthen the Financing Strategies of the prioritized proposals 2. Strengthen the national process of prioritization of proposals through the use of quantitative analysis tools. 3. Strengthen Chile's alliances with Latin American countries, in order to identify opportunities for joint climate actions Consultants Travel Workshops/ Trainings Others 6m 12m US$198.000 US$198.000 US$103.500 US$94.500 18 m 24m Concept Note preparation support 1. Strengthening of Chile s national program Comuna Energética 2. Reuse of treated wastewater in Chile 3. Sustainable Heating US$300.000 US$279.000 US$3.600 US$2.400 US$15.000 US$188.000 US$112.000 Development of a National Social and Environmental Safeguards Policy Framework 1. Social & environ-mental safeguards (SES) applicable to Chile benchmarked against international standards (i.e. IFC), and shaped to reflect country ownership 2. Methodologies and Operating Manuals on SES US$112.600 US$105.600 US$7.000 US$65.300 US$47.300

PAGE 9 OF 14 ver. 16 August 2016 READINESS AND PREPARATORY SUPPORT 3. Public and private consultation on National SES Policy Framework by prospective accredited entities and other incumbent institutional actors 4. Social & Environmental indicators guide and MRV Systems 5. Financial risk Assessment and Standards in the financial system. External audit US$ 10.000 US$10.000 US$ 10.000 CONTINGENCY (UP TO 5%) US$24.400 US$12.200 US$12.200 PROJECT MANAGEMENT COSTS (UP TO 10%) US$55.000 US$55.000 US$0 TOTAL US$700.000 US$592.600 US$3.600 US$9.400 US$15.000 US$424.000 US$276.000 Procurement plan For goods or services to be procured/hired, list the items to be procured/hired (including consultants), the estimated cost of each item, and the procedure to be used (i.e. direct procurement, open tender, shopping, other and related thresholds). Please include the procurement plan for at least the first tranche of disbursement requested below. The procurement process will follow the last version of CAF s Manual of Procurement of Goods, Consulting Services and Works (NM/ DFLA 038). The Chapter VIII of this Manual includes all the details and thresholds for the procurements and are presented in the table below. 1. Project Procurement Thresholds 1. The following CAF process thresholds shall apply to procurement of goods and works Threshold (Amount in USD) Method General procedures 0 5,000 (Only for the purchase goods) 5.001 10,000 (Only for the purchase goods) Direct contracting Market 1. Receive at least one offer. 1. Market ; 2. Receive at least two (2) offers 3. Select the best offer based on the completion of an evaluation.

0-10.000 (Only for the purchase of services, consultancy and works) 10,001 50,000 (For the purchase of goods, services, consultancy and works) 50,001 150,000 (For the purchase of goods, services, consultancy and works) 150,001 Until the next amount indicated below, depending the type of purchase. From 250,000 For Consultancy services From 500,000 for the purchase of goods and commercial or professional services From 2.000,000 for the purchase of works Direct contracting Market Market Private bidding International Public bidding PAGE 10 OF 14 ver. 16 August 2016 1. Receive at least one offer. READINESS AND PREPARATORY SUPPORT 1. Market ; 2. Receive at least three (3) offers from different providers; and 3. Select the best offer based on the completion of an evaluation. 1. Prepare Terms of Reference; 2. Market of potential providers; 3. Receive at least three (3) offers from different providers; and 4. Perform an evaluation based on the criteria indicated in the terms of reference. Private bidding to select providers Request for Proposal. An evaluation Committee will review the offers and select the provider. International Public bidding process for the selection of providers Request for Proposal. An evaluation Committee will review the offers and select the provider. Support for the design of financial structuring for prioritized proposals Consulting Services Contracts Estimated The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 12 months. General Description Contract Value Recruitment Method1 Consultant 1 US$45.000 Market Consultant 2 US$45.000 Market Consultant 3 US$45.000 Market Consultant 4 US$27.000 Market International or Advertisement Date (quarter/year) National Assignment Comments 1st quarter of 2017 National Consultant with economic / financial specialization, with experience of at least 5 years, whose dedication will be full time (180 hours per month), with a duration of the contract for a period of 12 months. 1st quarter of 2017 National Consultant with economic / financial specialization, with experience of at least 5 years, whose dedication will be full time (180 hours per month), with a duration of the contract for a period of 12 months 1st quarter of 2017 National Consultant with economic / financial specialization, with experience of at least 5 years, whose dedication will be full time (180 hours per month), with a duration of the contract for a period of 12 months 1st quarter of 2017 National Consultant with economic specialization, with experience in climate / economic modeling at least 5 years, whose dedication will be part time (90 hours per month), for a period of 9 months.

PAGE 11 OF 14 ver. 16 August 2016 READINESS AND PREPARATORY SUPPORT Consultant 5 US$36.000 Market External Audit US$2.000 Direct contracting 1st quarter of 2017 National Consultant with economic / financial specialization, with experience on climate change international negotiation for at least 2 years, whose dedication will be full time (180 hours per month), for a period of 12 months. N.A National Concept Note preparation support Consulting Services Contracts Estimated The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 12 months. General Description Contract Value Recruitment Method1 Consultancy firm USD100,000 Market Consultancy firm USD100,000 Market Consultancy firms USD100,000 Market External Audit USD 6,000 Direct contracting International or Advertisement Date (quarter/year) National Assignment Comments 1st quarter of 2017 National A consulting firm will be hired to perform the tasks to achieve outcomes Strengthening of Chile s national program: Comuna Energética The consulting firm will be expected to deploy the following resources: 4 consultant during a period time of 12 months under a part time contract (50% dedication each). 1st quarter of 2017 National A consulting firm will be hired to perform the tasks to achieve outcomes Reuse of treated wastewater in Chile. The consulting firm will be expected to deploy the following resources: CONSULTANTS: In order to achieve the proposed objectives, three subcontracts are considered in addition to internal hours of team dedication: TRIPS: In terms of monthly trips, the assumption is 1 monthly trip of 2 people to different communities in Chile. WORKING COMMITTEE MEETINGS: For the working commitee meetings 8 sessions are considered, between months 5 and 12. For each session the cost includes the room, catering and work materials. 1st quarter of 2017 National Two consulting firms will be hired to perform the tasks to achieve outcomes Sustainable Heating. N.A National Development of a National Social and Environmental Safeguards Policy Framework Consulting Services Contracts Estimated The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 12 months.

PAGE 12 OF 14 ver. 16 August 2016 READINESS AND PREPARATORY SUPPORT General Description Contract Value Recruitment Method1 Consultant 1 US$51.600 Market Consultant 2 US$27.000 Market Consultant 3 US$27.000 Market Workshops/ Trainings Advertisement Date (quarter/year) 1st quarter of 2017 1st quarter of 2017 1st quarter of 2017 International or National Assignment National National National Comments Consultant 1: General Coordinator: Consultant with environmental/ administrative / economic specialization, with experience of at least 5 years, whose dedication will be full time (180 hours per month), for a period of 12 months. Consultant 2: Consultant with attorney specialization, with experience of at least 3 years, whose dedication will be full time (180 hours per month), for a period of 9 months or will be part time (90 hours per month Consultant 3: Consultant with environmental/ administrative / economic specialization of at least 3 years, whose dedication will be full time (180 hours per month), for a period of 9 months. US$7.000 Direct contracting There will be at least 10 meetings at the end of the period, with potential accredited entities, civil society and project proponents. The meetings will be organized by the NDA. External Audit USD2,000 Direct contracting N.A National SECTION 5: IMPLEMENTATION ARRANGEMENTS AND OTHER INFORMATION Please attach an implementation map or describe how funds will be managed by the NDA/FP or delivery partner

PAGE 13 OF 14 ver. 16 August 2016 READINESS AND PREPARATORY SUPPORT If the entity implementing the readiness support is not an accredited entity of the GCF, please complete the Financial Management Capacity Assessment (FMCA) questionnaire and submit it with this proposal. CAF will act as Delivery Partner of the GCF Readiness and preparatory support project in support of the National Designated Authority (NDA) of Chile, the Ministry of Finance. The administration, oversight, and support in the implementation of the project will be managed by the Direction of Environment and Climate Change (DACC) of CAF, which is also the direction that hosts the GCF Focal Point of CAF for its function of Accredited Entity to the GCF. A CAF Executive from the DACC will be in charge of the project management of the GCF Readiness and Preparatory support, in close coordination with CAF GCF Focal Point. A coordination mechanism will be established between CAF DACC and the NDA to implement the activities of the Readiness and preparatory support project. CAF, as Delivery Partner, will administer the readiness funds and will be responsible for providing and contracting the services described in this proposal, in accordance with CAF s Manual on Good and Services Procurement, as reviewed by the GCF during CAF s Accreditation successful process; as well as reporting on the implementation progress in accordance with the Framework Readiness and Preparatory Support Grant Agreement to be entered between CAF and the GCF. CAF will assume the administrative implementation of the project, in coordination with the designated focal point in the Ministry of Finance through the designated focal point. CAF will ensure the transparent execution of resources, assuring that it be in accord with the budget previously presented to the GCF and that both the contracting, purchases and disbursements in general be carried out under its manuals, procedures and regulatory guidelines. The CAF s accompaniment to the NDA also considers a technical support in the implementation of resources. CAF will support in the follow-up and monitoring of the technical products developed by subcontractors, guaranteeing that they be in agreement with the clauses established in the contracts (professional services contracts, service orders or other), ensuring quality control and providing technical inputs in the whole process of the Readiness and preparatory support implementation. CAF is in the process of entering into a Framework Agreement with the GCF, therefore this proposal will be managed at portfolio level by CAF, in accordance to the Framework Readiness and Preparatory Support Grant Agreement to be entered between GCF and CAF. The disbursements of the grants resources from GCF to the CAF shall thus follow the disbursement schedule described in the Framework Agreement. Other relevant information This box provides an opportunity to include any important information you wish to bring to the attention of the GCF Secretariat, but did not have an opportunity to provide in the sections above. The NDA of Chile has requested CAF support for the implementation of its Readiness and preparatory support, including the preparation of three Concept Notes. Once these Concept Notes are developed, the NDA jointly with its Technical Secretariat, a public body composed of the Ministry of Finance, Ministry of Environment and Ministry of Foreign Affairs, and the project proponents will assess in an open process which is the most suitable accredited entity to accompany the preparation of the Funding Proposal and the implementation of the project. This process will be open but not limited to CAF. As such, no conflict of interest arises from this support. The scope of the proposed Audit includes the following activities: a) Accounting-Financial Audit

PAGE 14 OF 14 ver. 16 August 2016 READINESS AND PREPARATORY SUPPORT In this action line, The main objective of this audit is to verify the proper management and control of the resources received and used by the borrower or executor for the execution of the projects. Specifically, the financial statements of the project are audited (project audit), compliance with the financial-accounting issues stipulated in the contracts is verified, and recommendations are given on the structure of internal control, among others. b) Audit on the achievement of the objectives of the Project In this action line, the objectives of the project will be evaluated, in terms of expected results, installed capacity, project capacity to transcend future public policy actions or private sector actions, verify the application of good practices. This audit should prepare a recommendation report for future similar projects, based on the lessons learned during the project development. In addition, a governance structure should be recommended to monitor the project and generate the greatest involvement with key stakeholders.