Financing JI Projects Jan-Willem van de Ven Head

Financing JI Projects Jan-Willem van de Ven Head of Secretariat Multilateral Carbon Credit Fund Bonn, 14 February 2007 Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative 1

Multilateral Carbon Credit Fund • Established by the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD). • Participants: Six countries and six private companies – Belgium (Flanders), Finland, Ireland, Luxembourg, Spain, Sweden – Abengoa (Spain), ČEZ (Czech Republic), Gas Natural (Spain), Endesa (Spain), PPC (Greece), and Union Fenosa (Spain). • Total of € 165 -million for 3 zones across Central Europe and Central Asia (€ 150 mln for projects, € 15 mln for Green Investment Schemes) • MCCF helps Participants to meet their mandatory or voluntary greenhouse gas emission reduction targets by purchasing carbon credits (EAUs, CERs, ERUs and AAUs) from projects financed by the EBRD and/or EIB • The negotiation, contracting and monitoring of carbon credit transactions outsourced to private “Carbon Managers” Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative 2

Carbon Managers Zone Carbon Manager West (Estonia, Latvia, Lithuania, Poland, Czech Republic, Hungary, Slovakia, Slovenia, Romania, Bulgaria and Croatia) Haskoning, The Netherlands North-East (Russia, Ukraine, Belarus, Kazachstan) Greenstream Network, Finland South-East (Other Co. O’s) ICF Consulting, United Kingdom Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative 3

Emission Trading Regime Joint Implementation (JI) Clean Development Mechanism (CDM) EU Emission Trading Scheme (ETS) Type of Carbon Credit Emission Reduction Units (ERUs) Certified Emission Reductions (CERs) EU Allowances (EUAs) Green Investment Schemes State to State transactions in Assigned Amount Units (AAUs) (potentially all green countries) Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative 4

MCCF Interest and Project Eligibility Type of projects Criteria • Renewable energy (e. g. wind, biomass, hydro, geothermal) • Fuel switch (e. g. oil to gas, coal to gas) • Energy efficiency (e. g. CHP, district heating, lighting, insulation, process optimisation) • Waste processing (e. g. land fill gas extraction, waste incineration, waste water treatment) • Transport (energy efficiency in Metro) • Financial involvement of the EBRD and/or EIB in project; • Concrete projects that lead to Carbon Credits under CDM, JI and/or EU-ETS; • Contract size 100, 000 – 5, 000 CO 2 for 2008 -2012. Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative 5

What MCCF offers to Project Owners? – MCCF offers a fair deal to the project owner: • • • – Carbon Manager’s services minimises the workload of the project owner • • – Fair prices for carbon credits reflecting market and project risks Up to 50% of carbon finance upfront, if there is an objective need Hard currency payment (EUR) Trustworthy counterparty – participants are investment grade Possibility to structure “late credits” if host country approves and ready for Track 1 Conditions for under-delivery of carbon credits can be customised (buyers can bear delivery risk and Kyoto risk) MCCF Carbon Manager assists project owners in the full Kyoto cycle Flexible negotiation timeframes to submit PINs, PDDs and negotiate ERPAs EBRD – EIB’s MCCF is an ideal counterparty for the project owner adding value and contributing to project quality • • Combination of carbon finance expertise with expertise in project appraisal and risk mitigation of the two major international financial institutions In line with EBRD and EIB requirements for project viability and sustainability, integrity and corporate governance Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative 6

Colterm Investment and Carbon Deal • Timisoara District Heating - Romania • Project designed to increase the overall efficiency of the district heating system in the City of Timisoara – installation of a 20 MW co-generation gas turbine with 29 MW heat capacity; – replacing 'heat only' boilers; – € 23 million investment, of which € 15 million financed by EBRD; – reduction of carbon emissions by 120, 000 tons per year; – produce € 4 million worth carbon credits, purchased by the EBRD for the account of the Netherlands; – first project in Romania to directly link the financing of the project with carbon credits. Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative 7

MCCF Project Eligibility: EBRD and EIB must be financing the project • A pallet of direct and indirect financing options available at EBRD or EIB: equity, loans and partial risk guarantees • Projects need to meet EBRD’s or EIB’s standard project criteria – EBRD: sound banking, additionality, transition impact and environment – EIB: equivalent conditions • Selling Carbon Credits can help to make a project more bankable, yet mind the ERPA conditions…. . , they can be adverse to Bank financing! Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative 8

What bankers like to see in an ERPA for bank financing • Certainty about the Carbon Credit revenues, so fixed price is more preferable than “floating” • Buyers to be at least investment grade • Advance payment helps, however should be junior to bank lending. • Under-delivery of Carbon Credits should not lead to unlimited financial liabilities (preferably no penalties) • Possibility to pledge the ERPA, Carbon Credits or payments to the Bank • Assuming no “exploration” risk, certain projects need to demonstrate their potential based on actual production • Making sure that a performing project receives Carbon Credit payments, possibly by Buyers assuming registration and transfer risks Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative 9

Contact us MCCF Secretariat Mr. Jan-Willem van de Ven Head of Secretariat EBRD Phone + 44 20 7338 7821 E-mail vandevej@ebrd. com Ms. Kristin Lang Deputy Head of Secretariat EIB Phones +352 4379 7009 E-mail: lang@eib. org MCCF Carbon Managers West Zone Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia. Carbon manager: Haskoning cmwest@ebrd. com North-East Zone Russia, Ukraine, Belarus, Kazakhstan Carbon manager: Greenstream Network cmnortheast@ebrd. com South-East Zone Albania, Armenia, Azerbaijan, Bosnia-Herzegovina, FYR Macedonia, Georgia, Kyrgyz Republic, Moldova, Mongolia, Montenegro, Serbia, Tajikistan Turkmenistan, Uzbekistan Carbon manager: ICF International Consulting cmsoutheast@ebrd. com Multilateral Carbon Credit Fund A joint EBRD – EIB Initiative A joint EBRD-EIB Initiative 10

structuring example I MCCF ERUs ERPA ERU payment lenders credit agreements debt service obligations Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative project /sponsor 11

Contractual Framework for Project-based Carbon Credits Multilateral Carbon Credit Fund A joint EBRD-EIB Initiative 12