IFC in the Energy sector Portoroz Slovenia June

IFC in the Energy sector Portoroz, Slovenia June 2010 1

IFC – An Overview 2

IFC is a Member of the World Bank Group IBRD IDA International Bank for Reconstruction and Development International Development Association Est. 1945 IFC MIGA International Finance Corporation Multilateral Investment and Guarantee Agency Est. 1956 Est. 1988 Est. 1960 Role: To promote institutional, legal and regulatory reform To promote private sector development To reduce political investment risk Clients: Governments of member countries with per capita income between $1, 025 and $6, 055. Governments of poorest countries with per capita income of less than $1, 025 Private companies in 182 member countries Foreign investors in member countries - Technical assistance - Loans - Policy Advice - Technical assistance - Interest Free Loans - Policy Advice - - Political Risk Insurance Products: Equity/Quasi-Equity Long-term Loans Risk Management Advisory Services Shared Mission: To Promote Economic Development and Reduce Poverty 3

IFC – over $80 billion Invested in Emerging Markets since 1956 Net Income (U. S. $ billions) Net Worth (U. S. $ billions) IFC’s Net Income and Net Worthy IFC FY 08 Highlights S&P, Moody’s Portfolio Committed Syndicated # of companies # of countries # of companies with equity AAA $32. 4 billion $11. 4 billion $3. 3 billion 1, 450+ 85+ 800+ U. S. $ billions Total committed IFC financing: US$14. 7 billion 4

IFC Value Added Long Term Financing • Corporate / Project / Acquisition • Foreign / Local currencies • Equity / Quasi-equity • Carbon Finance Industry knowledge Relationship with / understanding of local authorities Expertise in emerging markets IFC’s Products Capital Mobilization • B loan program • Credit enhancement (Partial Credit Gurantee) • Pre-IPO stamp of approval Advisory Services 5

IFC in Europe & Central Asia IFC’s Europe & Central Asia (ECA) Region • Albania • Armenia • Azerbaijan • Belarus • Bosnia and Herzegovina • Bulgaria • Croatia • Estonia • Georgia • Kazakhstan • Kyrgyz Republic • Macedonia • Moldova • Montenegro • Romania • Russian Federation • Serbia • Slovak Republic • Tajikistan • Turkey • Turkmenistan • Ukraine • Uzbekistan IFC’s regional head offices are located in Istanbul and Moscow, with representative offices in other countries In FY 09, IFC invested $ 2. 99 billion in Europe and Central Asia, including $ 841 million of syndications. 6

IFC Approach to Financing 7

How We Finance Projects Project Type IFC Investment Greenfield, total cost less than $50 million Up to 35% of project cost for IFC’s account Greenfield, total cost more than $50 million Up to 25% of project cost for IFC’s account Expansion or rehabilitation Up to 50% of project cost • Umbrella for participants in IFC’s syndication program: IFC lender of record, immunity from taxation and provisioning requirements. • IFC’s total financing (for its own account) must be less than 25% of total company capitalization, and IFC does not manage or have largest stake. 8

Financial Products - From Equity to Debt Equity Mezzanine / Quasi Equity Senior Debt & Equivalents • • • Corporate and JV Typically 5 -15% shareholding (not to exceed 20% of total equity) Long-term investor, typically 6 -8 year holding period Not just financial investor, adding to shareholder value Usually no seat on board Infraventures (early equity investments) • • Subordinated loans Income participating loans Convertibles Other hybrid instruments • • • Senior Debt (corporate finance, project finance) Fixed/floating rates, US$, Euro and local currencies available Commercial rates, repayment tailored to project/company needs Long maturities: 8 -20 years, appropriate grace periods Range of security packages suited to project/country Mobilization of funds from other lenders and investors, through cofinancings, syndications, underwritings and guarantees 9

Mobilizing Financing - Syndication “B-Loan” Structure Loan Agreement IFC Borrower A + B Loans Participation Agreement B Loan • A loan is for IFC’s own account • B loan is for the account of participant commercial banks Participants • Only one loan agreement signed by the borrower and IFC • IFC is the lender of record for the entire loan (A+B) • Structure allows participants to benefit from IFC privileges and immunities • Better pricing/tenors than otherwise available; preferred creditor access to foreign exchange • IFC Loans exempt from withholding taxes 10

IFC Advisory Services 11

IFC Advisory Services in Europe & Central Asia Broad reach Significant Impact 336 laws/regulations enacted, affecting large populations $482 M in costs saved for businesses and $92 M in funds released through ADR Policy Over 27, 000 entities reached by AS projects Over 900, 000 copies of projects manuals, reports, guides, etc $1 B in leasing market growth Institutional Capacity / Company Operations Public Awareness $4. 2 B in investment generated 5 M Tons of GHG emissions avoided IEG 2009: “IFC should pursue more programmatic AS interventions” 12

Cross-cutting approach to Climate Change in FY 11 -15 Access to Finance • Energy Efficiency Finance • Residential EE • Small Hydro Infrastructure • Energy Sector • Waste Sector • Water Sector Corporate Advice • Water Footprinting Sustainability • Cleaner Production • Renewable Energy • Utility efficiency FY 11 -15 Targets • Avoid at least 15 million tons of lifetime GHG emissions • Generate $1 billion in climate change related investments, including from IFC • Unlock at least $20 billion in private sector participation in areas such as renewable energy, cleaner production, residential energy efficiency, water and waste management 13 13

IFC in the Energy Sector 14

IFC’s Track Record in Power Projects: Ø 120 projects in 40 emerging markets countries Ø 21, 733 MW private generating capacity Ø 94 generation projects Ø 7 transmission projects Ø 19 distribution companies US$5 billion committed in power Financing: Ø$ 5 billion committed in generation, T & D Ø$ 2. 5 billion raised through syndication Ø$ 22 billion aggregate project values Renewables: Ø 19% of generation investments in hydropower Ø$0. 9 bn in 30 renewable energy projects (20 hydro, 2 wind, 2 geothermal & 6 other) US$4 billion committed in generation 15

Addressing Climate Change is one of IFC’s 5 Strategic Prioritities • IFC has committed to expand Renewable Energy and Energy Efficiency investments threefold (3 x) to over US$3 bn in FY 09 -11 • IFC is piloting shadow pricing analysis to incorporate climate change considerations into all investments • IFC is developing its response to support its clients in their efforts at adapting to climate change 16

IFC’s Generation Investments are Prioritized Accordingly PRIORITIZATION 1. PROMOTE RENEWABLE GENERATION with direct equity/debt, financial intermediaries, integrated carbon finance, and advisory services. 2. PROMOTE USE OF LESS CARBON INTENSIVE FOSSIL FUELS (gas): finance infrastructure (terminals , T&D) and efficient generation. 3. IMPROVE EFFICIENCY OF INSTALLED GENERATION BASE 4. PROMOTE HIGH EFFICIENCY USE OF COAL IN GREENFIELD PROJECTS (facilities in top quartile of country’s generation efficiency): -Super Critical, Ultra-Super Critical & IGCC where scale allows -In all cases, verify proposed technology is most appropriate taking into account fuel availability, economic factors, and GHG considerations 5. FINANCE OIL POWER PLANTS WHERE IT IS THE ONLY OPTION: small countries dependent on import, remote communities, emergency situations 17

And IFC has strong and differing role in supporting each renewable technology IFC Role & Comp. Adv Characteristics Hydro • Established and cost competitive technology • Large hydros have long development time • Dams offer baseload • Potential for local E&S issues Wind Biomass Solar • Established • Technology risk • technology varies with fuel • Economics very type site specific • Long-term access • • Variable to low cost fuel generation essential • Dependent on • Opportunities for suitable co-firing and co- • regulatory generation support • Taking • Supporting • construction risk projects in new • Providing longmarkets & new tenors to match regulations asset life • Structuring to • Innovative support • bundling for small intermittent hydros generation & • Ensuring best merchant risk practice E&S • Supporting supply chain expansion to reduce costs Structuring fuel supply agreements to enable project finance Understanding technology risk Geo PV still expensive • Established and but costs cost competitive declining quickly baseload CSP w/ storage technology offers potential for • High exploration low cost base risks and long load lead times to Potential for grid develop steam and distributed fields generation EE • Profitable opportunities exist in generation, T&D and end use • Opportunities can be diffuse and require identification and aggregation • Supporting supply • Early stage equity • Identifying and chain expansion and incorporating EE to reduce costs concessionary opportunities in all • Supporting funding to share projects in new exploration risk • Coordinating markets and new • Sector expertise concessionary regulatory and innovative support to identify regimes structuring to and package • Coordinating enable project opportunities for concessionary financing clients funding to buy down costs 18

Investments in the power sector in Southern and Eastern Europe Bulgaria Poland AES Kavarna Russia $58, 000 Loan Financing ESCO Polska $2, 000 Loan Project Financing Mosenergo $20, 000 Loan Project Financing Lender August 2008 Lender September 1999 Lender June 1998 Hungary Ukraine ESCO Hungary Ukraine AESKyiv. Oblenegro Moldova UF Moldova Macedonia ESM Macedonia Balkans Region $15, 000 Loan Project Financing Lender June 2005 Lender November 1999 AES Rivne. Energo $30, 000 Loan Project Financing $3, 000 Loan Project Financing Lender June 2005 Turkey SENCAP Enerjisa ENTEK EUR 513, 000 Loan Financing EUR 51, 500, 000 Loan Financing Mandated Lead Arranger June 2008 Lender May 1998 $40, 000 Loan Project Financing $55, 330, 000 Loan Project Financing EUR 60, 000 Equity Providing Lender 2001 and 2009 Lender April 2008 Shareholder February 2008 19

IFC in Power- today and tomorrow Ø Istanbul regional hub for investments, Belgrade and Almaty for advisory services- global knowledge combined with stronger presence on the ground Ø Strong track record in project finance, proven ability to attract commercial bank funding accompanied by appetite to invest in new market segments Track record: Ø Post-privatization financing of distribution companies in Moldova and Macedonia Ø Wind projects in Bulgaria and Turkey, with additional mandated deals in the pipeline expected to reach financial close in 2009 Ø First solar deal in the region expected to reach financial close in 2009 Ø Lead arranger in a JV between a multinational expanding into a new market and a committed local sponsor 20

IFC Infrastructure Advisory- 2 nd pillar Ø Typically advising the Government on broad sector issues or working on select transactions whose aim is to attract private sector investments with repetition potential Ø Two transactions in Albania have reached financial close- privatization of the distribution segment (OSSH) and concession of a HPP on the Drin river (Ashta) Ø Several active mandates (primarily HPP’s) in the energy sector. Macedonia and Montenegro Ø Improve regulatory framework to enable SHPP market- active mandates in Bosnia, Albania and Macedonia with a primary goal to eliminate legal barriers in the sector and enhance access to finance. 21

Working with IFC 22

Working with IFC • Long term financing partner able to offer a wide array of instruments - equity, mezzanine, debt (including syndication), early-stage venture capital in select markets like Bosnia and Moldova (i. e. “infraventures”) • Ability to finance smaller projects by teaming up with financial institutions (i. e. providing credit lines, funded or un-funded risk sharing facilities) • Established track-record of working with leading multinationals, JV’s, local sponsors, and as of recently state-owned enterprises (“subnational finance programme”) 23

Thank you! Contact: Aleksandar Mihajlovic Investment Officer Phone: 381. 11. 3023. 750 Mail: amihajlovic@ifc. org 24