JBIC s Engagement to Kyoto Mechanisms and Japan Carbon

JBIC’s Engagement to Kyoto Mechanisms and Japan Carbon Fund (JCF) Ｙｕｓｕｋｅ　ＩＴＯ Deputy Director for Carbon Finance 　ＪＥＲＢＡ　ＣＤＭ　ＩＮＶＥＳＴＯＲ　ＦＯＲＵＭ September ２２－２４　２００４

Contents 1. JBIC at a Glance 2. JBIC and GHG Pollution Prevention Projects 3. General Outlines of Japan Carbon Fund (JCF) 4. Advantages of JCF 5. Characteristics of CDM/JI Projects ref. ) Project Information Note (PIN) 2

1. JBIC at a Glance • Established as an Official Financial Institution of Japan in October 1999 by the Merger of : The Export-Import Bank of Japan (JEXIM: est. 1950) and Overseas Economic Cooperation Fund, Japan (OECF: est. 1961) • Purpose A) Promotion of Japan’s international Trade and other international economic Activities B) Stabilization of the international financial Order C) Economic and social Development and/or Stability of developing Areas 3

• Operations A) Export Loan B) Overseas Investment Loan C) Untied Loan D) Guarantee E) Equity Participation F) ODA Loan 1. JBIC at a Glance 4

• Geographical Distribution of Outstanding Loans of JBIC (as of March 31, 2003) JBIC Total $181. 1 billion 1. JBIC at a Glance 5

• Overseas Network (26 Representative Offices) [Asia] Beijing, Hong Kong, Bangkok, Hanoi, Jakarta, Kuala Lumpur, Manila, Singapore, Colombo, Dhaka, Islamabad, New Delhi, Sydney (13) [Europe] Moscow, Frankfurt, London, Paris (4) [Africa] Cairo, Nairobi (2) [North America] New York, Washington (2) [South America] Bogota, Buenos Aires, Lima, Mexico City, Rio 1. de at a Glance (5) Janeiro JBIC 6

2. JBIC and GHG Pollution Prevention Projects • JBIC is actively supporting Projects to alleviate GHG Effect through Financing Operations, for example A) Renewable Energy – Northern Luzon Wind Power Project, Philippines (ODA Loan) – Upper Kotmale Hydropower Project, Sri Lanka (ODA Loan) 7

– Zafarana Wind Power Project , Egypt (ODA Loan) ＊The necessary Procedures for the Application 　　　 of the CDM have already been started. B) Natural Gas – Beijing Environment Improvement Project, China (ODA Loan) – Severnaya Natural Gas-Fired Combined Cycle Power Plant Project Ⅱ, Azerbaijan (ODA Loan) 2. JBIC and GHG Pollution Prevention Projects 8

C) Energy Saving / Energy Efficiency – Rehabilitation of Coal-Fired Thermal Power (Co-generation) Plant Project, Romania (Export Loan) – LD Gas Recovery System Project, Brazil (Export Loan) – Shaanxi Province Xian Co-generation Project, China (Export Loan) – Shanxi Coal Bed Methane Collection & Power Project (currently under Negotiation ) ＊The necessary Procedures for the Application 　　of the CDM have already been started. 2. JBIC and GHG Pollution Prevention Projects 9

D) Forest Conservation, etc. • JBIC’s contribution to Prototype Carbon Fund (PCF) • Cooperation Agreement with: A) IETA (International Emissions Trading Association) on Dec. 2003 B) Mexican DNA on Apr. 2004 C) BCIE（Banco Centroamericano de Integración Económica) on Julｙ. 2004 2. JBIC and GHG Pollution Prevention Projects 10

3. General Outlines of Japan Carbon Fund (JCF) • Objectives: To purchase CER and ERU issued, and VER verified before 2012 from CDM/JI Projects at reasonable Price • Size: Approx. USD 100 million • Equity Provider: JBIC, DBJ* and Japanese Private Enterprises * Development Bank of Japan • Location: Tokyo, Japan • Expected Establishment: October 2004 　　 11

• Sector Portfolio: Never exceed approx. 35% of total Investment to one Sector 　 Examples A) Renewable Energy B) Waste Management C) Energy Efficiency D) Fuel Switching E) Fugitive F) Chemical Industry • Country Portfolio: Never exceed approx. 30%of the total Investment to one Country • Maximum Size of a Project: approx. 20% of the total Investment to one Project • Targeted Purchase Price: T. B. D. 12

• Timing of Purchase : Payment on Delivery (Upfront Payment is to be made on case-by-case basis) • Project Development Cost (PDD Preparation, Validation etc): to be borne by Project Sponsor in principle, but to be borne by JCF on case-bycase basis 13

4. Advantages of JCF (1) • Ratification Risk of Kyoto Protocol (whether it will enter into Force): To be assumed by JCF • Intermediary Functions: Close and tight Relationship with Japanese Industry having Interest in CDM/JI Projects • Smooth Implementation of Projects: JBIC’s Support through its strong Relationship with Host Government 14

4. Advantages of JCF (2) • Possibility of Parallel Purchase: Other Japanese Equity Provider for JCF may purchase a　part or all of the remaining Carbon Credit after the Purchase by JCF. • Collaboration and Support with/from JBIC: Underlying Financing, such as; A) Export Loan, B) Overseas Investment Loan, C) Untied Loan, D) ODA Loan, etc. 15

-- Project Scheme -- 16

-- ER Purchase Structure -Japan Carbon Fund Payment Project Entities Payment Emission Reduction Purchase Agreements (ERPAs) Emission Reduction Resale Agreement ER Credits Japan Carbon Finance，Ｌｔｄ． (tentative name) Japan　ＧＨＧ Reduction　Ｆｕｎｄ (tentative name) ER Credits 17

5. Characteristics of CDM/JI Projects -- Hints - • Un-used Resources in the Surroundings Example) A) Agricultural Residue (Bagasse, Rice Husk, Wooden Chips) B) Wastes and Garbages C) Methane Gas (Cattle Excrements, Landfill) 18

--Merits- • Landfill Methane Collection and Power as an Example A) Safety (Prevention of Explosion) B) Reduction of ill Odor C) Prevention of Ambient Air Pollution D) Improvement of Water Quality E) Increase in Energy Supply F) Employment G) Additional Revenue by Carbon Credit 6. Characteristics of CDM/JI Projects 19

-- Renewable Energy (1) - • Small Scale Hydropower: A) Run of River Type, mainly, B) Utilization of Dam for Irrigation currently w/o Power Station • Middle Scale Hydropower: Coordination with NGOs is essential • Windpower: Highly dependent on Wind Conditions; Promising in strong Wind Area • Photo Voltanic: Promising in remote Area and Islands 6. Characteristics of CDM/JI Projects 20

-- Renewable Energy (2) - • Geothermal Power: Not realized unless it is registered as CDM/JI Projects? • Agricultural Residue (incl. Co-generation): Variety in Residue; to be more advantageous if Methane Reduction verified; Really Waste? 6. Characteristics of CDM/JI Projects 21

-- Energy Efficiency - • Energy Efficiency in Factories: To explain Additionality, Technological Barrier rather than Investment Barrier; Variety in Cost • Demand Side Management: Energy Control in Office Buildings and Hotel, for Example 6. Characteristics of CDM/JI Projects 22

-- Fuel Switching - • Energy Switching: Manufacturing Industries; from Coal to Natural Gas • Fuel Switching of Coal-fired Power: Availability of Fuel; Environmental Regulations? • Fuel Switching to Biomass in Steel Factories: Wooden Chips supplied by themselves? 6. Characteristics of CDM/JI Projects 23

-- Fugitive - • Oil Field Associated Gas Recovery and Utilization: Regulations on Flaring; Large Investment for Construction of Pipelines • Coal Mine Methane Recovery and Power: For Safety; Utilization of Fugitive Energy -- Transportation - • Fuel Switching, from Fossil Fuel to Alcohol, for Example 6. Characteristics of CDM/JI Projects 24

-- Waste Management - • Landfill Methane Gas Recovery and Power: Utilizing Global Warming Potential (GWP) of Methane; from small to large Scale; lower Project Cost and Typical and good Potentiality for CDM/JI Project • Cattle Excrements: Relatively low Cost with Methane Reduction Effect 6. Characteristics of CDM/JI Projects 25

ref. ) Project Information Note (PIN) -- What is PIN? - • Project Information Note (PIN): Basic Information about Project, Short Form (8 pages, excl. Attachments), First Contact between Project Proponents and JCF • Template: (Hard Copies and FD to be provided to Recipients) • Purpose: Project Screening and Clarification 26

-- Submission, etc. - • Submission of PIN (1) -- By Hard Copies--: To JBIC’s Oveaseas Rep. Office or Loan Departments in charge (Regional Dept. or Corporate Finance Dept. ) • Submission of PIN (2) -- By E-mail --: To jcf@jbic. go. jp • Request for Distribution of PIN: For Finding Project Candidate ref. ) Project Information Note (PIN) 27

-- Basic Points - • • Project Description Type of Technology Identification of Project Participants Institutional Arrangement for Project Implementation: Project-related Contracts ref. ) Project Information Note (PIN) 28

-- Key Criteria at Review of PIN(1) - • Project Additionality: Project would not be realized unless it is registered as CDM/JI Project (Investment Barrier, Technological Barrier, Barrier due to prevailing Practice and other Barrier; Detailed Description expected) • Methodology (Baseline Study and Monitoring Plan): Approved or not approved, in Process? • Baseline Scenario: Calculation Basis for Expected Emission Reduction (Detailed Description expected) ref. ) Project Information Note (PIN) 29

-- Key Criteria at Review of PIN(2) - • Validation Procedure (incl. PDD Preparation): Validated or not validated, in Process? • Contribution to Sustainable Development of Host Country: Prerequisite of Kyoto Protocol • Environmental and Social Safeguards: Compliance with Local Environmental Laws, Regulations, etc. ref. ) Project Information Note (PIN) 30

-- Key Criteria at Review of PIN(3) - • Creditworthiness and Competence of Project Participants • Capital Mobilization: Equity, Underlying Financings and Existence of Financial Gap • Commercially Viable Proven Technology ref. ) Project Information Note (PIN) 31

For More Information, contact JBIC Director　General for Carbon Finance and Japan Carbon Fund Mr. Hitoshi KURIHARA Deputy Director ： Mr. Yusuke ITO TEL: +81 -3 -5218 -9784 E-mail: jcf@jbic. go. jp Representative Office in Paris TEL: +331 -4703 -6190 Chief Representative: Mr. Motonori TSUNO (E-mail: m-tsuno@jbic. go. jp) Representative: Ms. Akika　ICHIKAWA (E-mail: a-ichikawa@jbic. go. jp) 32