JCF General Outlines of Japan Carbon Finance, Ltd. JCF September, 2005 Your Partner for Development & Success in CDM/JI Projects (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. & for Contribution to Sustainable Development
JCF Your Partner for Development & Success in CDM/JI Projects Company Profile (1) Main Business Objective: To purchase CERs and ERUs （ERs） issued until 2012 from CDM/JI Projects (2) Fund Pool: Called “Japan GHG Reduction Fund (JGRF)”, all amount of which JCF can utilize to purchase ERs (3) Committed Fund Amount: Approx. US$ 140 million (4) Establishment: December 1, 2004 (5) Location: Tokyo, Japan (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 2
JCF Your Partner for Development & Success in CDM/JI Projects (6) Fund Providers: 2 Policy-lending Institutions (Governmental Banks) & 31 Major Japanese Private Enterprises Sector Policy-lending Institution Utility Fund Providers Japan Bank for International Cooperation (JBIC) Development Bank of Japan (DBJ) Tokyo Electric Power Co. , Inc. 10 Kansai Electric Power Co. , Ltd. Major Chubu Electric Power Co. , Inc. Powers Tohoku Electric Power Co. , Inc. & Hokkaido Electric Power Co. , Inc. Hokuriku Electric Company the The Chugoku Electric Power Co. , Inc. Largest Shikoku Electric Power Co. , Inc. Gas Kyushu Electric Co. , Inc. Firms The Okinawa Electric Power Co. , Inc. Electric Power Development Co. , Ltd. (J-Power) Tokyo Gas Co. , Ltd. (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 3
JCF Your Partner for Development & Success in CDM/JI Projects (6) Fund Providers: Sector Oil & Manufacturing Trading Engineering Fund Providers Nippon Oil Corp. Idemitsu Kosan Co. Ltd. Japan Energy Corp. Kyushu Oil Corp. Sony Corp. Toshiba Corp. Sharp Corp. Fuji Xerox Co. , Ltd. The Japan Iron and Steel Federation Taiheiyo Cement Corp. Toyota Motor Corp. Terumo Corp. Mitsubishi Corp. Mitsui & Co. , Ltd. Sumitomo Corp. Itochu Corp. Marubeni Corp. Sojitz Corp. JGC Corp. (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. Major Companies in Oil, IT, Steel, Cement, Automobile & Medical Equipment fields 6 Major Investing & Trading Companies 4
JCF Your Partner for Development & Success in CDM/JI Projects Services (1) Assistance for Project Development: JCF are ready to bear following costs for development of CDM/JI projects in principle with a certain ceiling amount: Ø PDD Preparation Ø Validation (No Need to Refund in principle) Ø Initial Verification (2) Purchase of Carbon Credits (CERs, ERUs): JCF commits purchase of carbon credits under ERPA (Emission Reduction Purchase Agreement) (at a fixed price). * Payment on Delivery in principle * Purchase Price: to be decided on project-by-project basis (3) Upfront Payment: Upfront Payment for carbon credits can be considered on case-by-case basis. (depending on necessity and risks etc. ) (Thorough Due Diligence has to be taken. ) (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 5
JCF Your Partner for Development & Success in CDM/JI Projects Purchase Method (Ref. ) Other Buyers’ Case In case that purchase volume is 70% of original assumption in PDD Project Developer has to find other buyers (in each year). (may suffer from opportunity loss. ) CERs Volume Original Assumption in PDD Actually Generated CERs Purchased by Buyer (Delivered to Buyer) 6 00 2 7 00 2 8 9 0 1 2 00 201 201 2 (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 6
JCF Your Partner for Development & Success in CDM/JI Projects Purchase Method (JCF) JCF: Sweep Method Front-loaded revenue! Original Assumption in PDD Actually Generated CERs In case that purchase volume is 70% of original assumption in PDD All volume generated in each year will be purchased by JCF until reaching total volume of contract Project Developer has to find CERs other buyer Volume only after total volume for JCF is delivered Could be Purchased by JCF as Option 6 0 20 7 0 20 8 9 0 1 2 00 201 201 2 (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 7
JCF Your Partner for Development & Success in CDM/JI Projects Risks in development & implementation of CDM projects * Risks specifically involved in CDM projects 1. Registration Risks 2. Risks in Fluctuation of CERs Volume 3. Risks in Monitoring, Verification and Issuance of Credits 4. Risks in Additional Policy by CDM Executive Board 5. Political Risks in Host Country 6. Risks in Administrative Process for Credit Transfer 7. Risks in Renewal of Crediting Period (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 8
JCF Your Partner for Development & Success in CDM/JI Projects No Need to Compensate Even in case of shortage of Carbon Credits in spite of best endeavors by Project Participants: Project Participants are not required: • to make up for the shortage (with Credits from other projects or sellers); and • to pay any penalty to JCF. unless the delivery failure is caused by their willful misconduct. (e. g. Sale of Carbon Credits to some third party) Great Merit for Project Participants not to suffer from unpredictable financial risks in future. (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 9
JCF Your Partner for Development & Success in CDM/JI Projects Project Development Costs borne by JCF Ceiling Amount: Total Credit Volume purchased by JCF (ton-CO 2 e) Cost Item = < 300, 000 < ~ =< 600, 000 < PDD Max. US$ Preparation & 50, 000 75, 000 100, 000 Validation Initial Max. US$ 15, 000 Verification No Need to Refund to JCF in principle (JCF will not deduct these amounts from payment of credits in future. ) (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 10
JCF Your Partner for Development & Success in CDM/JI Projects Merits for Projects (1) Additional Cash Flow: Ø Improvement of Project Viability with additional Cash Inflow by selling CERs in US$ Ø Securing of Stable Profitability by getting commitment for purchase of CERs Ø Front-loaded Revenue in Sweep Method (2) Assistance in Development: Ø Saving of Development Costs (PDD, Validation, Initial Verification etc. ) Ø Getting of Assistance and Orientation for development of CDM projects (3) Possibility of Parallel-purchase / Equity participation: Ø A part or all of the remaining Carbon Credits may be purchased by our Fund Providers in collaboration with JCF. Ø Participation as investors by some our Fund Providers may be possible. (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 11
JCF Your Partner for Development & Success in CDM/JI Projects Merits for Projects (4) Collaboration with and Support from JBIC & DBJ: ØStrong ties with Japanese Government issuing Written Approvals for CDM/JI Projects ØCooperation and strong ties with Host Governments and Development Financial Institutions ØUnderlying Financing from JBIC, such as; A) Export Loan B) Overseas Investment Loan C) Untied Loan D) ODA Loan, etc. (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 12
JCF Your Partner for Development & Success in CDM/JI Projects Example Model for Underlying Finance provided for CDM /JI Projects by JBIC Fund Provision Underlying Finance （On-Lending Scheme） Direct Loan JCF Intermediary Financial Institution (Japanese) Companies in Power /Energy Sector, etc. Purchase of CER (Carbon Finance) Cash Inflow during Crediting Period Underlying Sponsorship Finance (Equity, etc. ) CDM/JI Projects (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. Cash Inflow during Construction Period 13
JCF Your Partner for Development & Success in CDM/JI Projects Operational Flowchart Stake Holders Other Participants of Project DOE Clarification & Screening of PIN Evaluation & Selection of Project Conclusion of Mo. U defining basic terms & conditions Exclusive Negotiation Period PDD Preparation Validation (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. Assistance for Project Development Bearing of PDD Preparation Cost Bearing of Validation Cost Conclusion of ERPA D Host Country DNA Submission of PIN ue Diligenc e Consultant JCF Project Planning Feasibility Study Project Preparation Host Country DNA Project Entity 14
JCF Your Partner for Development & Success in CDM/JI Projects Operational Flowchart Project Entity Stake Holders Host Country DNA CDM -EB JCF Assistance for Project Development Conclusion of ERPA Japan DNA Validation DOE Registration Upfro nt Paym ent Effecting of Sale/Purchase Obligation Bearing of Initial Verification Cost Monitoring Projec t Imple menta tion DOE CDM-EB Verification Certification & CERs Issuance (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. CERs Payment on Delivery 15
JCF Your Partner for Development & Success in CDM/JI Projects Key Criteria at Screening of PINs/PDDs * Red: High Priority Project Description and Project Participants u Fulfillment of Kyoto Rules: u Ø Methodology (Baseline Study & Monitoring Plan) Ø Validation (Methodology Applicability, Data, Quality Control, etc. ) Ø Possibility of Authorization & Approval by Host Country Ø Stakeholders’ Comments u Additionality Ø Investment Analysis/Barrier Analysis and Common Practice Analysis, etc. u Environmental & Social Safeguard Requirements: Ø Compliance with Laws & Regulations, etc. (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 16
JCF u Your Partner for Development & Success in CDM/JI Projects Project Feasibility: Ø Ø Ø Ø u * Red: High Priority Construction Plan, Business Plan and Fund-raising Plan Project-related Contracts Concession/License & Permits Creditworthiness and Competence of Project Sponsors Experiences of Management and/or Project Operator Commercially Viable Proven Technology Financial Viability (Cash Flow Projection, Sensitivity Analysis, etc. ) Contribution to Sustainable Development of Host Country Ø Environmental, Social & Economic Impacts, Technology Transfer Effects, etc. (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 17
JCF u Your Partner for Development & Success in CDM/JI Projects * Red: High Priority Purchase Conditions Ø Price Ø Volume More than 50, 000 t-CO 2 e/year is preferable. Ø Delivery Schedule etc. Early commissioning project is preferable. u Portfolio Guideline ERs to be purchased from: approx. in USD, million a Single Project Up to 25 a Single Host Country Up to 37 a Single Sector * Up to 41 *Sector: “Sectoral Scopes” listed in UNFCCC web site which include A) Renewable Energy, B) Waste Handling and Disposal, C) Manufacturing Industries (Energy Efficiency, Fuel Switching, etc. ), D) Fugitive Emissions, E) Chemical Industries, F) Agriculture, etc. (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. 18
JCF Your Partner for Development & Success in CDM/JI Projects For More Information, Contact Japan Carbon Finance, Ltd. (JCF) Carbon Finance Department Hitoshi Kurihara, Director General h-kurihara@jcarbon. co. jp Joichi Kimura, Deputy Director General j-kimura@jcarbon. co. jp Yoichiro Matsushita, Deal Manager y-matsushita@jcarbon. co. jp Tel: +81 -3 -5212 -8879 Fax: +81 -3 -5212 -8886 1 -3, Kudankita 4 -chome, Chiyoda-ku, Tokyo 102 -0073, JAPAN Japan Bank for International Cooperation (JBIC) Representative Office in Jakarta Ichiro Hayashidani, Representative i-hayashidani@jbic. go. jp Tel: +62 -21 -5220693 Fax: +62 -21 -520975 Summitas II, 7 th Floor, Jl. Jenderal Suderman Kav. 61 -62 Jakarta 12190, INDONESIA You are welcome to visit our web site ! (C) Copyright 2005 Japan Carbon Finance, Ltd. All Rights Reserved. www. jcarbon. co. jp 19
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