Netherlands-EBRD Carbon FundNetherlands-EBRD Carbon Fund

Facilitating the JI Carbon marketFacilitating the JI Carbon market

Egbert LieseEgbert Liese

EBRD’s objectivesEBRD’s objectives

promote transition to market economies

mobilise significant foreign direct investment

support privatisation, restructuring and better municipal services

encourage environmentally sound and sustainable development

Netherlands-EBRD Carbon FundNetherlands-EBRD Carbon Fund

purpose: purchase as much CO2 reductions as possible for the account of the Netherlands

budget: EUR 32 million incl. costs

number of projects: 10 -15

investment period: until 30 September 2006

Facilitating the JI Carbon MarketFacilitating the JI Carbon Market

facilitation linked to investment projects

development of JI project

project finance

Donor funding - Donor funding - Technical CooperationTechnical Cooperation

Nearly half of all signed EBRD investments have been supported by TC funding

Over 3,400 projects funded

Over €894 million of funds mobilised

Technical Cooperation commitmentsTechnical Cooperation commitments

Project implementation 46%

Training 3%

Advisory services 26%Sector studies

1%

Project preparation

24%

Focus on investment projects: 70% of commitments for project implementation or preparation

Facilitation by the FundFacilitation by the Fund

financial support for Project Design Document

– Technical Cooperation funds

– aim to retrieve after signing

– reduces risk in project development

advice on Project Design Document

– reduces development cost

Project FinanceProject Finance

CO2 reductions

heat

electricitydebt

equity

Project finance with carbon creditsProject finance with carbon credits

carbon credits:

– enhancing return on equity

– reducing debt leverage?

comfort for lenders?

– supporting debt service with carbon cash flows?

– securitising with ERPA?

RisksRisks

Kyoto Protocol risk

– enter into force of Kyoto Protocol

– baseline risk

– linking to other trading schemes

carbon price risk

– forward sale of carbon credits

exchange rate risk

– payment of cash flows in Euro

RisksRisks

project risks (under performance)

– penalty or liquidated damages clause;

– hedge for under performance:

call option on EUA at EUR 20;

put option on EUA at EUR 0.75.

credit risk

– cash flow from reliable buyer;

– possible prepayments from buyer;

– step in rights with bankruptcy of project company.