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IFC: Part of the World Bank Group

Geothermal: The Environmental Answer to Non-Intermittent Generation? Jan P. Mumenthaler Principal Insurance Officer, Insurance Services Group Asia Istanbul , 10.10.2013. IFC: Part of the World Bank Group. ICSID International Center for Settlement of Investment Disputes. IFC

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IFC: Part of the World Bank Group

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  1. Geothermal: The Environmental Answer to Non-Intermittent Generation?Jan P. MumenthalerPrincipal Insurance Officer, Insurance Services Group AsiaIstanbul, 10.10.2013

  2. IFC: Part of the World Bank Group ICSID International Center for Settlement of Investment Disputes IFC International Finance Corporation IDA International Development Association MIGA Multilateral Investment and Guarantee Agency IBRD International Bank for Reconstruction and Development Guarantees of private sector investment’s non-commercial risks Loans to middle-income and credit-worthy low-income country governments Interest-free loans and grants to governments of poorest countries Solutions in private sector development Conciliation and arbitration of investment disputes

  3. Fiscal Year 2013 Highlights Investments:612 new projects in 113 countries Advisory services: $232 million in program expenditures $24.8 billion in financing: $18.3 billion for IFC’s own account, $6.5 billion mobilized $49.6 billion committed portfolio IDA countries account for almost half of IFC projects overall: $3.5 billion invested in Sub-Saharan Africa

  4. Geothermal: Unique Risk Profile • Geothermal projects face unique risks throughout the project life-cycle • Suitability of Equity vs. Debt • Finance needs to be structured properly to reduce lenders’ risk exposure

  5. Active throughout the Geothermal Project Cycle IFC Advisory Services Provides technical assistance to geothermal companies to reduce exploration risk, through: • Exploration best practices • Exploration risk insurance IFC Investment Provides financing: • Can make investments at various points throughout the project implementation phase • Can mobilize other banks to provide financing alongside IFC

  6. Establishing Best Practice • IFC has partnered with IGA to define and roll-out best practices for geothermal exploration • IFC will work directly with geothermal developers to implement best practices • Benefitsto developers: • Brings projects in line with international Best Practices • Reduces project risks by providing a systematic framework for resource exploration • Reduces costs by improving well targeting • Improves access to finance

  7. Study Evidences the “Learning Curve” Effect Exploration Development Operation

  8. Sharing Exploration Risk through Insurance • IFC has partnered with Munich Re to support their Exploration Risk Insurance • Benefits to developers: • Reduces financial exposure to resource finding/productivity risk • Insures the thermal output of the wells • Success is based on pre-defined criteria • Coverage assessment is tailored to each project • Can be for production well(s) and/or injection well(s) • Whendoes IFC engage: • Either leads on from best practices support, or towards end of above-ground surveying activities • IFC can provide: • Expert, independent, high-level assessment of projects, • Streamlined introduction to insurer • Support to developers with insurance negotiations, if required • Grant funding to reduce cost of insurance+ +Note: Grant funding is dependent on project specifics and cannot be guaranteed

  9. Nicaragua Financing Geothermal under different Structures San Jacinto $50.3 million November 2010 Loan Lead arranger / Lender Equity Corp Finance Project Finance Guatemala Philippines Philippines Philippines Orzunil A Loan: $13 million PNOC Energy Dev Corp II Energy Dev Corp B Loan: $15 million $75 million $83.5 million $50 million Equity: $1.1 million Equity - IPO Lender Lender Lender May 2011 November 2008 December 2006 April 1998

  10. Geothermal Financing Options : The Borrower Plant Construction Resource Development : Already developed IFC experience : To be financed Corporate Finance Easier • Multiple existing assets and financing expansions EDC, Philippines Project Finance Orzunil, Ormat, Guatemala Steam Provider Steam Supply Contract • Power Plant BOO/BTO with Steam Off-take San Jacinto, Ram Power, Nicaragua • “Brown field”: resource development completed, financing power plant only • “Green field”: financing resource development and power plant concurrently ?? Harder

  11. Thank You

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