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Netherlands-EBRD Carbon Fund

Netherlands-EBRD Carbon Fund. Facilitating the JI Carbon market Egbert Liese. EBRD’s objectives. promote transition to market economies mobilise significant foreign direct investment support privatisation, restructuring and better municipal services

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Netherlands-EBRD Carbon Fund

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  1. Netherlands-EBRD Carbon Fund Facilitating the JI Carbon market Egbert Liese

  2. EBRD’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

  3. Netherlands-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

  4. Facilitating the JI Carbon Market • facilitation linked to investment projects • development of JI project • project finance

  5. Donor funding - Technical 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

  6. Technical Cooperation commitments Focus on investment projects: 70% of commitments for project implementation or preparation Sector studies 1% Advisory services 26% Training 3% Project preparation 24% Project implementation 46%

  7. Facilitation 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

  8. Project Finance CO2 reductions equity heat debt electricity

  9. Project 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?

  10. Risks • 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

  11. Risks • 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.

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