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November 19th, 2001 www.prototypecarbon.org

November 19 th WBI-PCF Training Session. World Bank Impact of Carbon Finance on Project Financing. November 19th, 2001 www.prototypecarbon.org. Features of the PCF. Closed-end Mutual Fund structure with diverse portfolio to: Minimize Project Risks Reduce Transactions Costs

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November 19th, 2001 www.prototypecarbon.org

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  1. November 19th WBI-PCF Training Session. World BankImpact of Carbon Finance on Project Financing November 19th, 2001 www.prototypecarbon.org

  2. Features of the PCF • Closed-end Mutual Fund structure with diverse portfolio to: • Minimize Project Risks • Reduce Transactions Costs • Enhance the Learning Experience • Shareholding: Governments, $10 m; Companies, $5 m • Total Capital: US$145 million to be used in ~ 30 projects • PCF Products: • Competitively priced, high quality emissions reductions • target portfolio wide outcome price: ~$5/tCO2 ($20/tC) • target deal price: $2.5-3.5/tCO2 (~$9-12tC) • High value knowledge asset: create competitive advantage for corporate investors and efficient market regulation and leverage for sustainable development for Parties

  3. PCF Subscribers ($145 million) Public Sector(6) Governments of Netherlands, Finland, Sweden, Norway, Canada, and Japan Bank for International Cooperation Private Sector: (17) RWE - Germany, Gaz de France, Tokyo Electric Power, Deutsche Bank, Chubu Electric, Chugoku Electric, Kyushu Electric, Shikoku Electric, Tohoku Electric, Mitsui, Mitsubishi, Electrabel, NorskHydro- Norway, Statoil -Norway, BP-Amoco, Fortum, RaboBank, NL

  4. Impact of Carbon Finance on Project Financing at $3/t CO2e Project, Not Equity, FIRR. Note: data are preliminary

  5. Impact of Carbon Finance on Project Financing at $3/t CO2e Waste-to-Energy project : Chennai, India, MSW • Gasification of solid waste • 15 MW plant, 95 GWh/ann, $38m cost • ERs from: • Power generation displacing fossil fuel (40%) • Methane capture & conversion (60%) Project IRREquity IRR • Without carbon finance 14% 16% • With carbon finance >19% > 25%

  6. Annual Uganda 1-7MW Costa Rica Chile 25MW Mini-Hydro off-grid grid grid ERs (000 t) 49 61 79-138* Net Gen.(GWh) 30 75 160 CO2 ERs/GWh 1664 807 494-860 ER (USc/kWh) 0.50 0.24 * Gas vs. 0.15-0.26 coal BL Impact of Carbon Finance on Project Financing at $3/t CO2e Hydro: Off-grid vs. Grid

  7. Impact of Carbon Finance: Quality and Quantity (at $3/t CO2e) • Methane-capture projects: carbon finance can turn “dogs” into “cash cows” • “Traditional” renewables: boost return by 0.5-2.5% • Makes some marginal deals bankable; • Creates a useful additional risk hedge for already profitable deals • Can displace ODA and Government subsidy in some projects • Quantity of carbon finance is only half the story: The leverage of carbon finance on financial closure is disproportional to volume of carbon finance

  8. Annexes

  9. Typology of Funds/Plays • Pure Carbon Funds (PCF, National Funds) • Private Equity Funds • Aimed at JI/CDM Projects • New Energy, RE, EE Funds with Carbon Credits • Forestry Funds with Carbon Credits • Energy or Forestry Funds that Could Add Carbon Credits • Mutual Funds with % in Private Equity • NGO Funds • Sustainability, Social, Ethical Mutual funds • Corporate “Funds” Earmarked for Carbon Credit Investment

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