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Maximizing the impact of World Bank Financing in Energy Efficiency Projects February 23, 2012

Maximizing the impact of World Bank Financing in Energy Efficiency Projects February 23, 2012. Issam Abousleiman Head of Banking Products Banking and Debt Management. Financing Needed to Deal with Climate Change. Additional investment needed in developing countries, by 2030.

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Maximizing the impact of World Bank Financing in Energy Efficiency Projects February 23, 2012

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  1. Maximizing the impact of World Bank Financing in Energy Efficiency ProjectsFebruary 23, 2012 IssamAbousleiman Head of Banking Products Banking and Debt Management

  2. Financing Needed to Deal with Climate Change Additional investment needed in developing countries, by 2030 Climate finance covers 10-15% of development aid and serves to.. Mitigation $139—175 billion 2.8-3.5 trillions needed for 20 years “Baseline” Private & Public Investment Adaptation $75—100 billion … to catalyze sustainable investments ..enhance capacity & policy … leverage other sources of finance Funding for adaptation and mitigation $9 billion Source: World Bank, 2010

  3. Fundamental changes in the nature of international capital flows in the new millennium • Paradigm shift: Need to optimize scarce public resources for development Use scarce public resources to enable other sources of funds and/or improve development outcomes

  4. Need to mobilize Finance Additional Finance: Tapped Capital Markets • Green Bonds: USD 2.4 billion through 41 transactions and 16 currencies Funds raised from the WB Green Bonds support climate change (including mitigation- EE-) projects that are selected by WB environmental and climate change specialists based on certain criteria. • WB Eco-3 Bonds: USD 316 million through 3 issuances. A 6-year bond issued for investors in the Netherlands, Belgium, and Luxembourg (February 2008) • CER Linked Bonds: USD 31.5 million: First Certified Emission Reductions-linked Bond, nicknamed “Cool Bond”, with Daiwa Securities Group (June 2008); second issue with Mitsubishi UFJ Securities (September 2008). Summary of CO2 “Cool Bond” Terms Amount: US$ 25 million Settlement Date: June 26, 2008 Maturity Date: June 30, 2013 Coupon: 3% fixed annual coupon for an initial period of 15 months, and then a coupon linked to the future performance of CER prices and the actual versus estimated delivery of CERs that will be generated by a hydropower plant located in the Guizho Province in China. Sole Lead Manager: Daiwa Securities Group SMBC Europe Ltd. Investor Type: Japanese Retail

  5. McKinsey Curves illustrate the areas where mitigation investments can be more efficient Source: The McKinsey Quarterly 2007. Number 1

  6. Residential Energy Efficiency in Mexico: Financing Structure IBRD Loan GHG emissions reductions $$$ Potential Carbon Revenues IBRD US$ 250 million Government of Mexico Component 1: Light Bulb Replacement IBRD US$ 55 million Purchase, Distribution and Disposal Component 2: Appliance Replacement IBRD US$ 195 million Consumer Rebates Replacementand Disposal Repayment through electricity bills US$ 50 million NAFIN (state bank) CTF Loan Consumer Loans US$ 5 million* GEF Grant Guarantee Facility GHG emissions reductions $$$ Potential Carbon Revenues *US$2 million of the GEF grant partially funds the technical assistance component of this project

  7. Traditional vs. Recycling Green loan: Savings in Exposure Savings in Exposure Recycling Green Loan Amount : 100 USD million Disbursement period: 5years (sixth-month disbursements of 10 million USD) Each disbursement: 1 year grace period, 5 years final maturity Traditional Loan Amount : 100 USD million Disbursement period: 5 years (six-month disbursements of 10 million USD) Maturity : 30 years Grace period: 5 years

  8. Traditional lending vs. Recycling Green loans for EE: CFL replacement (1) Assuming a peak coincidence factor of 0.264% and a capacity of 53 W per replaced lamp. This decrease in demand allows for a permanent reduction in the expansion of the power generation capacity required to meet the demand of the country, compared with the base line.

  9. Main Messages • Need of customization of financing to address EE • Thesecustomizedstructuresenable: • Substantialincreases in theamount of energycapacitysavings (throughthereduction of peakdemand) • Optimalusage of limited IBRD financingenvelope

  10. Contacts IssamAbousleiman, Head of Banking Products 202-458-8065 iabousleiman@worldbank.org www.treasury.worldbank.org

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