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 encourage environmentally sound and sustainable development
Netherlands-EBRD Carbon Fund purpose: purchase as much CO 2 reductions as possible for the account of the Netherlands budget: EUR 32 million incl. costs number of projects: investment period: until 30 September 2006
Facilitating the JI Carbon Market facilitation linked to investment projects development of JI project project finance
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
Technical 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 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 Finance CO 2 reductions heat electricity debt equity
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?
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
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 credit risk –cash flow from reliable buyer; –possible prepayments from buyer; –step in rights with bankruptcy of project company.