1. Identification of financial sources & supporting bodies
Socio-economic development in the era of renewable energies: Towards the creation of a research institution for the MENA region based on the DESERTEC concept
3-4 september 2012, Tunisia
Identification of financial sources & supporting bodies
Ass. Prof. Amel Belanès
High Institute of Management of Tunis – Tunisia

2. Overview of Session
1. Conventional methods of projects financing 2. What attracts capital to finance renewable energy? 3. What are the renewable energy finance handicaps? 4. Supporting bodies of renewable energy 5.How do financial institutions contribute? 6. What are the factors determining the appropriate financing mechanism? 7. How can we innovate in financing sources and mechanisms? 2

3. 1. Conventional methods of projects financing
Project financing
Corporate finance
Lease financing
Subsidies 3

4. 1. Conventional methods of projects financing
Project financing
Limited recourse financing to the cash flows of the project
Corporate finance
Retained earnings otherwise paid to stockholders
Equity financing
Stock issuance
Short-term borrowing from financial institutions
Sale of long-term bonds
Lease financing
Subsidies 4

5. 2. What attracts capital to finance renewable energy?
Regulatory compliance
Direct business profits
Indirect business benefits
Not-business related benefits 5

6. 2. What attracts capital to finance renewable energy?
Regulatory compliance
Taxes, fines, polluter-pays principle, Subsidies
Direct business profits
Business opportunities
Secure, sustain or reduce costs of key natural resource inputs required for business operations
Securing license to operate and avoiding losses from protests 6

7. 2. What attracts capital to finance renewable energy?
Indirect business benefits
“Green” branding, marketing
Improved staff pride and morale and enhanced recruitment
Reflect broader business values of the corporation
Not-business related benefits
Philanthropy / Charity 7

8. 3. Renewable energy finance handicaps
Several barriers before penetrating the market
Lack of technical capacity
Lack of supportive policy frameworks
Inadequate financing for installations or supporting businesses
Lack of awareness and trust in the technologies by users and utility companies
Benefits accrue on the long run
Appropriate regulatory framework
Provision of the infrastructure to make the local economy viable 8

9. 4. Supporting bodies of renewable energies
Global Environmental Facility (GEF)
The United Nations Development Programme (UNDP)
The United Nations Environment Programme (UNEP)
The world Bank
Regional development banks
Executing Agencies under the policy of expanded opportunities 9

10. 4.1 Supporting bodies of renewable energies
Global Environmental Facility (GEF)
Independent financial organization, established in 1991
Grants to developing countries for projects that benefit the global environment and promote sustainable livelihoods
Removed barriers to developing markets for renewable energies wherever cost-effective
Enabling policy frameworks, capacity for understanding and using the technologies
Financial mechanisms to make renewables more affordable
GEF’s three implementing agencies : UNDP, UNEP and the world Bank 10

11. 4.2 Supporting bodies of renewable energies
The United Nations Development Programme (UNDP)
UN global development network, funded entirely by voluntary contributions from member nations in 1966
Solutions to develop local capacity and meet global and national development challenges
Change and exchange of knowledge, experience and resources to help people build a better life
Expert advice, training, and grant support to developing countries, with increasing emphasis on assistance to the least developed countries 11

12. 4.3 Supporting bodies of renewable energies
The United Nations Environment Programme (UNEP)
Programme rather than an agency of the UN found in 1972
Developing international environmental conventions, promoting environmental science and information and illustrating the way to be implemented
Funding and implementing environment related development projects
Assisting developing countries in implementing environmentally sound policies and practices 12

13. 4.4 Supporting bodies of renewable energies
The world Bank
UN agency created in 1944 and focus on economic growth
Since the 1992 Rio Declaration, activities promoting the environment and human rights
“Safeguard” policies: the minimum environmental and social requirements expected of borrowers, developed in the 1980s and gradually updated
2006, Sustainable Development Network
2010, a progressive “access to information” policy 13

14. 4.4 Supporting bodies of renewable energies
Regional development banks
The Asian Development Bank, Inter-American Development Bank, European Bank for Reconstruction and Development, and African Development Bank
Development Business Programme 14

15. 5. How do Financial Institutions contribute?
Invest directly in projects
Provide direct budget support to government for policy reforms
By injecting money directly into the government treasury, full discretion on how to use this money
Leverage further investments
By managing climate change trust funds that attract other investors
Share knowledge
By providing expert advice to governments and companies on sustainable development best practices 15

16. 6. Factors determining the appropriate financing mechanism
National level context
Site-specific context
Economics practices 16

17. 6.1 Factors determining the appropriate financing mechanism
National level context
Institutional & Governance (vision + capacity)
Stable political and economic environment
Regulatory framework in place
Environmental awareness
Understanding of social and economic impact of unsustainable land management
Site-specific context
Economics practices 17

18. 6.2 Factors determining the appropriate financing mechanism
National level context
Site-specific context
Ecosystem type and use and current use of the land
Capacity to enhance environmental services
Local capacities (social capital, infrastructure, space for discussion)
Land tenure situation
Economics practices 18

19. 6.3 Factors determining the appropriate financing mechanism
National level context
Site-specific context
Economics practices
Demand and supply
Cost and cost-effectiveness
Required time for development and implementation
Amount of resources generated
Synergies with other thematic priorities 19

20. 7. How can we innovate in financing sources and mechanisms?
Why innovative financing?
What is innovative financing?
Innovative financing models for renewable energy 20

21. 7.1 Why Innovative Financing?
Aim to :
Increase resources availability
Diversify the resource base
Complement traditional funding
Maximize the projects financial profitability
Can provide direct incentives to engage in renewable energy projects 21

22. 7.2 What is Innovative Financing?
Innovative sources and mechanisms of funding are non-traditional modes of financing
Innovative funding includes resources from internal, external, private or public sources
Innovative funding can be mobilized through financial mechanisms and instruments 22

23. 7.3 Innovative financing models for renewable energy
Clean Development Mechanism
Dealer-Credit Model
Consumer Credit Model
Supplier Credit Model
Energy Service Company Model
Revolving Fund
Green Venture Capital Fund 23

24. Clean development Mechanism (CDM)
Developed countries (Annexes-1 ones)
reduce emission in a flexible and cost-effective manner
obtain Certificates of Emissions Reductions
Developing countries (non-Annex I called the “host countries”)
meet sustainable development objectives
benefit in the form of investment, access to better technology, and local sustainable development 24

25. Energy Service Company Model (ESCM)
Ownership and maintenance of the equipment lies with the energy service company
Customers pay for the energy service that is provided by an energy service company (ESCO)
Energy becomes more affordable
Less long-term risks

26. Green Venture Capital Fund (GVCF)
Environmental
Social
Financial
Investment model: “socially responsible investing” or “the triple bottom line”
Investments from GVCFs can be in :
Loans: for small and medium enterprises which contribute to sustainable development
Equity financing: to “green” entrepreneurs
Links with supporting bodies

27. Thank you for your attention27