Investing in climate-smart business: IFC s experience in Europe & Central Asia. Patrick Avato Lead, IFC Climate Business Europe & Central Asia

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1 Investing in climate-smart business: IFC s experience in Europe & Central Asia Patrick Avato Lead, IFC Climate Business Europe & Central Asia Istanbul, 23 November 2012

2 Agenda IFC in Context Climate Smart Business in IFC Case Study: Renewable Energy in the Balkans 2

IFC in context: who we are IFC is the private sector lending arm of the World Bank Group IFC is the world s largest private sector IFI investing in developing countries Commitments in FY2012 of

3 IFC in context: who we are IFC is the private sector lending arm of the World Bank Group IFC is the world s largest private sector IFI investing in developing countries Commitments in FY2012 of approximately US$15.5 billion + $4.9 billion mobilized FY12 Advisory program of $197m Offers a full range of products from advisory to equity, mezzanine to debt S&P / Moody s AAA rating Portfolio We bring global experience Committed (FY12) Mobilized (FY12) IFC FY2012 Highlights $56.4 billion $15.5 billion $4.9 billion # of Companies 1,825 with a local presence Established in 2010, IFC s Istanbul Operations Centre covers 50 countries in EMENA (Europe, Middle East and North Africa) region # of Countries 102 3

long-term finance and 10% of trade finance

conservation, wastewater treatment, access

and offsets BUILDINGS: Low carbon strategy,

4 How does IFC define climate business? IFC Climate business targets: 20% of IFC s long-term finance and 10% of trade finance by FY15 Solutions for climate mitigation / adaptation and sustainable development ENERGY: Low carbon generation, energy efficiency, storage, smart grids, sustainable energy access TRANSPORTATION: Energy efficient components, fuels and logistics WATER: Capture, treatment, conservation, wastewater treatment, access AIR & ENVIRONMENT: Carbon credits, trading and offsets BUILDINGS: Low carbon strategy, energy efficiency, sustainable materials. MANUFACTURING: Green chemicals, RE/EE supply chain, cleaner production. AGRICULTURE & FORESTRY: Land mgmt, low carbon and adaptation strategies, biomass. RECYCLING & WASTE: Recycling and waste treatment services

5 Pioneer investments in early market movers Commercial Finance (Equity, Debt and Mezzanine) Renewable energy generation and supply chains Resource efficiency (Energy, Waste, Water) Credit lines and guarantees for Financial Institutions to lend for RE & EE Climate Change Private Equity Funds Cleantech growth capital Carbon Finance Blended Concessional Finance Concessional funds for investment and advisory services Convening industry players for research / standard setting

6 and opening up new markets for Climate Smart Investments Technical and economic potential for Energy Efficiency & Renewable Energy is huge, but commercial opportunities are often constrained by market barriers Market Barriers Deficiencies in policy and regulatory framework Limited experience and high risk perception in the market High development costs for first projects in a country Difficult access to finance, e.g. limited project finance, banks not familiar with the sector, etc. Project developers lack experience and appropriate balance sheets IFC Advisory Solutions Policy advice: e.g. feed-in tariffs, permits, PPAs, housing efficiency regulations Awareness and skills for firms: e.g. cleaner production audits, capacity building for project developers & banks Transaction support to demonstrate new business models, e.g. PPPs for concessions in renewable energy generation/access, energy distribution, solid waste, water Best practices, industry benchmarks and lessons learned

commercial finance Recent Investment in Efficiency and Clean Supply Chains

Russia: Borets (energy efficient motors/pumps) $33m loan(*) China: Suntech

US$10m loan Ghana: Ashesi University ( green building incl. biogas use) $0.

(solar cells) $75m loan Note (*) financing for climate friendly project; was

(biomass/plantation) $18m loan Apollo Tires III (low rolling resistance tires

7 commercial finance Recent Investment in Efficiency and Clean Supply Chains Turkey: Trakya Cam glass producer (energy efficiency and solar ) $55m loan Russia: Borets (energy efficient motors/pumps) $33m loan(*) China: Suntech (solar cells) $50m convertible debt Mexico: Optima Energia (hotel ESCO) US$10m loan Ghana: Ashesi University ( green building incl. biogas use) $0.2m loan(*) India: VicatSagar (cement) $9m loan(*) Philippines: Sunpower (solar cells) $75m loan Note (*) financing for climate friendly project; was part of a larger total IFC investment Tanzania: Green Resources (biomass/plantation) $18m loan Apollo Tires III (low rolling resistance tires and waste heat recovery) $30m loan Jain Irrigation (micro/drip irrigation systems) $60 million loans/equity 7

Recent Renewable Energy Investments Wind Romania commercial finance Wind Eurus $75,000,000 Mexico Sub Debt and Debt Lead Lender of

Lender Hydro China Zhongda Hydro US$23,200,000 Loan Project Financing Lender Hydro Panama Electron Investment Pando Montelirio

Electriciie $750,000 Equity Senegal Biomass India Shalivahana $14,930,000 Equity Solar Thailand Solar Power Company US$2,700,000

8 Recent Renewable Energy Investments Wind Romania commercial finance Wind Eurus $75,000,000 Mexico Sub Debt and Debt Lead Lender of US$375m financing Geothermal Cernavoda Wind $60,800,000 Loan Project Financing Lender Nicaragua Hydropower Georgia Paravani $52,000,000 Lender Hydro China Zhongda Hydro US$23,200,000 Loan Project Financing Lender Hydro Panama Electron Investment Pando Montelirio $40,000,000 Loan Project Financing Lender Wind Chile San Jacinto $50,300,000 Loan Project Financing Lender Solar Office National d Electriciie $750,000 Equity Senegal Biomass India Shalivahana $14,930,000 Equity Solar Thailand Solar Power Company US$2,700,000 Geothermal Philippines Energy Dev II US$75,000,000 Loan Project Financing Lender Norvind $30,750,000 Loan Project Financing Lead Lender of US$60.75m financing Equity 8

IFC Advisory: Opening up new markets for climatesmart

Resource Efficiency in heavy industry, SMEs and Efficient

legislation & firm-level support for early movers advisory

Distribution HPP, Wind, Biomass regulatory support and

Hospitals: Green/EE hospitals buildings with LEED Silver

contract for electricity distribution in Monrovia including

Medina Airport: Green/EE airport terminal building Turkey:

Solarbased power generation through PPP in Gujarat.

electricity distribution including technical losses reduction

generation and Lima distribution system (includes technical

Green/EE special economic zone at Athi River Maldives: Solid

power plant (June/2011* ) Male Airport: Green/EE airport

9 IFC Advisory: Opening up new markets for climatesmart investment Russia & Ukraine: Resource eficiency: Focus on Resource Efficiency in heavy industry, SMEs and Efficient Housing Renewables: Support to regional govts on RE legislation & firm-level support for early movers advisory services Balkans: PPPs: for HPP, Solid Waste & Power Distribution HPP, Wind, Biomass regulatory support and capacity building for banks Mexico: Toluca & Tlalnepantla Hospitals: Green/EE hospitals buildings with LEED Silver certificate equivalent (Dec /2010*) Liberia: LEC: Management contract for electricity distribution in Monrovia including technical losses reduction goals (April/2010) * Saudi Arabia: Medina Airport: Green/EE airport terminal building Turkey: GeoFund program supports geothermal power sector India: Solarbased power generation through PPP in Gujarat. Philippines: Olongapo Power: Private sector participation in electricity distribution including technical losses reduction goals (Aug/2010*) Peru: Electrolima: Sale of electricity generation and Lima distribution system (includes technical losses reduction) (1994/1995*) Kenya: KMIP: PPP for various Green/EE special economic zone at Athi River Maldives: Solid Waste Management: SWM concession including waste-toenergy power plant (June/2011* ) Male Airport: Green/EE airport terminal building with LEED Silver certificate equivalent (June/2010* ) Solomon Islands: Tina River 14 MW hydro-power to substitute diesel generation 9

Case Study: Opening up Western Balkans for RE investment Opportunity High cost of electricity, expensive energy imports Significant small-hydro, biomass and wind potential, export potential to EU

10 Case Study: Opening up Western Balkans for RE investment Opportunity High cost of electricity, expensive energy imports Significant small-hydro, biomass and wind potential, export potential to EU Interest by government, banks and industry to develop the RE sector IFC approach Comprehensive program in Albania, Bosnia, Kosovo, Macedonia, Montenegro and Serbia: 1. Regulatory reform: support governments with developing feed-in tariffs, streamline licensing and standardizing contracts (e.g. PPA, wheeling etc.) 2. Access to Finance: provide long-term financing & risk-sharing to banks for RE credit lines, coupled with technical support on project assessment & direct investment in individual projects 3. Capacity building: Support project developers with technical advice and access to international partners & finance early mover projects 10

11 Annex 11

12 IFC products Equity Corporate JV (early equity investments, Infraventures) Typically up to 20% shareholding Long-term investor, typically 6-8 year holding period Mezzanine / Subordinated Debt Senior Debt Any number of structures/flavors of subordination Subordinated loans, income participating loans, convertible loans Senior Debt (corporate finance, project finance) Fixed/floating rates, USD, EUR and local currencies available Long maturities: 8-20 years, appropriate grace periods Range of security packages suited to project/country Mobilization of funds from other lenders and investors 12

13 IFC exposure guidelines IFC s investment size on its own account is set by the following criteria: Greenfield with total cost >= $50 million Up to 25% of project cost Greenfield with total cost < $50 million Up to 35% of project cost Expansion or rehabilitation Up to 50% of project cost IFC can deliver the following complements to its own debt investment B loans Syndicated loans where IFC is lender of record, typically with funds provided by international commercial bank. Parallel loans IFC can mobilize parallel lenders, typically DFI or local lender IFC is able to work alongside co-lenders as part of lender group IFC s equity investment typically cannot exceed 20% of total share capital 13

MW of HPP investments, across more than 40 projects in all regions.

A pipeline of CSP projects, and further PV investments in development

14 Cumulative experience of 7.7 GW of RE investments Hydro: Long standing experience, with well over 4,500 MW of HPP investments, across more than 40 projects in all regions. Wind: IFC s first investment in 2008, with over 1,500 MW since then in over 15 projects; approximately 40% in SEE. Solar: More than 10 PV investments over the last 3 years, totaling 165 MW. A pipeline of CSP projects, and further PV investments in development Geothermal: A difficult but promising sector in which IFC has made investments totally over 1,300 MW, in Guatemala, Nicaragua, and Philippines. Biomass 275 MW of investments, from Brazil to China 14

15 Case Study: Financing HPPs in Armenia 1. Supporting RE and EE financing through local banks Ameriabank CJSC: AS from ASEF + IFC $15 million for small hydropower plant (SHPP) financing Results: 11 SHPPs financed; installed capacity of 33.2 MW; annual generation of GWh; GHG reduction 40,720 tco2e/year HSBC Armenia CJSC: AS from ASEF + IFC $15 million for SME EE financing Results: 6 projects in pipeline for $13.05 million; 6.5 GWh/year savings, GHG reduction of ~2,500 tco2e/year Byblos Bank Armenia CJSC: AS from ASEF + IFC $5 million for Residential EE financing Results: bank has launched a broad marketing campaign and started to provide loans 15

IFC Power and Renewables

IFC Power and Renewables Dzenan Malovic Technical Specialist Balkans Renewable Energy Program International Roundtable on Water and Energy Nexus in transboundary basins in SEE Sarajevo, 06. 11. 2013 IFC: