Sustainable Island Resource Framework Fund OAS / Department of Environment Antigua and Barbuda Marko Markov, St. John`s, 23 February 2016 1
WHAT IS SIRFF Special Fund established under the EPMA Independent legal entity* Financial framework mechanism Green funding catalyst 2
WHAT IS THE OPERATIONS MANUAL General framework for SIRFF operations Governance structure Project cycle details Risk and Investment policies Reporting Broad guidelines A living document 3
WHAT THE OPERATIONS MANUAL IS NOT Fully comprehensive rulebook Guarantee for success Silver bullet for all possible problems 4
SIRFF OPERATING PRINCIPLES Independent and autonomous entity Clear and firm investment criteria Equal opportunity for all applicants Protection of A&B`s biodiversity and natural resources Promotion of environmental sustainability Transparent reporting 5
SIRFF MAIN FINANCING SOURCES International and Bilateral financing institutions Donor agencies Fees and fines charged under the EPMA Protected areas entry fees at and other ecotourism fees Designated funds provided by the Government / Parliament Other water levies, philanthropy, eco-taxes Own revenue from electricity sales 6
THE GENERAL BOARD OF DIRECTORS - COMPOSITION The composition of the General Board is set out in section XIII of the EPM Act The Permanent secretary in the Ministries responsible for environment Budget director or his/her representative Representative of the Ministry of finance Director of environment NGO representative All will serve voluntarily 7
WHAT IS THE ROLE OF THE GENERAL BOARD? Adopts and amends SIRRF`s internal regulations (incl. the OM) Adopts the long term business strategy of the Fund Adopts assessment criteria for eligible projects Allocates funds among various thematic windows Approves Fund`s operational budget and annual report Procures independent external auditor Appoints the Executive Director Advises the Governor General on recruiting members on the Board of Directors of thematic windows Approves financing of eligible investment projects 8
THEMATIC WINDOW BOARD Separate and independent Board for each thematic window The members will be appointed by the Governor General upon advice from the General Board The thematic window Board will: develop its own regulations and procedures develop and approve specific eligibility criteria for projects supported under the respective thematic window establish and maintain an account for each thematic window keep proper records of accounts in compliance with SIRFF`s financial management system and principles review, and approve or reject programs and project proposals 9
THE EXECUTIVE DIRECTOR To be appointed by the General Board through an open and transparent selection process A person with experience and sufficient capacity in project and financial management Strong interest in environmental management Responsible for entire day-to day operations of the Fund 10
THE EXECUTIVE DIRECTOR ROLE AND RESPONSIBILITIES Legal representation of SIRFF and implementation of General Board`s decisions Administration and management of Fund`s operations Presentation of internal reports, business plans, fund raising strategies for approval by the General Board Review of project proposals before submission to the General Board Signing of contracts for project financing and power purchasing agreements Management of Fund`s property Preparation of annual budget and implementation reports 11
THE FINANCIAL CONTROLLER Develops and maintains the proper organization of the financial and accounting functions Oversees the implementation of the Financial management system and respective accounting software Prepares financial statements, annual financial reports, financial monitoring reports, etc. Maintains the accounting records of the Fund Approves and accounts for all disbursements for approved projects and investments Communicates with internal and external auditors, tax offices and any other financial authorities 12
PROJECT COORDINATION EXPERTS Supports applicants identify eligible projects and draft well structured project proposals Helps project developers (applicants) on procurement matters Conducts comprehensive project analysis Identifies and assesses project risks and potential mitigation measures Takes ownership in a number of projects throughout their whole project life cycle 13
PROJECT COORDINATION TEAM - EXPERTISE Project finance expert(s) or Financial analyst Renewable energy technical expert(s) Environmentalist(s) 14
SIRFF GENERAL BOARD SUPPORT STAFF Assist the ED in daily administrative and logistical activities Drafts the minutes at the General Boar meetings Back-up support to Project coordinators Handle Fund`s bookkeeping Assists the FC in preparation of financial statements and other reports Assists the FC in fund disbursement and collection process 15
TECHNICAL ADVISORY COMMITTEE An independent unit providing advise to the General Board and the Thematic windows Boards Performs due diligence screening of submitted project proposals Supports the decision making process Members prominent technical and financial experts 16
RISK POLICIES OF THE FUND Market risk policy Operational risk policy Reputational risk policy Investment risk policy 17
MARKET RISK POLICY Refers to the risk of losing earnings or decline in the economic value of SIRFF. May also include: 18 the risk of a decline in net asset value (NAV) or loss in investment earnings (due to changes in equipment / electricity prices) the risk of a decline in the value of the securities held by the Fund interest rate risk for debt instruments Risk identification and assessment as part of the transaction approval process on an ongoing basis for all investments in the Fund s portfolio Risk mitigation Proper PPA/equipment delivery agreements to transfer the risk of changing prices to the other party Adjustments to the financial structure of investments e.g. swaps
OPERATIONAL RISK POLICY Refers to potential losses caused by inadequate or failed processes, people, systems. It may include: IT risk, legal risk, risk of misconduct, etc. Risk identification and assessment on an ongoing basis each process owner will try to identify ways in which the process could fail assess the likelihood of a given risk to occur assess the potential impact in case the risk materializes Operational risk reports at least annually (more frequent operational risk screening is however recommendable) 19
REPUTATIONAL RISK POLICY Refers to impairment of Funds reputation due to adverse public opinion on Fund`s operations. Risk identification by monitoring the perceptions of various stakeholders: 20 Clients (existing and potential) Money providers (donors and lenders) Government and public agencies NGOs, Media, Fund`s staff Mitigation measures Better communication with all stakeholders Continuous improvement of Fund`s operational processes Transparent and open reporting of Fund`s performance to all interested stakeholders
INVESTMENT RISK POLICY Refers to a loss caused by clients failing meet their obligations to pay the Fund Financial risk appetite SIRFF will set limits for: Maximum risk exposure by sector (tourism, healthcare, education) Maximum exposure to given sub-contractor or off-taker Maximum exposure to a given technology Financial risk mitigation: Contractual guarantees from clients (electricity off-takers) Performance guarantees or cash retainers from subcontractors Adjustments to the financial structure of a project (e.g. equity participation from a client in exchange of lower electricity price) 21
PROJECT ELIGIBILITY CRITERIA Relevance to EPMA implementation, thematic windows or specific requests for proposals Sustainable project benefits Positive value for money Project can be linked with national and local strategies related to climate change and environmental management Consultation with relevant stakeholders Project complies with existing legislation Environmental and Social safeguards 22
THE PROJECT CYCLE - IDENTIFICATION Definition of thematic window eligibility criteria Proactive identification. The Fund Staff will: Approach relevant stakeholders Present SIRFF`s eligibility criteria Perform sector analysis to identify potential beneficiaries Prepare a list of potentially eligible stakeholders Launch a media/on-line awareness raising campaign to promote the terms and conditions of an upcoming thematic window 23
INITIAL PROJECT SCREENING Project developers prepare IPPs, containing project description, implementation timetable, goals and rationale. Fund`s staff may provide support to Project developers upon request Initial appraisal general eligibility check performed by the Project Coordinator The Project Coordinator recommends to the ED an early rejection or further evaluation of the IPP Project screening decision the ED decides to reject the IPP or proceed with it Project developers with rejected IPPs may appeal before the Thematic window board 24
COMPREHENSIVE PROJECT APPRAISAL Technical feasibility assessment. Examination of: Physical scale, design, engineering, location of the project Technology to be used (incl. types of equipment or processes) Major technical and organizational risks identification Reliability of project costs estimates (incl. design, engineering, installation and maintenance costs) Financial feasibility assessment. Checks: The expected benefits exceed the project operational costs (positive NAV) Adequacy of the projected investment costs. Risk of cost overrun? Project Developer`s level of expertise and track record Financial soundness of the Project Developer (possibility to cofinance if needed) 25
COMPREHENSIVE PROJECT APPRAISAL, CONTD. Environmental feasibility assessment checks whether the project complies with all regulations and permits The Project appraisal report incorporates findings and recommendations of all feasibility assessments. Covers: Summary description of the project (incl. estimated green impact) Project risk profile and possible mitigants Project implementation timetable and financing structure Recommendation for rejection or approval Non-objection from the Technical advisory committee A refusal for non-objection may be appealed before the General Board 26
PROJECT APPROVAL AND FINANCIAL CLOSURE Done by the Thematic window Board, based on ED`s proposal and TAC non-objection The Board may approve / reject the project or Recommend changes to project design and scope All Project developers get notified of Boards decision (incl. for declined project proposals) ED is authorized to sign approved projects Funds disbursement according to the project implementation timetable and in compliance with Fund`s financial management rules 27
PROJECT MONITORING The Project coordinator collects financial and project progress and impact data Project monitoring plan part of the project support agreement. The purpose of the plan: timely and adequate reporting effective early warning system tracks if the project contributes to SIRFF`s strategic objectives Project monitoring reports Reporting frequency at least semi-annually 28
INVESTMENT PROJECTS PROCESS Active market potential screening Continuous project identification and assessment (no calls for proposals required) Financial structuring Project Term sheet Power purchasing agreement to reflect the Term sheet Rigorous analysis of the electricity off-taker`s financial standing Final approval to be done by the General Board 29
PROCUREMENT AND COMMISSIONING Generally based on OECS procurement manual Conflict of interest / Fraud / Corruption precautions Automatic bid rejection in case of proven conflict of interest or corruption Environmentally responsible procurement 30
PROCUREMENT OF GOODS, WORKS AND NON-CONSULTING SERVICES Invitation to bid procurement method - for contracts exceeding USD 100,000 Request for quotations (RFQ) with a minimum of three quotations from different bidders - for contracts between USD 10,001 and USD 100,000 Shopping procurement method for contracts with an estimated value below USD 10,000 31
PROCUREMENT OF CONSULTING SERVICES Restricted request for proposals with minimum three bids/proposals for contracts of up to USD 75,000 (including taxes) Request for proposals open to all bidders for all consulting services agreements with a total contract value exceeding USD 75,000 (including taxes). 32
RESOLUTION OF DISPUTED CASES Complaints submission via post service or designated on-line form ED appoints complaint reporting officer within 2 days after submission The ED may involve external experts to support the investigation The complaint officer issues a report with findings and recommendations Overarching goal of the process to find mutually satisfying solution 33
RESOLUTION OF DISPUTED CASES, CONTD. In case an agreement cannot be reached, the complainant may: submit complaint to the office of the Permanent Secretary of the Ministry of Health and the Environment contact the Office of the Minister of Environment proceed with legal action (if all previous steps proved unsatisfactory to the claimant) Mediation or Arbitration is a recommendable alternative to court procedures 34
REPORTING REQUIREMENTS Five-Year Business strategy Annual operations and business plan Annual report (incl. audited Financial statements) Operational budget Financial monitoring reports 35
FIVE YEAR BUSINESS STRATEGY First draft due within 3 months after appointment of ED Updated every 3 years Presents the strategic approach to running the Fund Includes indicative long-term budget 36
ANNUAL OPERATIONS AND BUSINESS PLAN Prepared annually by October 31 st of the preceding year Describes the level of activity and financial result to which the Fund management commits Lays out the thematic windows and RE investments the Fund will focus on during the financial year Indicates the number of calls for proposals to be carried out Projects the volume of funds to be disbursed, broken down by thematic window and type of investment Provides insight to Fund`s level of planned technical assistance and marketing initiatives 37
SIRFF ANNUAL REPORT To be prepared within 3 months after the end of the financial year Presents the actual financial and operational results achieved by the Fund Evaluates the actually achieved against the Fund`s Business plan forecasts Includes SIRFF`s audited financial reports and the report of the external auditor 38
OPERATIONAL BUDGET Presents the budgeted level of revenues for the following year, broken down by source (electricity sales, park entry fees, water levies, grants, etc.) Provides estimate for expected operational costs (office rental, communication, maintenance) Budgeted compensation of the ED and Fund staff Budgeted costs for technical assistance and marketing activities Best case scenario to be submitted together with the annual business plan 39
FINANCIAL MONITORING REPORTS Due semiannually Presentation of Fund`s intermediate financial performance, physical progress and procurement status Financial indicators to be reported: 40 Net asset value of Fund`s investments Budget variances Electricity sales collection rate and past-due recovery rate Includes report on aggregate Green impact indicators Cumulative energy demand reduction (MWh) Cumulative estimated GHG reduction Other performance indicators number of marketing and awareness raising campaigns; number of NGOs and local community groups supported
AUDIT OF SIRFF`S OPERATIONS Independent External Audit 41 Review and Verification of Fund`s Annual financial report Auditor to be selected upon fair and transparent procurement procedure To operate in compliance to internationally accepted audit standards Has unrestricted access to Fund`s records Reports directly to the General Board Independent Internal Audit To carry out regular inspections Reviews Fund`s processes and operations at least semi-annually Not necessarily part of Fund`s permanent staff Has unrestricted access to Fund`s records Reports directly to the General Board
42 THANK YOU!