Asia ESCO Conference 2010 New Delhi, India 14-15 January, 2010 JBIC Finance for Energy Efficiency Investment ~ Over the Environment and Energy Constraint ~ Takashi Hongo Special Advisor and Head of Environment Finance Engineering Department Japan Bank for International Cooperation
Copenhagen Accord Increase in global temperature below 2 degrees Emissions targets of Annex I Parties for 2020 are to be submitted by 31 January 2010. Nationally appropriate mitigation actions (NAMAs) by Non-Annex I Parties are to be communicated every two years. NAMAs seeking international support are to be recorded in a registry. Crucial role of REDD-plus Additional funding to developing countries: USD 30 billion (2010-2012) mobilizing USD 100 billion a year by 2020 (public & private, bilateral & Multilateral) Copenhagen Green Climate Fund Technology Mechanism to accelerate technology development and transfer Assessment of the implementation of this Accord is to be completed by 2015. 出所 :UNFCCC 1
Where is business opportunities? 2
Growing Energy Demand (Mton) 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 1990 2006 2015 2020 2025 2030 Others Russia India China OECD Sources:IEA, World Energy Outlook 2008 3
Opportunity for CO2 emission reduction Gt 42 Reference Scenario Share of abatement % 40 2020 2030 38 Efficiency 65 57 36 End-use 59 52 34 13.8 Gt Power plants 6 5 3.8 Gt Renewable 32 18 20 Biofuels 1 3 30 Nuclear 13 10 28 CCS 3 10 450 Scenario 26 2007 2010 2015 2020 2025 2030 Source IEA WEO2009 4
Investment demand for Climate Change Mitigation Billion dollars (2008) 1 200 1 000 800 600 400 Other Countries Other Major Economies OECD+ 200 0 2015 2020 2025 2030 Source IEA WEO2009 USD 200 billion from developing countries and more than half are China and India 5
Without access to electricity Electrification rate 90% 80% 70% 60% 50% 40% 30% 20% 10% Average electrification rate in developing countries = 72% Malawi Uganda Burkina Faso DR of Congo Tanzania Mozambique Myanmar Afghanistan Kenya Ethiopia Angola Cameroon Sudan Yemen Bangladesh Nigeria Pakistan Indonesia India 0% Others 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 11456 400 Population without access to electricity (million) Source IEA WEO2009 India 300+ million 6
Business Opportunities in India Expected investment in India Power Plant Industry Building Source : IEA WEO2009 Transport
Finance of JBIC 8
Modality of JBIC s Finance Public projects Private project Export Finance Untied Loan Investment Credit Equity (Indirect Support) For Private project Cash flow base finance Guaranteed Through Local FI PE type fund Direct investment 9
LIFE (Leading Investment to Future Environment) Initiative by JBIC The LIFE will support both public and private sectors, co-operate with Multilateral Development Banks (MDBs) and mobilize private finances. The JBIC s financial support under the Initiative will be around 5 Billion USD for the next 2 years. J B I C Private Financial Institutions Loans, etc Catalytic Role Loans / Equity Investment MDBs (ADB, World Bank Group, etc) Co-operation (Co-finance, Information Sharing, etc) Loans, etc 4 Main targeted sectors of the Initiative are... Clean Power Generation (Solar, Geothermal, Wind Power, Clean Coal Power Plant, etc) Energy Efficiency Improvement (Upgrading of Existing Transmissions and Distributions, Modernization and Heat Recovery of Steel Furnaces and Cement Kilns, ESCO (Energy Service Company), etc.) Water (Water Purification and Supply, Sewage System, Wastewater Treatment, Desalination and Water Processing, etc) Urban Transportation (Modal Shift in Densely Populated Areas, etc) 10
Aims of LIFE 1 Mobilization of private fund Demand is enormous. Mobilize of private funding is inevitable Limitation of public funding 2 Specification of commercially viable BAT Diffusion of BAT Establishment of global de fact standard The first step of Environment Finance 11
LIFE No. Country Project Amount of Finance( million) Date Remarks 1 India Production of Super Critical boiler and Turbine (MHI) USD 153.7 m July 2009 2 UAE IWPP Project USD 1,111 m October 2009 3 India Production of Super Critical boiler and Turbine (Toshiba) USD 90m October 2009 4 Asia (General) EE and Environment Fund USD20m (Equity) November 2009 Fund Total USD 300M 5 Asia (General) Infrastructure Fund USD 50 m (Equity) December 2009 6 Kazakhstan Flare Gas Power Generation USD 21 m December 2009 12
The 1st Project by LIFE ~ High EE Boiler supply project in India ~ Indian Company Investment Manufacturing of high energy efficiency Boiler and Turbine High EE Boiler and Turbine Power Sector Power Plant India : 70% of power comes from coal (700million CO2 ton/y from power sector) MHI Technology = Super Critical Boiler Investment & Technology transfer JBIC Finance Finance Dialogue and Cooperation Indian Government Scaling up (Endorsement/Support) 13
CDM Support Credit Line ICICI Credit Line JBIC & Commercial Banks Loan Cooperation CDM Projects Developer Carbon Credits Supply (technology and equipment) JBIC extended Credits Line in many countries, including Asia and South America. Preferred Status Japanese Buyer JCF Private Company Government Program Japanese Suppliers 14
Typical Structure of Fund Approach of JBIC GP Why Fund approach? For small scale projects To use local network Non Japanese Investors Japanese Investors LP JBIC Japanese Investors Participation Advice Equity Financial Return Fund Management Fund Partners Finance Financial Return Technology Partners Sourcing Partners JBIC JBIC JBIC JBIC Non Japanese Investors IPO market 15
Carbon Finance Additional revenue source and market base incentive system Growing market, USD 6 billion in 2008( primary market) Limited contribution (May not cover all project cost) Complicated and unpredictable process ( CDM reform ) Volatility of Carbon Market No international Framework Beyond 2012 16
Secondary Market ( Nikkei JBIC ) 4,500 4,000 3,500 3,000 Gap between primary and secondary was squeezed. Price has been dropped after Copenhagen but it is not Collapse JPY/t 2,500 2,000 1,500 1,000 500 N-J Carbon August 2009~ : JPY 1600 ~ 1800 2008 Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 2009 Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 17
Trends of Primary and Secondary Price 25 20 Gap between primary and secondary was squeezed. 15 EUR/t 10 5 N-J Carbon pcer (IDEAcarbon scenario (d)) pcer (IDEAcarbon scenario (b)) Floor price by China is around EUR10 2008 Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 2009 Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 18
Demand for Credits : 2013-2020 11.4Gt 13,1t 12,5Gt 10.9Gt 25% Reduction 8.6Gt 2.3~4Gt of credits PA will be needed. Source IEA WEO2009 5 times bigger market 19
Scaling up of Investment 20
Scaling up Financing for Low Carbon Investment Environmental Finance MDBs Climate Security / Energy Security Company Low Carbon Investment Japanese Company Loans / Equity Investment LIFE ( March 2009 ) (Leading Investment to Future Environment) 5 billion USD for 2 years. Target Sectors : Clean Power generation, Energy Efficiency, Water and Transport ( Steel : CDQ, Heat Recovery, Regenbarner, etc.) MDBs JBIC Co-operation Catalytic Role Private Financial Institutions Financial Institutions (Developing Countries) JBIC ECAs Private Financial Institutions For Scaling up Step1 Measurement methodology Step2 Specification of BAT Step3 Voluntary EE standard 21
Commercially viable BAT ~ Steel industry ~ 22
Cooperation of TERI and JBIC Cooperation Agreement on 17 September 2008 Support the transition to Low Carbon Society Study of possibility of EE and RE projects Information exchange for scaling up investment Facilitation of Emission Trading 23
Conclusion Public- Private- Financial Partnership ( PPFP) New Market Mechanism for Climate Change with financing Public Sector (Improvement of investment climate) Private Sector (Driving force) Financial Sector (Push last one mile) 24