adb climate ppp fund: an overview may 2013 strictly private & confidential
Post on 15-Jan-2016
219 Views
Preview:
TRANSCRIPT
ADB Climate
PPP Fund:
An Overview
May 2013 strictly private & confidential
CONFIDENTIAL
DisclaimerThis document has been prepared to provide prospective investors with the opportunity to determine their preliminary interest regarding a product (“product”) that is being prepared by the Asian Development Bank (“ADB“) and may not be used or reproduced for any other purpose. This Program received ADB Board approval on February 15, 2012.This document is for informational purposes only and all information contained herein is subject to revision and completion. This document does not constitute or form part of an offer to issue or sell, or of a solicitation of an offer to subscribe or buy, any securities or other financial instruments, nor does it constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. Any such offer will be made only by means of the product’s confidential private placement memorandum or such other offering documents as may be delivered by ADB to prospective investors and is subject to the terms and conditions contained therein and in the limited partnership agreement of the product. The information set forth herein does not purport to be complete. In addition, this document does not constitute nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any investment contract. Please note that the views, analyses and opinions reflected herein unless expressly stated otherwise reflect the perspective of the deal team and do not necessarily state or reflect the views of ADB. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained herein. No reliance may be placed for any purpose on the information and opinions contained in this document or their accuracy or completeness and nothing contained herein shall be relied upon as a promise or representation whether as to past or future performance. Certain information in this document has been derived from materials furnished by outside sources. ADB assumes no responsibility for independent verification of such information and has relied on such information being complete and accurate in all material respects. Nothing contained herein should be construed as legal, business or tax advice. This document contains confidential information and the recipient hereof agrees to maintain the confidentiality of such information. This document is intended solely for the information of the person to whom it has been delivered. Distribution of this information to any person other than the person to whom it has been originally delivered and to the advisers of such person who are also subject to a duty of confidentiality is unauthorized, and any reproduction or transmission of these materials, in whole or in part, or the divulgence of any of its contents to third parties, without the prior consent of ADB, is prohibited. The distribution of this document may be restricted in certain jurisdictions. The information herein is for general guidance only, and it is the responsibility of any person or persons in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. This document is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. In particular this document is not intended for distribution in the United States or for the account of U.S. persons (as defined in Regulation S under the United States Securities Act of 1933, as amended (the “Securities Act”)), except to persons who are both “qualified purchasers” (as defined in Section 2(a)(51) of the United States Investment Company Act of 1940, as amended (the “Investment Company Act”)) and “accredited investors” (as defined in Rule 501(a) under the Securities Act).
2
Climate Finance Market
CONFIDENTIAL
MDBs
Sustainable investing is an increasingly mainstream area that will impact MDB’s positioning in the market
Fina
ncia
l Ret
urns
Development Impact / Sustainable Investing_
_
+
+
SRI Players
Private Sector Investors
Partnership Potential
There is significant partnership potential with institutions that have common goals and complementary capabilities
Current space
Trends
Reputation + Sustainability
Drivers
Note: For illustrative purposes. Several sources were consulted but exact position/proportion of shaded areas could vary
Call for all MDBs
4
CONFIDENTIAL
Investment space and risks
Infrastructure
Technology
EnvironmentResourceEfficiency
Renewable Energy
Nature base assets
Biomass
Clean Fuels
GreenReal Estate
Transportation Waste-Energy
Batteries
Clean Transport
CombinedHeat & Power
ComponentManufacturing
Smart-grid
EnvironmentalRemediation
Landfill Gas
Lighting
SustainableAgriculture
Waste-HeatRecovery
AdvancedMaterials
ForestryFisheries
WindSolarHydro
Geothermal
CSP/Desalination
Water
Recycling Waste water
5
CONFIDENTIAL
Market: Growth potential/upside particularly for those who can address current bottlenecks
CurrentMkt Size
US 120 bn*
Investors interest inenvironmental finance
investmentsUS 620 bn*
Yearly investment needs in environmental finance
US 780 bn*
* Estimates based on New Energy Finance publications, EBGC calculations of demand from Pension funds, SWF, insurance companies, other institutional investors, HNWI and Family Offices, Stern Report and World Bank “Winds of Change” estimates
Exposure to regulators and policy makers and skills that go beyond the traditional banking/investment managers
Cross disciplinary team with ability to build synergies across environmental sectors: investors, knowledge, network, brand reputation
Strong network and access to niche opportunities Tailored and customized risk approaches
Regulatory uncertainty
Information and knowledge gaps
Lack of scale and high transaction costs
Infant sector with underdeveloped risk tools
… that requireBottleneck factors …
6
Opportunities
CONFIDENTIAL
Benefits of intersection area
Public sector funding2
Number of facilities: 50+
Average size: ~$300 million
Players: Managed mostly by MDBs and other development agencies
Growth prospects: Limited
Private sector funding2,3
Number of funds: 75+
Average size: ~$200 million
Players: Managed by fund managers mostly in the private equity space
Growth prospects: Significant, particularlywith new incentives/instruments
Notes: (1) Data is based on best available information as provided by Preqin, climatefundsupdate.org, ADB, and World Bank. (2) Data refers to facilities/funds with exposure to Asia. (3) This information includes Private Equity Funds that are both closed and currently raising capital.
8
PPP Fund
CONFIDENTIAL
MDBs value addition in a JV with private operator
Reach
2 29 offices across developing Asia including frontier countries important for deal sourcing and monitoring activities. Additionally, ADB has access to regulators and policy-makers and benefits from an institutional reputation that private sector operators value
Risk mitigating instruments
3 ADB has several unique risk-mitigating facilities that are relevant for players who want to enter/reinforce their emerging market presence. Investment vehicles (such as CP3) are recognized by the World Economic Forum as highly applicable to emerging market conditions: one-stop shop for debt, equity and grants, complemented by policy dialogue
Access to new investors
4 ADB has privileged relationships with other DFIs and public sector sources of finance. Additionally, ADB reputation and development credentials appeal to socially responsible investors (SRI)
Environmental, Social and
Governance
5 Most private sector institutions do not possess ADB’s capabilities in ESG and development impact measurement that is becoming essential for risk mitigation and reputation purposes
Expertise
1 ADB has a long track record in areas like infrastructure, cleantech, water, and agriculture that, due to environmental constraints, are becoming increasingly attractive to mainstream investors
9
CONFIDENTIAL
How do we reduce risk or add value? (grey areas = differentiators) Partners and Public
Sector Agenda
+
Debt
Grant
Project finance Guarantees
Dedicated TA Other climate
change related facilities managed by ADB
+Support Financial Facilities
High Develop. Impact
Country dialogue
Regulatory framework / Policies Political risk mitigation
ESG Assessment
Dedicated resources SRI compliance
Climate Change Knowledge Pool
Historic project/country information Conferences & seminars
Support Knowledge Facilities
Fundraising: Public and private investors Deal Sourcing: > 40 offices in the region Execution: Team of 12* combined ADB/FM staff Monitoring: Unique risk mitigators Exit: Strong historic track record
InvestmentProgram
Returns > 10%**
Investors
*Note: Based on a $1B fund size**Note: The statement of target return amounts is not a representation that the fund will only make investments whose individual expected returns are in excess of the target return. No implication shall be drawn as to the advisability of investing in the fund.
Fund Manager
10
CONFIDENTIAL
PPP Fund re-engineered to match target investors needs and risk profiles ...
Long term capital protection and inflation hedge
Non correlation with financial markets
Clear structures and solid risk mitigation mechanisms
Strengthening of SRI, “impact investing“
Pension funds and SWF are looking for:
Natural Res.Infrastructure GreenTech
PPP Fund offers:
Investment drivers anchored in long term macro fundamentals and inescapable environmental constrains. Additional likely upside from future public/regulatory support
Renewable power and real assets may benefit from a variety of long-term contractual arrangements specifically designed to provide revenue certainty over 15-20 years with inflation protection
Private equity investments less vulnerable to equity markets and offer diversification value. Additionally high growth expected in Asian markets given lag to EUR/US
Partnership between reference player in the private equity industry and ADB unique risk mitigating instruments
Diversification across a wide range of sectors, geographic regions and investment structures within a rigorous investment process with multi-party, interdisciplinary due diligence and on-site monitoring
ADB champion of sustainable and triple bottom line investing with high environmental & sustainability investment standards
11
CONFIDENTIAL
… and to offer a new product specifically designed to minimize climate finance risks
PPP Fund
>10% ; 0.75%/7.5% Mix of sectors including infrastructure
within env. finance Global Inst. investors and DFI
Project Finance
Retu
rn
Risk_
_
+
+
Returns & Fees Sectors Typical Investors
6-12%; 1-2% Mostly infrastructure Local Financial Inst. and Dev.
Fin Inst. (DFI)
Private Equity
>20%; 2%/20% Niche or high potential but undercap. sectors
that could offer diversif. /arbitage opport. HNWI, Asset managers, SWF, Pensions, FoF
12
CONFIDENTIAL
Carbonmarkets
2
Carbontaxes
7
Generaltax revenues
NE
Offset markets and voluntary
3
Globalcapital
markets55+
Domesticpublic
budgetsNE
Bilateralagencies/
banks24
Multilateralagencies/
banks15
Public funding sources
42
Policy incentives
NE
Carbon Offset flows
3
Grants4
Concession loans
13
PPP Fund within climate change financeAllocation & Growth Potential2Effectiveness1InstrumentsSources
CP3 Space
Market rate loans
56
Equity18
üüü
üü
ü
ü
ü
ü
Private funding sources
55
Public money Offset money Private money
(1) Based on multiplier and refinancing effect (2) CAGR 2011-2016
Legend:
2%
10%
NE Not Estimated
Privatesector
finance55
Notes:
($, bn)
13
Source: Climate Policy Initiative (CPI) , ADB, 2011. Boxes and flows not drawn to scale
CONFIDENTIAL
PPP Fund: Differs from existing public sector facilities…
PPP Fund
Vehicle‘s suitability to addressmarket constraints
2
Knowledge and technology transfer
3
Reach
4
Returns
5
Scope
6
Leverage/Resource mobilization
1
Differentiator factors
Impact7
Deployment ratios below expectations due to market
conditions and disbursement criteria
Limited ability to attract new players to the region
Policy/regulatory work separated from investment opportunities; Limited reach beyond DFIs and government institutions
Primarily loans and grants, not reinvested into this space
Often capacity-building and investments in adaptation/mitigation areas
Marginal % of privatesector investors
Limited due to reach, scope, and lack of private sector leverage effect
Recognized by World Economic Forumas highly applicable to market conditions:one-stop shop for debt, equity and grants
Partnerships with best-in-practice fund managers and industry players to promote
FDI and knowledge/technology transfer
Financial facilities combined with policy dialogue that could effectively change investment environment in this
sector; Diverse set of investors, players and agencies operating under a common platform
Private equity, commercially-driven returns model with revolving effect
Pan-Asian, diversified strategy targets wide spectrum of infrastructure, technology, and nature-
based investments with positive climate impact
Leverages public fundingto mobilize private capital;
Targets multiper effect of >200x
Unique impact on job creation (>5,000 jobs/year),CO2 reductions (2.5M TCO2/year),
and technology transfer (90%)
14
Pure Public Sector Facilities
CONFIDENTIAL
The Climate PPP Fund concept
A vehicle that will mobilize capital at scale from global public and private sector investors …
1
Fund$1bn
Fund Investments Co-investments
… to invest in environmental finance in Asia …2
+
… designed to maximize impact and complement existing initiatives in this space.
4
ClimateFund
Clean energy initiatives
… through an unique investment management platform that combines private operators and MDBs with equity, debt and grant facilities …
3
Fund Manager
15
CONFIDENTIAL
Contact information
Duarte Henriques da SilvaProject Coordinator/PPP FundPrivate Sector Operations DivisionCapital Markets and Financial SectorsAsian Development Bank6 ADB Avenue, Mandaluyong City1550 Philippines(p) +63 2 683 1829dhenriquesdasilva@adb.org
Brian LiuInvestment SpecialistPrivate Sector Operations DivisionCapital Markets and Financial SectorsAsian Development Bank6 ADB Avenue, Mandaluyong City1550 Philippines(p) +63 2 683 1765bliu@adb.org
16
CONFIDENTIAL
CustomizedInvestment
Strategy
• Maturing PE market well positioned for low carbon and resource efficiency
• Early mover advantage and window of opportunity for scaled investment
• Track record and sector exposure above benchmarks
• Public private partnership supported by environment finance reference investors
Compelling Investment Opportunity
Experienced Investment
Manager
• LP preference for scale diversification and SRI exposure
• Hybrid fund and co-investment approach
• Low correlation with financial markets and hedge on climate / fossil fuel risk
• Significant anchor commitments and strong alignment of interest
Unique Program Attributes
• Deep sector expertise
• Extensive local presence brings extraordinary sourcing and coverage
• Focus on optimizing risk-adjusted returns in emerging markets
• Unique ability to mitigate risk
• Efficient fee structure
• Stable, inflation protected revenues with substantial upside
• Robust macro drivers in sector and region
• Natural resource limitation
Return
Risk
Key takeaways
CP3
Fund Manager
17
CONFIDENTIAL
Climate PPP Fund expected development impactPublic Sector Loan Operations Private Sector Equity Operations Climate PPP Fund
Public sector avg catalytic effect Private sector avg catalytic effect Catalytic effect
Public sector operations Yearly private sector (PE) Op. impact Yearly Fund impact
NA 4,391 jobs / $472m paid taxes 5,000 jobs / $885m paid taxes
Public sector operations Total private sector portfolio Fund investments NA 72% 90%
Public sector yearly average Private sector yearly average Fund expected yearly average
18,560,131 3,268,145 2,500,000
Public sector track record Private sector track record FundAt entrance/investment relying in
most cases on 3rd parties implement.At entrance/investment relying in
most cases on 3rd parties implement.MDB in the drivers seat with direct impl. responsibilities on ESG issues
Average project Average project Fund
Total multiplier effect of $100m MDB Investment
Job creation (#) / Taxes generated ($m)
Technology & Skills Transfer (% inv. with + impact)
Greenhouse gas emission reduction (tCO2-eq/year)
Environment, Social and Governance (ESG) compliance
Foreign direct investment promotion (%)
Non Reg. Inv./FinanciersLocal investors
< 20% < 30% < 70%
18
CONFIDENTIAL
Climate PPP Fund expected development impact (cont.)
Public Sector Loan Operations Private Sector Equity Operations Climate PPP Fund
Average project Average project Fund
Mostly country focus Mostly country focus Regional, allows for divesification at scale
Average project Average project Fund
Climate change mitigation or adaptation Mostly renewable energy projects
In addition to RE/EE, introduction of a third pillar-nature based assets (sust.
agri, water, forestry, fisheries)-that reinforces SRI and mega trends inv. case
Public sector track record Private sector track record Structure & Implement. Arrange.
Medium Medium Wide platform of donors and PPP effect
Traditional Interventions Traditional Interventions Fund platform
Knowledge dissemination, technical assistance, policy dialogue and public
financing
Participation in projects originated by private sector operators. MDB
intervention mostly as financier
Combination of policy dialogue and grant, debt & equity facilities under the same platform to address market bottlenecks
Average project Average project Fund
Average project Average project Fund
IRR < 10% IRR > 8% IRR > 10%
Geo exposure & promotion of regional integration
Definition of space and exposure to new markets
Partnership bet. public& private op.& strengthening of donors'
collab. agenda
Scope of interventions and resources
Private investors participation (%)
Returns (%) / Revolving effect
Private sector Invest.DFIs & Public Invest.
< 40% < 60%< 10%
19
I. Concept
CONFIDENTIAL
CP3: Unique insight, expertise and investing capabilities
Background A leading global banking platform (est. 1856) with a customized PE fund investment team (est. 1999) An AAA-rated, Asia-focused multilateral development bank (est. 1966), with 67 member countries
Assets and Investors Approx. $28B of client commitments under management from institutional investors, financial institutions, family
offices and high net worth investors; 433 fund investments and 97 co-investments $17B in approved financing in 2010; $800M+ in private equity funds under management
Unique approach
Synergetic and complementary joint venture Customized strategy offering diversification at scale Global perspective and local execution Proprietary risk mitigating facilities and policy/regulatory expertise
Investment thesis Comprehensive Pan-Asia climate investing strategy across three sectors: (1) alternative energy generation, (2)
energy efficiency, (3) natural resources & environmental services
Sector exposure $1.3B in sector-relevant investments, via 35 co-investments and 30 fund investments $7.2B invested in 139 clean energy projects since 2003; several carbon funds totaling $300M
Support platform
Over 200 energy investment bankers, including 43 professionals in Asia Over 30 alternative energy analysts, including 10 in Asia Over 40 policy dialogue, environmental safeguards, and regulatory support experts Access to debt financing, concessional/grant financing, technical assistance facilities, and guarantees
Investment team Dedicated execution team supported by full fledged platform – 10+ nationalities – 10+ languages Expertise in clean technology, private equity, environmental finance, and project finance
Sourcing and monitoring Extensive local presence, exceptional networks, and proprietary databases to deliver unique knowledge/deal flow Proprietary monitoring system that provides 24/7 web-based access to portfolio information and reports
21
CONFIDENTIAL
The ADB/FM partnership: Synergetic and complementary, combining extensive local presence and sector expertise
Jakarta
Taipei
Manila
Pakistan
New Delhi
Bangkok
Singapore
Hong Kong
Kuala Lumpur
Beijing
Guangzhou
Shanghai
Bangalore
KolkataMumbai
Chennai
HyderabadPune
TokyoSeoul
Labuan
Jakarta
Taipei
Manila*
Pakistan
New Delhi
Bangkok
Singapore
Kuala Lumpur
Guangzhou
Shanghai
Bangalore
KolkataMumbai
Chennai
HyderabadPune
Tokyo
Labuan
Kabul
Baku
YerevanTbilisi
Almaty
Astana
Bishkek
Dushanbe
Tashkent
Ashgabat
Ulaanbaatar
Beijing
Colombo
Vientiane
Hanoi
Phnom PenhPhnom Penh
Kathmandu
Dhaka
Port MoresbyPort MoresbyDiliDili
FM Offices
ADB Offices
* ADB HQ
The Asian Development Bank features a network of over 2,800 employees operating in more than 29 countries and a track record of $7.2 billion invested in 139 clean energy projects since 2003.
The Fund Manager capitalizes on global opportunities through its network of over 50,000 employees operating in more than 50 countries. The bank has a significant presence in Asia, with 21 office locations in 10 countries and approximately 3,400 professionals across the Continent.
22
CONFIDENTIAL
Strategy: Designed to maximize upside of the investment case and leverage on market trends
Source: Investment Environment and Government Policy for Climate Change Adaptation and Mitigation Funds, John Sawdon, 2011, ADB, E&Y 2007 and 2011
Policy Support
E&Y Private EquityAttractiveness
EM Index 2009-10
E&Y Renewable Energy Attractiveness
World Index 20111st 3rd NA NA NA NA NA
High
3rd 6th 1st 17th 23rd 5th 22nd
Legend: Low
Focus on countries with favorable investment conditions…
…within a conservative investment strategy…
30% allocation targeting leading fund managers
70% allocation alongside leading fund managers in portfolio companies
The Fund does not anticipate using leverage, but underlying funds and portfolio companies will
IPO on global exchanges, M&A to strategic buyers, secondary sale to financial investors
Non-control fund investments
Non-control co-investments
Leverage
Exit Strategy
FundInvestments
Co-Investments
Total
…through a well diversified set of investment vehicles*…
Source: CFIG and ADB, 2011
Infrastructure PrivateEquity Total Target
# deals
Asian Solar Energy Initiative 9,500*Small Wind Initiative/Quantum Leap in Wind 1,000*Clean Energy Financing Partnership Facility 250Asia Pacific Carbon Fund 150Future Carbon Fund 115Asia Climate Change & Clean Energy Venture Cap Initiative 100Climate Change Fund 40Carbon Capture & Storage Fund 20
20% 10% 30% 10-15
40% 30% 70% 25-35
60% 40% 100% 35-50
…that will benefit from ADB-managed debt/grant facilities.
Facility Name Amount($, mn)
* Including co-financing. Source: ADB, 2011
*Note: This sample investment strategy is presented for illustrative purposes only and is based on a number of assumptions regarding available investments that may not provide to be correct in the future.
23
CONFIDENTIAL
No. of deals Target returnTarget Size
Portfolio construction and target returns
Co-Investments
Funds
Joint Ventures
Target experienced GPs with track record in the region in low carbon sectors
Attract global managers with Asia teams to establish sector-focus funds
Seed platforms in Asia with global managers entering sector and region
Diverse portfolio of mature infrastructure technologies at utility-scale with contracted cash flows and government incentives
Buyouts in industrials with rapid growth in low carbon sectors
Growth investments in companies with significant revenue, bottom-line traction and margin improvement opportunities
Fund manager relationships Renewables equipment manufacturers Engineering-procurement-construction ADB/FM existing portfolios
Investment strategy
10-15
15-20%
~450mn
25-35~1,050mn
24
CONFIDENTIAL
Well-defined deal sourcing strategy
Deal sourcing abilities CP3 2013 Pipeline
Network& platform
Funds invested/to invest
Co-investments withcorporates /
industry players
Joint Ventures withregional players
ü ü
ü ü
ü ü ü
ü ü ü
Funds Co-Investments
Sources1
6 Funds
pre-selected
12 Co-Investments
pre-selected
Fund Manager
üü
ü
ü
üNote: 1) An additional source of deals not captured here are the large volume of unsolicited investment opportunities from managers interested in establishing a relationship with either ADB or the FM.
25
CONFIDENTIAL
CP3 fund and co-investment focus list An initial focus list of fund investments and co-investments for CP3 is as follows:
(all figures in USD million)
Potential fund investments Timing Committment Geography Primary StrategyAsia Growth Fund 2013 $25 Asia/Regional Growth/BuyoutGlobal Renewable Fund 2013 $40 China Growth/BuyoutAsia Mezzanine Fund 2013 $25 Asia/Regional MezzanineAsia Infrastructure Fund 2013 $30 Asia/Regional Energy InfrastructureRegional Renewable Fund 2013 $25 Vietnam/Cambodia/Laos GrowthChina Renewables and Cleantech Fund 2013 $25 China Growth
Potential co-investments Timing Committment Geography Type of businessProject Dragon 2012/2013 $25 China HydroProject Suriya 2012/2013 $30 Thailand SolarProject Tiger 2012/2013 $15 Southeast Asia Energy storage & handlingProject Elephant 2012/2013 $6 India Building management servicesProject Wind 2012/2013 $12 China WindProject Rose 2012/2013 $25 China Sustainable AgricultureProject Power 2012/2013 $25 India Wind, small hydroProject Renewables 2012/2013 $12 China Wind, solarProject Hydro 2012/2013 $12 Caucasus HydroProject Tree 2012/2013 $12 Southeast Asia ForestryProject Green 2012/2013 $12 India Wind, small hydro
26
CONFIDENTIAL
Terms
Target Fund Size U$ 1.5 billion
Anchor Investors [GBP 60 million] (UK DFID)* [U$100 million] (ADB)* 3% of the total commitments, up to $50 million (Fund Manager)
Term Twelve (12) years including five (5) years for investment
Target Returns 15-20% per annum**
Hurdle Rate 8% per annum
Management Fees Performance Fees
0.65% for fund investments, 1.15% for co-investments 5.0% for fund investments, 10.0% for co-investments
Potential Investors Pension funds, sovereign wealth funds, foundations, family offices, and other institutional private sector investors
Minimum Subscription U$25 million
Fund legal structure Cayman-exempted limited partnership***
Anticipated First Close Q1 2013 (TBD)
Anticipated Final Close Q1 2014 (TBD)
* Subject to approval** The statement of target return amounts is not a representation that the fund will only make investments whose individual expected returns are in excess of the target return. Return targets are included herein for the sole purpose of illustration and do not reflect any management fees, carried interest, taxes, transaction costs in connection with the disposition of unrealized investments, and other expenses borne by investors, which in the aggregate may be substantial. No implication shall be drawn as to the advisability of investing in the fund.*** CP3 may create additional jurisdictions to accommodate some investor’s preferences.Note: This summary of selected terms and conditions is qualified in its entirety by reference to the program's operative documents as finalized by FM, ADB and the client.
27
II. CP3 within current climate change finance
CONFIDENTIAL
(1) CAGR 2011-2016
Allocation & Growth Potential1InstrumentsSources
Public money Offset money Private moneyLegend: NE Not Estimated
Private funding sources
~55
Carbonmarkets
2
Carbontaxes
7
Generaltax revenues
NE
Offset markets and voluntary
3
Globalcapital
markets55+
Domesticpublic
budgetsNE
Bilateralagencies/
banks24
Multilateralagencies/
banks15
Public funding sources
~42
Policy incentives
NE
Carbon Offset flows
3
Grants4
Concession loans
13
Market rate loans
56
Equity18
2%
10%
Privatesector
finance55
Notes:
($, bn)
Source: Climate Policy Initiative (CPI) , ADB, 2011. Boxes and flows not drawn to scale
Climate change finance market
29
CONFIDENTIAL
CP3 sits in a narrow universe for public-private capital focused on climate-related investing1
Public sector funding2
Number of facilities: 50+
Average size: ~$300 million
Players: Managed mostly by MDBs and other development agencies
Growth prospects: Limited
Private sector funding2,3
Number of funds: 75+
Average size: ~$200 million
Players: Managed by fund managers mostly in the private equity space
Growth prospects: Significant, particularlywith new incentives/instruments
Notes: (1) Data is based on best available information as provided by Preqin, climatefundsupdate.org, ADB, and World Bank. (2) Data refers to facilities/funds with exposure to Asia. (3) This information includes Private Equity Funds that are both closed and currently raising capital.
30
CP3
CONFIDENTIAL
Facility name1 Year Administrator2 Size ($, mn)
Facilitytype Sector Funding Returns Asia
focus
Asia Climate Change & Clean Energy VC Initiative 2010 ADB 100 Equity/Grant Clean Energy Public Commercial 100%
Clean Energy Financing Partnership Facility 2007 ADB 250 Grant Clean Energy Public Non-commercial 100%
Clean Technology Fund 2008 World Bank 4,433 Debt/Grant Cleantech/Carbon Public Non-commercial 30%
Climate Change Fund 2010 Govt. of Indonesia 18 Grant Adaptation/Mitigation Public Non-commercial 100%
Forest Investment Program 2009 World Bank 599 Debt/Grant Mitigation/Forestry Public Non-commercial <10%
Global Climate Partnership Fund 2010 KfW 500 Equity/Grant Mitigation Public Commercial <40%
Global Energy Efficiency and Renewable Energy Fund 2008 EIB 170 Equity/Grant RE3 Public Commercial <30%
IFC Climate Catalyst Fund 2011 IFC AMC 500 Equity Climate change Public/Private Commercial 50%
Indonesia Clean Technology Fund 2009 CTF Partners 250 Equity Cleantech/RE Public Commercial 100%
International Climate and Forest Initiative 2008 Govt. of Norway 517 Debt/Grant Mitigation/Forestry Public Non-commercial <50%
Least Developed Countries Fund 2002 GEF 415 Grant Adaptation Public Non-commercial <30%
Pilot Program for Climate Resilience 2008 World Bank 982 Grant Adaptation Public Non-commercial 30%
Scaling Up Renewable Energy in Low Income Countries 2009 World Bank 352 Debt/Grant Mitigation Public Non-commercial 30%
SDIC Innovation (Beijing) Investment Fund 2009 SDIC 95 Equity Cleantech/RE SOE4/Private Commercial 100%
Climate Public Private Partnership (CP3) Fund 2012 ADB and Fund Manager 1,500 Debt/Equity
Guarantee/GrantTechnology, infrastructure, and nature-based assets in climate change space
Public/Private Commercial 100%
Main public sector climate change facilities
Notes: (1) Data is based on best available information as provided by Preqin, climatefundsupdate.org, ADB and World Bank. This is a selected list of public facilities most comparable to the CP3 platform. The full list is provided as an excel attachment. 2) ADB = Asian Development Bank; CTF = Clean Technology Fund; EIB = European Investment Bank; GEF = Global Environment Facility; IFC AMC = International Finance Corporation Asset Management Company; KfW = (German Development Bank); SDIC = State Development and Investment Corp. (3) RE = Renewable Energy. (4) SOE = State-owned Enterprise
31
CONFIDENTIAL
CP3: Differs from existing public sector facilities…CP3
Vehicle‘s suitability to addressmarket constraints
2
Knowledge and technology transfer
3
Reach
4
Returns
5
Scope
6
Leverage/Resource mobilization
1
Differentiator factors
Impact7
Deployment ratios below expectations due to market
conditions and disbursement criteria
Limited ability to attract new players to the region
Policy/regulatory work separated from investment opportunities; Limited reach beyond DFIs and government institutions
Primarily loans and grants, not reinvested into this space
Often capacity-building and investments in adaptation/mitigation areas
Marginal % of privatesector investors
Limited due to reach, scope, and lack of private sector leverage effect
Recognized by World Economic Forumas highly applicable to market conditions:one-stop shop for debt, equity and grants
Partnerships with best-in-practice fund managers and industry players to promote
FDI and knowledge/technology transfer
Financial facilities combined with policy dialogue that could effectively change investment environment in this
sector; Diverse set of investors, players and agencies operating under a common platform
Private equity, commercially-driven returns model with revolving effect
Pan-Asian, diversified strategy targets wide spectrum of infrastructure, technology, and nature-
based investments with positive climate impact
Leverages public fundingto mobilize private capital;
Targets multiper effect of >200x
Unique impact on job creation (>5,000 jobs/year),CO2 reductions (2.5M TCO2/year),
and technology transfer (90%)
32
Pure Public Sector Facilities
CONFIDENTIAL
Donor Country1 Australia Germany Japan United Kingdom
Initiative International Forest Carbon Initiative
International Climate Initiative Fast Start Finance International Climate Fund
AdministratorAustralia’s Department of
Climate Change / AusAID
Germany’s Federal Ministry for the Environment2
Japan’s Ministry of Finance UK Treasury, DFID, DECC, DEFRA, FCO and others3
Year of launch 2007 2008 2010 2011
Pledge size ($, million) 225 800 15,000 4,590
Funding Public Public Public and private Public
Facility type Grant Debt/Equity4/Grant Debt/Equity/Grant Equity/Grant
Delivery method Funds Direct and via funds Direct and via funds Direct and via funds
Focus on Asia (%) >80 30 N/A N/A
CP3 applicable? Yes Yes Yes Yes ($100M earmarked)
…and offers tax-payers an efficient vehicle to tackle climate change challenges at scale
Notes: (1) Data provided is based on best available information, as provided by climatefundsupdate.org, ADB and World Bank. This is a selected list of bilateral public initiatives targeting climate change. (2) The International Climate Initiative is administered by the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) of the German government. (3) The International Climate Fund will be managed by a cross-departmental team with representation from the Department for International Development (DFID), the Department for Environment and Climate Change (DECC), the finance ministry (Her Majesty’s Treasury), The Department for Environment, Food and Rural Affairs (DEFRA), and the Foreign and Commonwealth Office (FCO). (4) In addition to debt and grant facilities, the International Climate Initiative where appropriate, via ‘project-based contributions’ to international funds (climatefundsupdates.org).
33
CONFIDENTIAL
Equis
Abundance
Element CLSA
Ever-bright
Macquarie
Prax
NatureElements
AIF Capital
Sect
or a
nd R
egio
nal E
xpos
ure
Track Record and Support Platform_
_
+
+
Robeco
Sindi-catum
TsingCEF
Inter-Vest
Berk-eley
SouthRiver
Westly
Capital Dynamics
LEGEND
1B
Mostly private investors
Raising funds
700M
400M
100M
KTBiDTech
Public-Private investorsSAIL
Keystone
JP MorganAsia Infra
& Resources
AquaInt’l
VantagePoint
SBIChallengerMitsui
AloeEnviroFund
StandardCharteredIL&FS Asia
Infra
ADB/Fund ManagerCP3
Source: Preqin, Company Reports, ADB, 2011
34
Main private sector climate change funds
CONFIDENTIAL
Pure Private Sector Facilities
Risk-mitigation
2
Environmental, Socialand Governance
3
Deal sourcing and track record
4
Diversification
5
Fee structure
6
Size and opportunity
1
Differentiator factors
CP3: Differs from existing private sector funds…
Unmitigated exposure to political and regulatory risk
Not core business;Typically dependent on third parties
Mostly new players with local presence limited to 1 or 2 markets
Limited either by scale (fund size)or by scope (geography/sector)
Traditional 2/20 fee structure
Average $200 million;Anchored on powerful macro
drivers in sector and region
Private sector diligence/execution, combined with unique set of risk-mitigating facilities (guarantees, b-
loans, grants), and access to policy makers
Reference institution in ESG compliance; Vehicle SRI1 compliant
Combined ADB/FM team augments traditional deal-sourcing across the whole region;
>10 years track record in this space
Diversification at scale across sectors, regions, and investment vehicles
Competitive fee structurebelow market rates and significant
anchor committments
Up to $1,500 million; Window of opportunity for scaled investment platform
35
Notes: (1) SRI = Socially Responsible Investing
CP3
CONFIDENTIAL
... and was re-engineered to match target investor’s needs and risk profiles
Long term capital protection and inflation hedge
Non correlation with financial markets
Clear structures and solid risk mitigation mechanisms
Strengthening of SRI*, “impact investing“
Pension funds and SWF are looking for:
Natural Res.Infrastructure GreenTech
CP3 offers:
Investment drivers anchored in long term macro fundamentals and inescapable environmental constrains. Additional likely upside from future public/regulatory support
Renewable power and real assets may benefit from a variety of long-term contractual arrangements specifically designed to provide revenue certainty over 15-20 years with inflation protection
Private equity investments less vulnerable to equity markets and offer diversification value. Additionally high growth expected in Asian markets given lag to EUR/US
Partnership between reference player in the private equity industry and ADB unique risk mitigating instruments
Diversification across a wide range of sectors, geographic regions and investment structures within a rigorous investment process with multi-party, interdisciplinary due diligence and on-site monitoring
ADB champion of sustainable and triple bottom line investing with high environmental & sustainability investment standards
*Note: SRI = Socially Responsible Investing
36
III. CP3 platform
CONFIDENTIAL
Full fledged, triple-bottom line platform in enviro. financePartners
+
Debt
Grant
Project finance Guarantees
Dedicated TA Other climate
change related facilities managed by ADB
+Support Financial Facilities
High Develop. Impact
Country dialogue
Regulatory framework Political risk mitigation
ESG Assessment
Dedicated resources SRI compliance
Climate Change Knowledge Pool
Historic project/country information Conferences & seminars
Support Knowledge Facilities
*Note: Based on a $1.5Bfund size**Note: The statement of target return amounts is not a representation that the fund will only make investments whose individual expected returns are in excess of the target return. Return targets are included herein for the sole purpose of illustration and do not reflect any management fees, carried interest, taxes, transaction costs in connection with the disposition of unrealized investments, and other expenses borne by investors, which in the aggregate may be substantial. No implication shall be drawn as to the advisability of investing in the fund.
Fundraising: Public and private investors Deal Sourcing: > 40 offices in the region Execution: Team of 12* combined ADB/FM staff Monitoring: Unique risk mitigators Exit: Strong historic track record
InvestmentProgram
Returns 15-20%**
Investors
Fund Manager
38
CONFIDENTIAL
CP3 will provide deal sourcing opportunities for existing facilities
… leverage additional resources / cofinancing
opportunities
… benefit from knowledge/policy
dialogue
Technical Assiatance Project Development Facility
2012+ 30Clean energy & environ. finance
Asian Solar Energy Initiative 2010-2013 500/9000* Solar Carbon Capture and Storage Fund 2009+ 20 Carbon Capture Asia Climate Change & Clean Energy VC 2010-2018 9/100** Clean Energy Low Carbon Technology Exchange 2010-2013 8 Solar/Wind/EE Small Wind Init./Quantum Leap in Wind 2009-2015 4/1000* Wind Asia Pacific Carbon Fund 2007+ 150 Carbon Clean Energy Fin. Partnership Facil. 2007+ 250 Clean Energy Future Carbon Fund 2008-2015 115 Carbon
ADB funds Climate Change Fund 2008+ 40 Climate Change Energy for All Initiatives 2008-2015 N/A Access to Energy Asian Clean Energy Forum 2006+ N/A Clean Energy Apac Clean Energy Governance & Regul. 2010+ N/A Clean Energy
Policy/ Knowledge
Note: (*) Denotes total investments including co-financing, (**) Denotes equity investment in facility
CP3 Specific
Aggr
egati
ng M
arke
t/Te
chno
logy
Tra
nsfe
r Donor funds mgd
by ADB
ADB funds
Inno
vativ
e Fi
nanc
e
Donor funds
managed by ADB
Technical Assistance Facilities
Name PeriodAmount($ mn)
Focus Areas
Ability of CP3 to …
Source: ADB, 2011
39
CONFIDENTIAL
Investors Partners in the CP3 network
Joint fundraising activities
2
Access to ADB risk-mitigating instruments, as well as debt
and grant products
3
Access to ADB policy dialogue and climate change-related
initiatives
4
Logistical support through network of 24 offices in the
region
5
Mentioning of CP3 in Fund Manager’s marketing materials
6
Access to co-investment opportunities
1
CP3 Platform
The CP3 advantage to investors, investees, and partners
40
Investees
Yes To be negotiatedYes
Yes To be negotiatedTo be negotiated
Yes YesYes
Yes YesYes
Yes To be negotiatedTo be negotiated
Yes To be negotiatedYes
CONFIDENTIAL
CP3 platform aims to achieve partnerships with industry players
Corporate Partners
CP3 Investment Program
Major Japan-based industrial
conglomerate
Chinesephotovoltaicmanufacturer
Danishwind turbinemanufacturer
Germanelectronics
multinational
India’s largestpower utility
company
Major Korea-based industrial
conglomerate
Major USA-based industrial
conglomerate
Venture-stageclean energy
firms
Direct/Co-InvestmentsFunds Corporate
Joint Ventures
Investment opportunities in Asia
Risk sharing opportunities
Access new set of investors
Ability to globalize portfolio
Access government institutions and regulators
Access CS and ADB debt and grant facilities
Strategic advantage for corporates
New deal-sourcing pillar
Partnership with industry leaders
Access new industry developments
Facilitate technology transfer to Asia
Value addition to CP3
41
IV. Development impact
CONFIDENTIAL
With a multiplier effect more powerful than other ADB inv., CP3 leverages > resources into this space
Loan
ADB Loan
Total debt component
(US$m)
100 300 400
Total resources
(debt+ equity)
4.0xMultiplier effect
100
25x
400
2,500
Traditional LP Investment
ADB Equity
Total equity Investment
Total resources
(debt+ equity)
Multiplier effect
21,875
219x
CP3
100
1,500
ADB Equity
Total resources
(debt+ equity)
CP3 Size
Multiplier effect
43
CONFIDENTIAL
CP3 expected development impactPublic Sector Loan Operations Private Sector Equity Operations CP3
Public sector avg catalytic effect Private sector avg catalytic effect CP3 catalytic effect
Public sector operations Yearly private sector (PE) Op. impact Yearly CP3 impact
NA 4,391 jobs / $472m paid taxes 5,000 jobs / $885m paid taxes
Public sector operations Total private sector portfolio CP3 investments NA 72% 90%
Public sector yearly average Private sector yearly average CP3 expected yearly average
18,560,131 3,268,145 2,500,000
Public sector track record Private sector track record CP3At entrance/investment relying in
most cases on 3rd parties implement.At entrance/investment relying in
most cases on 3rd parties implement.MDB in the drivers seat with direct impl. responsibilities on ESG issues
Average project Average project CP3
Total multiplier effect of $100m MDB Investment
Job creation (#) / Taxes generated ($m)
Technology & Skills Transfer (% inv. with + impact)
Greenhouse gas emission reduction (tCO2-eq/year)
Environment, Social and Governance (ESG) compliance
Foreign direct investment promotion (%)
Non Reg. Inv./FinanciersLocal investors
< 20% < 30% < 70%
44
CONFIDENTIAL
CP3 expected development impact (cont.)Public Sector Loan Operations Private Sector Equity Operations CP3
Average project Average project CP3
Mostly country focus Mostly country focus Regional, allows for diversification at scale
Average project Average project CP3
Climate change mitigation or adaptation Mostly renewable energy projects
In addition to RE/EE, introduction of a third pillar-nature based assets (sust.
agri, water, forestry, fisheries)-that reinforces SRI and mega trends inv. case
Public sector track record Private sector track record CP3 structure & Implement. Arrange.
Medium Medium Wide platform of donors and PPP effect
Traditional Interventions Traditional Interventions CP3 platform
Knowledge dissemination, technical assistance, policy dialogue and public
financing
Participation in projects originated by private sector operators. MDB
intervention mostly as financier
Combination of policy dialogue and grant, debt & equity facilities under the same platform to address market bottlenecks
Average project Average project CP3
Average project Average project CP3
IRR < 10% IRR > 8% IRR > 10%
Geo exposure & promotion of regional integration
Definition of space and exposure to new markets
Partnership bet. public& private op.& strengthening of donors'
collab. agenda
Scope of interventions and resources
Private investors participation (%)
Returns (%) / Revolving effect
Private sector Invest.DFIs & Public Invest.
< 40% < 60%< 10%
45
Annex 1: ADB Credentials
CONFIDENTIAL
243
550
512
1,053
Equity
Guarantees
Co-Financing
Loans
220
396
4382006 2007 2008 2009 2010
Loans 7264 9516 9899 13216 11462
Co-Financing 970 534 1275 3418 3669
TAs, Grants, Guarantees 895 961 896 1452 2139
Equity 231 80 103 220 243
1,0005,0009,000
13,00017,000
ADB’s financial capacity and clean energy exposureADB approved $17.51 billion worth
of transactions in 2010……of which $2.36 billion was deployed in
non-sovereign investments.
ADB made $4.8 billion worth of clean energyInvestments in 2008-2010…
…resulting in significant clean energy outputsthroughout the Asia region.
71 million tonsCO2/year abated
112 TWH-equivalent
saved
14GWInstalled
generatingcapacity from
renewable energy
$, millions2010: $2,358
2009: $1,054*
$, millions
*2009 figure does not include ADB’s Trade Finance Program
1,234
192
318
1,674
638
206
556Energy Efficiency
Clean Energy
Cleaner Fuel
Hydro
Wind
Solar
Other$, millions
RenewableEnergy
47
CONFIDENTIAL
ADB’s Private Equity Fund business
Source: Asia Private Equity Review, EMPEA, Preqin, ADB, 2011a) Preqin Performance Indicators (net IRR) based on a pool of 251 Asian (excl Japan & Korea) funds with vintage years 2001-2009b) Value-weighted pooled net IRR of active ADB fund investments with vintage years 2001-2009
Current portfolio totals > 40 funds amounting to > $850m widely distributed across the continent …
SME
Restructuring
Infrastructure
Environment
… focusing on sectors with growth potential and development impact …
Avg. yearly investments and market share Performance
12.0%a)
11.6%b)
… ADB has played an evolving industry incubator role and its performance has been
in line with the market
2001-04 2005-07 2008-10Support Consolidate Further
early stage relationships w/ expansion to industry promising frontier mkts &
players sectors
0.5% 0.5% 0.6%
48
CONFIDENTIAL
ADB’s Private Equity Funds and portfolio companies
Investments in over 40 funds, resulting in over $850 million in committed capital…
…providing capital to over 400 portfolio companies throughout the Asia region.
49
CONFIDENTIAL
Tombstone of ADB clean energy investmentsSolar Wind Hydro
Water Transport Waste To Energy
Energy Efficiency Cleaner Fuel Clean Energy Fund
Thailand: Bangchak Solar Power
THB 4.2 billion
2010
India: Tata Power Wind Energy Financing
INR 2.05 billion
2007
Regional: Clean Energy PE/VC Funds Initiatives
$100 million
2010
PRC: Municipal Natural Gas Infrastructure
$200 million
2010
PRC: Songhua River Basin Water Pollution Control
$10 million EquityCNY 250 million Loan
CNY 100 million B Loan2010
India: Himachal Pradesh Clean Energy Development Program
$800 million
2008
PRC: Lanzhou Sustainable Urban Transport
$150 million
2009
PRC: Everbright Environmental Energy Limited
$100 million loan$100 million B Loan
2009
Azerbaijan: Garadagh Cement Expansion and Energy Efficiency
$27 million
2010
50
CONFIDENTIAL
Company
ADB direct equity investment in climate change
51
Sector Country Equity investment ($, mn) IRR1 Exit strategy
Company A
Company B
Company C
Company D
Company E
Company F
Energy(Cleaner fuel)
Energy(Cleaner fuel)
Energy(Cleaner fuel)
Energy (Supply side energy efficiency)
Energy (Hydro)
Environmental protection
India
India
China
Pakistan
China
China
9.2
2.6
24.0
2.8
16.8
9.1
43%
6%
18%
18%
12%
10%
Exchange / Block sale
IPO pending
Exchange / Block sale
IPO / Trade sale / Put
option
IPO / Trade sale / Put
option
IPO / Trade sale / Put
option* Unrealized IRR Based on ADB estimate, including guaranteed IRR under the put option.
The investment case: Why are LPs so interested?
CONFIDENTIAL 53
Market snapshot: Asia driving global growth
Europe
North America
Asia & Oceania
Middle East & Africa
South America
Source: Bloomberg New Energy Finance, UNEP, ADB, 2011
New clean energy investments per year($bn)
CONFIDENTIAL
Investors perspective: Keen to invest in the space, particularly long term institutional investors
54
Breakdown of cleantech funds by firm HQ
Source: Prequin, 2011Expected timeframe for next commitment to a cleantech fund
Source: Prequin’s survey of 100 limited partners conducted in December 2010.
Most attractive regions for cleantech invest. opport. in 2011
Asia North America
Europe Greater China
South America
Australasia
Pro
po
rtio
n o
f R
esp
on
den
ts
MENA Africa
Source: Prequin’s survey of 100 limited partners conducted in December 2010.
Breakdown of cleantech investors by type
Proportion of Investors
Source: Prequin, 2011
Source: Prequin, 2011
CONFIDENTIAL 55
Understanding their motivations: Investment case anchored on powerful long term economic drivers …
Environmental Constraints
2%
-3% -32%
Population at risk by sea rise
CO2 emissions
Water per capita
Forest Area
-5%
28%-2%
Avg Animal Protein, Paper and Wood consumption
1.0x 26.9x3.4x
12% 40%14%
0% -19%1%
Note: Data refers to ∆ % between 2010 and 2020, except for GDP (2010-16) and deforestation (1990-2005)Source: World Bank, Asian Development Bank, OECD, IEA, World Forests Report
Investment case drivers US Europe Asia
Long Term Macro Trends
GDP per Capita
Population
Energy demand
Urbanization
28% 21% 84%
8% 1% 11%
-6% -6% 8%
3% 1% 48%
(Data refers to ∆ % between 2010 and 2020)
top related