Supported by the

Sourcing JI and CDM credits:The ESSB case study

EcoSecurities-Standard Bank Carbon Facility - Summary

• An open-ended carbon purchasing facility

• Provides assistance in developing JI/CDM projects

• Purchases emission reduction (ER) credits from these

projects on behalf of participants

• Open for government and private sector participation, as a

tool to facilitate compliance with Kyoto and the EU ETS

Current participants:

• Government of Denmark, anchor investor in JI programme

• Austrian Government – CDM credits from small scale

projects

JI/CDM Program: Danish Government

• Anchor investor = Government of Denmark, who contributed to the development of the Facility

• Initial investment of € 10 million by the Danish Ministry of the Environment

• Denmark’s objective:

Acquisition of JI projects in Eastern Europe

Compliance with Kyoto and EU ETS

Fostering participation of Danish private sector

Part of wider Danish programme

Danish participation part of wider climate change strategy:

DEPA

• Direct (DEPA managed)

– Direct programme

– Tender

• Indirect (outsourced)

– ESSB CF

Min. of Foreign Affairs also has programmes for the

development of CDM projects

Danish Facility:

Geographic focus:

Balkan states (Albania, Bosnia-Herzegovina, Croatia, Macedonia, Montenegro, Serbia, Slovenia)

Baltic states (Lithuania, Latvia, Estonia) Central Europe (Bulgaria, Czech Republic, Slovakia,

Hungary, Poland, Romania) Eastern Europe and Central Asia (Armenia,

Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan)

Small Scale CDM Program: Austrian Government

• Anchor investor = Government of Austria

• Initial investment of € 6.5 million by the Austrian Government

• Austria’s objective:

Procurement of credits from small scale CDM projects

Social and developmental benefits

Compliance with Kyoto and EU ETS

Part of wider Austrian programme

Management Team

The ESCF is managed by:

EcoSecurities, responsible for credit procurement • Project identification• Project structuring

Standard Bank London, responsible for financial services

• Financial due diligence• Financial management• Transactions

Both organisations has presence or maintain strong networks in JI and CDM countries

EcoSecurities is a group of companies dedicated entirely to all aspects of

Climate Change mitigation

Voted “Best JI and CDM advisory firm” in 2001, 2002 and 2003, by the reader’s survey of

Environmental Finance, London

What is EcoSecurities Group?What is EcoSecurities Group?

JI procurement results

• An initial list of 130 projects

• Located in 15 countries in Central and

Eastern Europe

• Based on 24 technologies

Number of Project Leads in CEE and FSU Countries

0

2

4

6

8

10

12

14

16

18

20

Country

Nu

mb

er

of

pro

ject

lead

s

Technologies screened

0

2

4

6

8

10

12

14

16

18

20

Technologies

Nu

mb

er

of

pro

ject

lead

s

Barriers for JI project development

• No JI Supervisory Committee leads to uncertainty about

overall application of rules

• DNA systems in many countries are still incomplete. None

are able to use Track 1 yet

• Some host countries uncertain about priorities and C trading

strategies, and thus reluctant to approve projects

• Privatisation of some sectors causing additional problems in

some countries

• Lack of capital prevents some deals

Barriers for JI project development

Accession to the EU adds extra problems:

• Acquis communautaire – even though some countries will

not meet it, JI disallowed. E.g., landfills, etc.

• Different requirements for each sector in each country –

complex

• Linking directive and the issue of double counting –

confusion among developers and government as to which

path to follow and which instrument to use

• Governments busy with NAPs, neglecting JI rules.

CDM procurement results

• EcoSecurities current CDM pipeline includes

45 projects (plus 20 sinks projects)

• Located in 13 countries in Asia, Latin America

and Africa

• Using 15 technologies

• Abating 50 million t CO2e until 2012

EcoSecurities project pipeline: Biomass Energy – Brazil, El Salvador, Malaysia, Thailand

Anaerobic Digestion – Thailand, Philippines, Nicaragua, Nepal

Landfill Gas – Brazil (5 Locations)

Hydro – Peru, Guatemala, Brazil

Wind Power - Jamaica

Geothermal – Kenya, Nicaragua

Municipal Waste Management – Argentina, Philippines

Biodiesel – Argentina, Malaysia

Coal Mine Methane – China

Generation Efficiency – Colombia

Etc.

Barriers for CDM project development

• Under-resourced CDM EB, leading to incomplete set of

methodologies and procedures and to a lengthy project cycle

• DNA systems in many countries are still incomplete. No

rules for project approval leading to long delays. This is a

major hurdle in some cases

• Too high expectations from developers, governments and

public observers, leading to antagonism to some projects

• Too high requirements from private sector buyers, who

demand transaction terms which make some project

unfeasible or heavily discount them

Main differences

• CDM is operational, and there is some

experience with the system

• Although convoluted, at least CDM process is

known and transparent

• Less uncertainties with the EU ETS

Final points

• Kyoto mechanisms can assist in promoting new

technologies and generating large amounts of ERs

• While progress has been slow, it is much closer to a

workable framework

• The ESSB is currently working with a large pipeline,

illustrating the potential of JI and CDM

• While uncertainties remain, need to deal with risk

• Aggregation structures are an obvious approach to

diversify exposure and mitigate risk and uncertainty

Further information

www.essbcarbonfacility.com

or contact

The ESSB CF Deputy ManagerEcoSecurities Ltd.paul@ecosecurities.comTel. (44) 1865 297 489

Standard Bank

Standard Bank – A Global Bank

Wherever your business takes you, Standard Bank is there

New York(55)

Sydney

(4)

Miami(48)

Sao Paulo(26)

Lima(4)

Buenos Aires(8)

London(558)

Stockholm(2)

Prague (5)

Milan(3)

Istanbul(19)

Moscow(16)

Tehran(3)

Dubai(8)

Shanghai(3)

Hong Kong (115)

Singapore(25)

As at 31 December 2002Total: 909 employees

Kuala Lumpur(2)

Taipei (20)

Bucharest (2)

Johannesburg(SBL Headquarter)

The Standard Bank Group

A reliable partner with a global perspective

• Standard Bank built its reputation in emerging markets – we understand that what many European and American banks call currency, market, and political risk represents a business opportunity

• A reliable partner with a global perspective, Standard Bank offers a complement of trading, risk management, financing, and advisory services

• Standard Bank London Limited (SBL) is the Principal International Investment Banking Subsidiary of The Standard Bank Group

• The Energy Group is part of Standard Bank London Ltd. (“SBL”)*

* A member of The London Stock Exchange

Authorized and Regulated by the Financial Services Authority

For more information on the suite of products and services we offer, visit our website at

www.standardbank.com

Standard Bank Energy Group

A niche player, the Energy Group offers a comprehensive service

• Established in 1998 as part of Resource Banking, the Energy Group is staffed by highly experienced industry professionals

• SBL has trading relationships with all the major dealers in the energy markets

• SBL’s Energy Group has representation in London, New York, Oslo, Dubai, Miami and Sao Paolo

Energy & Project Advisory

Energy & Project Finance

Energy Risk Mgmt & Trading

Energy Group

Power & Infrastructure Group

Examples of successful project finance transactions:

Nampower, Namibia - US$ 180,000,000 Construction of 400kV

Transmission Line, Project Finance Adviser and Arranger

MTN, Uganda - US$ 68,500,000 Second National Operator’s

License, Project Finance Adviser and Arranger

Union Fenosa/Wartsilla, Mauritius - US$ 70,000,000 Independent

Power Project 68MW Plant, Financial Adviser and Arranger

CGE, Brazil - US$ 55,000,000 Emergency Power Project 3-year

Financing, Financial Adviser and Arranger

Engebra/Cummins - US$ 25,000,000 Emergency Power Project 3-

year Financing, Financial Adviser and Arranger

Successful Presence in Central and Eastern Europe

Further informationwww.ecosecurities.com www.standardbank.comor contact

The ESCF Manager Mary O’CarrollEcoSecurities Ltd. Standard Bankinfo@ecosecurities.comTel. (44) 1865 202 635 (44)207 815 2723

Standard Bank London Limited, Cannon Bridge House, 25 Dowgate Hill, London EC4R 2SB. This document does not constitute an offer, or the solicitation of an offer for the sale or purchase of any investment or security. This is a commercial communication. If you are in any doubt about the contents of this document or the investment to which this document relates you should consult a person authorised under the Financial Services and Markets Act 2000 who specialises in advising on the acquisition of such securities. Whilst every care has been taken in preparing this document, no representation, warranty or undertaking (express or implied) is given and no responsibility or liability is accepted by Standard Bank London Limited, its subsidiaries, holding companies or affiliates from time to time (the "Standard Bank Group") as to the accuracy or completeness of the information contained herein. All opinions and estimates contained in this report may be changed after publication at any time without notice. Members of the Standard Bank Group, their directors, officers and employees may have a long or short position in currencies or securities mentioned in this report or related investments, and may add to, dispose of or effect transactions in such currencies, securities or investments for their own account and may perform or seek to perform advisory or banking services in relation thereto. No liability is accepted whatsoever for any direct or consequential loss arising from the use of this document. This document is not intended for the use of private customers in the United Kingdom. This document must not be acted on or relied on by persons who are private customers. Any investment or investment activity to which this document relates is only available to persons other than private customers and will be engaged in only with such persons. Standard Bank London Limited is authorised and regulated in the United Kingdom by the Financial Services Authority ("FSA") and entered in the FSA's register (register number 124823). The distribution of this document and the offering, sale and delivery of securities in certain jurisdictions may be restricted by law. You are to rely on your own independent appraisal of and investigations into all matters and things contemplated by this document. This document has been sent to you for your information and may not be reproduced or redistributed to any other person. By accepting this document, you agree to be bound by the foregoing limitations. Value Added Tax identification number 625861525