welcome to the kfw carbon fund kfw carbon fund project team tel: +49-69-7431-4218 [email protected]...
TRANSCRIPT
Welcome to the
KfW Carbon Fund
KfW Carbon Fund Project TeamTel: +49-69-7431-4218
Djerba CDM Investor Forum, September 23, 2004
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Agenda
1. Basic facts about KfW
2. Concept and Framework Conditions
3. Project Selection Procedures
4. Main Contract Features
1
Basic facts about KfW
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The KfW BankengruppeBasic Information
Promotional bank of the Federal Republic of Germany.
Founded in 1948.
Shareholders: Federal Republic of Germany (80%), German federal states (20%).
Headquarter: Frankfurt am Main; branch offices: Berlin and Bonn.
Foreign offices: Brussels and 28 offices in developing and emerging countries.
Balance-sheet total at the end of 2003: EUR 315 billion.
3,670 employees at the end of 2003.
Rating: AAA/Aaa/AAA.
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*
* KfW IPEX-Bank at first as a brand name; from Jan. 2008 as a legally independent 100 % subsidiary of KfW Bankengruppe
Investment Finance in
Germany and Europe
Financial
Cooperation
Export and
Project FinanceAdvisory and
other Services
Promotion of housing, environmental and climate protection, education, infrastructureand the social sector
Export and project financing, investment andcorporate financing
Consultancy for the federal government on the privatisation of state enterprises,other advisory services
Promotion of developing and transitioncountries
Promotion of SMEs, business founders and start-ups
KfW Bankengruppe New brand structure
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The KfW Carbon Fund
Concept and Framework Conditions
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Framework Conditions
Kyoto-Protocol; Marrakech Accord
Project-based Mechanisms:
- Joint Implementation – JI
- Clean Development Mechanism – CDM
European Emissions Trading System (ETS)
National allocation plans
Linking Directive for JI and CDM
GHG Emissions Trading Law (“TEHG”)
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Objectives
Project development function: Promotion of projects and measures contributing to
reduction of global Greenhouse Gas Emissions
sustainable development in the host country
Development of an economically attractive service instrument for
German and European enterprises,
who are interested in using the project-based mechanisms of the Kyoto Protocol in their CO2-strategy
Cost-effective purchase of emission reduction certificates,
which can be converted into EU-Allowances („Compliance Tools“)
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Fund Concept
Overall concept: Setting-up a programme for acquiring certificates from project activities (purchase programme, no direct financing function)
Fund is organized as a „Buyers Pool“ of participants
KfW acts as a buyer in its own name for account of the participating companies/institutions
KfW will conclude Agency Contracts with participants and long term „Emission Reduction Purchase Agreements“ (ERPAs) for emission credits or project related allowances
Fund has a commercial orientation
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Advantages for projects:
Long-term purchase contracts (fixed amount, fixed price)(„Emissions Reductions Purchase Agreement (ERPA)“);
Additional flow of income for climate protection projects
Improved cashflow and return on investment
Increased attractiveness to equity providers and lenders („bankability“): Possibly additional financing or „credit enhancement“ through ERPA as part of the securities package
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Fund Concept
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Project Partnership Structure
Contractor
Community of Fund Participants:
Enterprises, etc.
KfW Carbon FundCredits Offtaker
Project CompanyExample:
Combined Heating and Power Plant
Investor/Project
Developer
€
Bank
Power OfftakerHeat Offtaker
ECA- Guaranteeas required
€
€
€
€
€
Credits
Credits
Equipment
Power/Heat
Credits
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Contractual Relations
Participant 1
KfW
Project Portfolio
(“KfWCarbon
Fund“)
Project n
Project 3
Project 2
Project 1
Participant 2
Participant 3
Participant x
ERPA
Ag
ency co
ntracts
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Fund Volume / Time Schedule
Fund volume
Target volume: EUR 50 million
First closing: EUR 25 million
KfW‘s participation: up to EUR 10 million
German Government: up to EUR 8 million
Time schedule
Official launch (floating of first CDM-tender): 29 June 2004
Deadline for closing 1st tranche: 31 December 2004
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The KfW Carbon Fund
Project Selection Procedures
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General Framework:
Kyoto Protocol/Marrakech Accord
European Emissions Trading System (ETS),Linking Directive
Clearance by the German Government
Internationally accepted environmental standards (e.g. World Bank guidelines, EU regulations, EIA of German co-operation with the developing countries)
Ensuring the value and acceptance of the purchased certificates in the ETS
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Project Selection Principles (I)
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Fund management guidelines:
➨ Building up a balanced project portfolio under the aspects of risk and
return in the interest of the fund participants
➨ Investment grade project portfolio
Main criteria:
➨ Delivery risk
➨ Price per ton of CO2e
➨ Transaction costs (normally minimum of 50,000 t/pa CO2e per
transaction)
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Project Selection Principles (II)
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Technologies and sectors:
No restrictions or preferences but exclusions in line with Kyoto and
the ETS:
No nuclear power projects
Large hydro power projects only if they fulfill the recommendations of
the World Commission on Dams
No sinks projects (LULUCF)
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Project Selection Principles (III)
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Two stage tender process; transparent selection criteria
Stage 1: “Expression of Interest“
Project Information Note (“Project Pre-Check“)
Letter of Endorsement of Host Country
Financial status of project proponents
Letter of Support by German Government (obtained by KfW)
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Selection Procedure (I)
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Selection Procedure (II)
Step 2
Full Proposal Phase
Stage 2: “Full Proposal“
Project Design Document; Business Plan; EIA Report
Final Validation Report
Host Country Letter of Approval
Invitation to negotiate a purchase Contract
Basis: General Conditions of Contract
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Time Schedule
Expression of Interest Phase
Deadline for submission
of Expression of Interest (EoI): 31 October 2004
Evaluation of EoI; short listing: 30 November 2004
Invitation to submit Full Proposals
(Step 2): December 2004
For further details: www.kfw.de/carbonfund
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The KfW Carbon Fund
Main Contract Features
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Purchase Contracts (I)
Long-term purchase agreement (Forward contract)
KfW will buy in its own name (AAA Buyer)
Guaranteed minimum offtake quantity at a fixed price;
usually max. 50% of expected quantity of credits generated
Contract period up to 2012 with option to extend
Market-based pricing
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Purchase Contracts (II)
Delivery options
Early delivery option for seller early fulfillment of contract;
option to sell surplus amounts in later years in the market
Right of first refusal for buyer on Additional and Future Credits
at the then prevailing market price
Payment arrangements
Payment on delivery as a rule
Prefinancing on a case by case basis; to be decided by KfW‘s credit
departments; customary terms and conditions
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Opportunities for Developers and Investors
Attractive Long-term contracts at fixed prices Improved and reliable cash flowBankable contract, well structured, AAA off-taker
Service package provided by KfWGuidance through the Kyoto processDrawing on KfW’s experience in project finance
Controlling transaction costsStandardized proceduresCo-operation with intermediaries
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Conclusion
