ADFIAP CEO Forum VII November 17 – 19, 2010, Cambodia Sustainable SMEs through Value Chain Financing

1. ADFIAP CEO Forum VIINovember 17 – 19, 2010, CambodiaSustainable SMEs through Value Chain Financing „Supporting Investments in Climate Protection at Company Level – KfW’s Approach“ Stephan Opitz, First Vice President Regional Department South Asia, Afghanistan, Pakistan

2. KfW‘s Climate and Environment Protection Activities 1 2 Conclusions Supply Side: KfW Programmes for Innovations 5 4 Agenda Example: Special Fund Energy Efficiency for SMEs PoA: Combining refinancing and carbon crediting 3

3. Total Energy Commitments Energy Efficiency Renewable Energies KfW’s Energy Activities 2009 10,610 mn EUR 6,344 mn EUR 634 mn EUR 765mn EUR 9,845 mn EUR 5,710 mn EUR

4. KfW SME Bank: Funding for industrial environmental protectionand climate protection General environmental protection Energy efficiency Renewable energy Innovativepilot projects KfW Renewable Energy Programme for private clients, enterprises/SMEs, municipalities Power generation Wind, photovoltaic, geothermal energy, hydro power plants, biogas, biomass Heat generation Biomass heat, biogas, geothermal heat, solar thermal heat including heat storage facility and heat grids ERP Environmental and Energy Efficiency Programme for enterprises a)General environmental protection investments Focus on transportation as well as other energy efficiency investments (bigger companies, efficient energy generation) for SME b)Energy efficiency investments Complemented by grant funding for advisory services BMU EnvironmentInnovation Programme for private clients, enterprises/SMEs, municipalities Large-scale technical projects with demonstrationcharacter in environmentaland climate protection KfW Carbon Fund Programmes for the acquisition of carbon credits

5. Example:ERP Environmental and Energy Efficiency Programme Special Fund for Energy Efficiency: Components Main restrictions for the implementation of corporate energy savings measures: Financial constraints and Lack of information „Special Fund for Energy Efficiency in SMEs“ Component „Financing“ (low-interest loan forenergy-saving investments) Component „Consulting“ (grant for energy efficiency advice) Detailed consulting Broad-scale financing scheme with a special focus on SMEs Initial advice All components can be applied independently The use of advisory support is recommended

6. ERP Environmental and Energy Efficiency Programme Special Fund for Energy Efficiency: Components Reducing information deficits about energy saving options Grant: 80 % of costs Initial advice Decreasing subsidy Detailedconsulting In-depth energy analysis of energy saving measures and investments, savings potential and cost effectiveness Grant: 60% of costs Decreasing subsidy • ERP Environmental and Energy Efficiency Programme: • confirmation by independent energy efficiency consultant • up to 10 Mio. EUR (up to 100 % of project costs) • max. loan term: 20 years / max. grace period: 3 years • risk adjusted interest rates Financing Programmewith special focus on SMEs

7. Combining refinancing and carbon crediting (PoA) Carbon credits Carbon revenues Carbon title Carbon credits Promotional Institution, e.g. KfW Participating Financial Intermediary Interest Subsidy Fund Carbon Fund Carbon payment Interest subsidy Final Beneficiaries Advice(PoA) Credit Line Sub-loan Credit Line Redemption Redemption

8. Combining refinancing and carbon crediting (PoA) Promotional Approach • Make the carbon market usable for climate protection policy • Special support to small projects • Simplifying the access to the carbon market, e.g. for SMEs • Support of Programmes of Activities (PoA), especially for energy efficiency improvement Combing refinancing and carbon crediting:Use of carbon revenues for financing projects (e.g. interest subsidy) Example Programmatic Joint Implementation Project between KfW and BOS Bank (Poland) • Refinancing: Energy Efficiency Programme for Buildings / Boiler Modernisation Programme (esp. for SMEs) • Parallel Negotiations: Two Emission Reduction Purchase Agreements (ERPAs) • Prospective: Selling of certificates to EIB-KfW Carbon Fund II

9. KfW Programmes for Innovations:Improved supply of new products in the area of climate and environmental protection Volume of financing per project / firm Established Companies- Long Term Loans and Mezzanine Loans - Start-up Finance fortechnology-based companies- Equity - Seed Finance for technology-based companies - Equity - Age of enterprise 0 9

10. Conclusions Global Trends / Central developmental topics: • Climate Change, Environmental Protection, Shortage of Resources • International Competitiveness Crucial factors in promoting SMEs: • Finance and consultancy services • Governmental incentive packages • Use of innovative mechanisms for the generation of interest subsidies (e.g. PoAs) General features: • Standardized and transparent financing instruments • Package of instruments through the value chain (supply and demand side) • Measures with a broad impact • Monitoring mechanisms

11. Contact Stephan Opitz KfW Bankengruppe First Vice President Palmengartenstrasse 5–9 Regional Department 60325 Frankfurt am Main South Asia, Afghanistan, Pakistan Fon +49 69 7431 – 3573 Fax +49 69 7431 – 2944 stephan.opitz@kfw.de 11 11