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Sourcing JI and CDM credits: The ESSB case study. Supported by the. EcoSecurities-Standard Bank Carbon Facility - Summary. An open-ended carbon purchasing facility Provides assistance in developing JI/CDM projects

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  1. Sourcing JI and CDM credits: The ESSB case study Supported by the

  2. 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

  3. 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

  4. 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

  5. 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)

  6. 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

  7. 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

  8. What is EcoSecurities Group? 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

  9. JI procurement results • An initial list of 130 projects • Located in 15 countries in Central and Eastern Europe • Based on 24 technologies

  10. 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

  11. 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.

  12. 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

  13. 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.

  14. 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

  15. 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

  16. 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

  17. Further information www.essbcarbonfacility.com or contact The ESSB CF Deputy Manager EcoSecurities Ltd. paul@ecosecurities.com Tel. (44) 1865 297 489

  18. Standard Bank

  19. Stockholm (2) London (558) New York (55) Milan (3) Bucharest (2) Miami (48) Istanbul (19) Lima (4) Sao Paulo (26) Buenos Aires (8) Standard Bank – A Global Bank Prague (5) Moscow (16) Tehran (3) Shanghai (3) Dubai (8) Hong Kong (115) Taipei (20) Kuala Lumpur (2) Singapore (25) Johannesburg (SBL Headquarter) Sydney (4) As at 31 December 2002 Total: 909 employees Wherever your business takes you, Standard Bank is there

  20. The Standard Bank Group • 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”)* For more information on the suite of products and services we offer, visit our website at www.standardbank.com * A member of The London Stock Exchange Authorized and Regulated by the Financial Services Authority A reliable partner with a global perspective

  21. Standard Bank Energy Group • 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 Group Energy Risk Mgmt & Trading A niche player, the Energy Group offers a comprehensive service

  22. 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

  23. Successful Presence in Central and Eastern Europe

  24. Further information www.ecosecurities.comwww.standardbank.com or contact The ESCF Manager Mary O’Carroll EcoSecurities Ltd. Standard Bank info@ecosecurities.com Tel. (44) 1865 202 635 (44)207 815 2723

  25. 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

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