Financing Clean Energy In Asia Singapore, 20 June 2008
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Transcript of Financing Clean Energy In Asia Singapore, 20 June 2008
Financing Clean Energy In AsiaFinancing Clean Energy In Asia
Singapore, 20 June 2008Singapore, 20 June 2008
Opening the Flood GatesOpening the Flood Gates
Samuel TumiwaSamuel TumiwaSenior Energy SpecialistSenior Energy Specialist
Regional and Sustainable Development DepartmentRegional and Sustainable Development Department
• ADB and How it Works
• The Problem
• The Target
• What Can be Done
• What ADB is Doing About it
• How Can We Work Together
OutlineOutline
ADB’s MissionADB’s MissionTo help our developing To help our developing
member countries member countries (DMCs) reduce poverty (DMCs) reduce poverty and improve their living and improve their living conditions and quality conditions and quality
of lifeof life
ADB’s Core BusinessADB’s Core Business
• Finance and advice for Finance and advice for • development solutionsdevelopment solutions
How it WorksHow it Works• Two types of financingTwo types of financing
– Asian Development FundAsian Development Fund• Concessional Funds Concessional Funds • From Donor Government to Least Developed Member From Donor Government to Least Developed Member
CountriesCountries– Ordinary Capital ResourcesOrdinary Capital Resources
• AAA Rating backed by Donor Member CountriesAAA Rating backed by Donor Member Countries• Borrow from the Market Borrow from the Market • Relend to both Sovereign and Non-Sovereign EntitiesRelend to both Sovereign and Non-Sovereign Entities
Rest of the
World 71%
42%
Developing Asia
29%
Rest of the
World 58%
The ProblemThe Problem
2005 Actual
2030 (Projection)
Developing Asia’s Share in Global CO2 Emissions from Energy Consumption
112%
23%
55%
0%
20%
40%
60%
80%
100%
120%
Asia OECD World
Growth Rates in Energy Consumption (2005-2030)
The ProblemThe Problem
1995 2005 2015
160,796
58,191
21,059
0
50000
100000
150000
200000
In U
S$ b
illio
n
Growth of Holdings by Institutional Investors (assuming 10.70% growth)
The TargetThe Target
• Corporate Investment• Debt Finance • Equity Finance• Domestic Capital• FDI• Mezzanine Finance• Infrastructure Funds• Capital Markets – portfolio
investments • Carbon Finance
The Target - It is all about scale !The Target - It is all about scale !
Corporate & Compliance Investors
Angel Capital
Project Development Lifecycle
Technology Development Lifecycle
Development
Construction
Commissioning
Operation
Early-stage Mid-stage Late-stage
R&D Commercial Scale
Project Development
Seed Capital Start-up Financing
Proof of C
oncept
Early Stage Technology
Development
Pilot Plant
Financing
Fu
nd
ing
So
urc
e
Innovator Entrepreneur
Sponsor / Developer
R&D Grants Venture Capital
Private Equity
Corporate Investors
Capital Markets
Private Equity & Infrastructure Funds
Capital Markets
Mezzanine Capital
Angel Capital 1 Carbon Finance 2
Tech Development ‘Capital & Skills
Gap’
Project Development ‘Capital & Skills Gap’
Investment Development Investment Development LifecycleLifecycle
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Ro
E R
equ
ired
0
10
20
30
40
50
60
70
80
90
100
Eas
e o
f A
ttra
ctin
g E
qu
ity
Fu
nd
s
Required Return Ease of Raising Funds
MoU
Development
Financing Activities
Financial Close
Construction Operations
Testing & Commissioning
Pro
jec
t P
ha
se
time
Friends & Family
Angel Capital
Venture Capital
Private Equity
Institutional Investors
Inv
es
tor
Cla
ss
Ret
urn
Req
uir
emen
t
Eas
e o
f A
ttra
ctin
g
Fu
nd
s
ROI (%)
Clean Energy Equity Clean Energy Equity SourceSource―Stage―Return ―Stage―Return RelationshipRelationship
Early-stage Mid-stage Late-stage
DFI
DFI support forDevCO
DFI Co-investment, risk mitigation and loan products catalyse private investment
DevCo RecirculatesInvestment in new
project developmentsPrivate Capital
Early-stage Mid-stage Late-stage
DFI
DFI support forDevCO
DFI Co-investment, risk mitigation and loan products catalyse private investment
DevCo RecirculatesInvestment in new
project developmentsPrivate Capital
What Can be DoneWhat Can be Done
• Counterparty Credit – too low
• Risks (perceived)– too high
• Returns (perceived)– to low
• Deal Size/Volume – too small/too few (low)
• Transaction Costs – too high
• CONCLUSION = All TOO HARD!
• Result = capital migrates to other sectors/regions
CE Financiers “highs” & “lows”?CE Financiers “highs” & “lows”?
• Counterparty Credit – OK
• Risks (perceived)– OK
• Returns (perceived)– OK
• Deal Size – Aggregated & OK
• Transaction Costs – OK
• CONCLUSION = “Lets do it!”
• Result = capital migrates to Asian Clean Energy
CE financiers “highs” & “lows”?CE financiers “highs” & “lows”?
• Partial Credit Guarantees
• Performance Guarantees
• Other Risk Mitigation Products
• Risk Sharing amongst public sector, IFIs & private sector risk takers
• Increase availability of finance
• Increase terms of finance
What can be done: Risks?What can be done: Risks?
• Enhanced price signal & incentives• Market Based Approaches:
– Stepped tariffs– Local management charges– Dedicated public RE funds– Tax related incentives– Enhanced carbon price
• Incentives must be enhanced at national level (negative subsidiary removal)
• “Ability to pay” issues• Big expectations on CDM.
What can be done: Returns?What can be done: Returns?
Energy Efficiency Initiative (EEI)
Increase investments for energy efficiency and clean energy to min $1 billion/yr through loans, guarantees, TAs and
grants
Carbon Market Initiative (CMI)
Use of carbon market to leverage financing resources to new GHG mitigation investments
Sustainable Transport Initiative
Capacity development and support to advance sustainable transport policy, planning, investment and services
Energy for All
Develop new strategic approaches to mainstream and scale up energy access projects for the poor
Knowledge Hubs
Serve askey partners and information sources
Emerging Reduced Emission from Deforestation and Degradation Program
Provide incentives for developing countries to cut emissions by preserving forests or having better forest
management practices
GHG Inventory
Pursue carbon neutral corporate footprint as well as to monitor and report on net GHG emissions for ADB’s
portfolio
Mitigation Adaptation
ADB Adaptation Mainstreaming Incorporating Vulnerability Risks into
Country Partnership Strategies
“Portfolio at Risk” analysis, integration of adaptation Country Partnership Strategies to incorporate climate
change impacts and adaptation needs considerations into the CPS process, information dissemination, and staff
development
Adjusting Sector Strategies to Climate Change Realities National Adaptation Plans &
Actions
Technical support for climate resilient development, including plans and actions to reduce risks from floods,
droughts, storm surge, heat waves, etc.Country-level sector roadmaps to incorporate
climate change considerations
Screening of Pipeline ProjectsDisaster-Adaptation Integration
Analysis of climate change risks considered in future project designs Climate change risks fully integrated with
planning and profiling for natural disaster preparedness and response, including associated actions
ADB’s Climate Change Program
Social Dimensions Regional Cooperation/Partnerships
Manage social risks associated with climate changePromote sustainable development and environmental management, particularly helping people cope with increased threats to
livelihoods and well-being
EEI:Clean Energy Financing Partnership
Facility
CMI:Asia Pacific Carbon Fund
Future Carbon Fund (proposed)
Climate Change Fund
Water Financing Partnership Facility
Water-related Disaster Management (proposed)
Climate Investment Funds (proposed)
Clean Technology Fund Climate Resilience Pilot Programme
Forest Investment Fund
Global Environment Facility (various funds)
Strategic Priority on Adaptation
Least Developed Countries Fund
Special Climate Change Fund
Adaptation Fund
Renewable Energy, Energy Efficiency and Climate Change (REACH)
Mitigation Adaptation
ADB’s Climate Change Program Supporting Funds
On track to reach a clean energy investment On track to reach a clean energy investment target of $1 billion a year starting in 2008target of $1 billion a year starting in 2008
Total Approved
Loans
CE Component
$ million $ million2003 1,263 226 2004 1,431 381 2005 1,685 637 2006 1,812 834 2007* 1,801 668 2008** 5,671 2,543 2009** 4,085 1,224 2010** 4,187 1,090
Year
* Several projects deferred to 2008
** Based on Project Processing Information System which is a record of all projects under discussion with DMCs – Reality is about 30-40% realization
Email: [email protected]
Web site: www.adb.org/clean-energy
For More InformationFor More Information