DEG‘s experience in small-scale renewable energy projects in developing countriesrisks – mitigants - carbon credits
Workshop on tools for risk mitigation in small-scale clean infrastructure projects Paris, 19th and 20th November 2003
David RusnokDEG - Deutsche Investitions- und Entwicklungsgesellschaft mbH
Overview
1. DEG - Basic information
2. DEG‘s small-scale renewable energy portfolio
3. Risk mitigation in renewable energy projects
4. DEG and carbon credits
5. Next steps
1. DEG – Basic information
Founded: 1962
Owner: KfW (Kreditanstalt für Wiederaufbau)
Headquarter: Cologne
Capital: EUR 932 million
Employees: 314
Commitments 2002: EUR 464 million / 66 projects
2. DEG‘s small-scale renewable energy portfolio
Windpower(1) 15 MW Brazil(2) 16 MW China(3) 10 MW Turkey Hydropower(4) 5 x 20 MW Brazil (5) 18 MW Costa Rica (6) 10 MW Costa Rica (7) 15 MW Peru(8) 36 MW Nepal (Renewable Energy Fund)
8 Projects
58m EUR commitments
About 300m EUR total investments
2. DEG‘s small-scale renewable energy portfolio
0
18
0 20 40 60 80 100 120Developmental outcome (scale: CPPR-Points - max. 150 Points)
DEG's ROE, in percent
Average CPPR-points Infrastructure projects
Expected DEG's ROE
6% Main message:
Renewable energy projects are „win-win“-projects: They
generate high developmental outcome and adequate return
on equity for DEG.
3. Risk mitigation in renewable energy projects
- Risks Mitigants
(1) Technology risks
Track-record Feasibility study
Performance guarantees
(2) Exchange-rate risk
PPA nominated in/linked to fx Equity
Carbon Credits (!)
(3) Force Majeure
Insurance
(4) Construction risks
Turn-key-contracts
(5) Political risk, including
PPA risks
Political cooperation/
pressure
(6) Partner risks, including
operation and management risk
Due diligence
Long-term co-operation
4. DEG and carbon credits
Promotion of renewable energy- / energy-efficiency projects
Strengthening financial capacity of DEG‘s project companies
Reduction of exchange-rate risks of DEG‘s project companies
Additional income for DEG
4. DEG and carbon credits
ProjectCompany DEG
(1)
(2)
(3)
(1) Project finance (2) CO2-Consultancy(3) CO2-Mandate(4) Intermediation
KfW-
Carbon Fund
(4)
4. DEG and carbon credits
DEG-Pipeline: windparks and geothermal project No DEG-certification without DEG-financing DEG‘s commitment > 500.000 EUR No sinks, no nuclear power, no large hydro-projects Additionality could become a major issue Taxation of carbon-credit cash flows Eligibility of carbon credits for JV/FDI
5. Next steps – Preliminary ideas for DFI co-operations
Exchange of know-how (meetings and internet platform)(1) baselines(2) new technologies (3) additionality(4) taxation of carbon credit cash-flows(5) eligibility Project finance
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