LAC Fact Sheet Project Consistent Collateral for Effective Business Development

1
IFC and Carbon Finance
Hany A. Assaad Head, MENA Private Equity
Investment Funds 18 November 2007
2
WBG Carbon Facilities
Total funds pledged US 1.9 bn (13 governments,
56 firms)

• Prototype Carbon Fund. 180 million (closed).
  Multi-shareholder. Multi-purpose.
• IFC-Netherlands Clean Development Mechanism
  Facility 120 milion and World Bank Netherlands
  CDM Facility 249 million (closed). Netherlands
  Ministry of Environment. CDM energy,
  infrastructure and industry projects.
• Community Development Carbon Fund. 128.6
  million (closed). Multi-shareholder. Small-scale
  CDM energy projects.
• BioCarbon Fund. 53.8 million (Tranche One
  closed). Multi-shareholder. LULUCF projects.
• Italian Carbon Fund. 45.4 million (open to
  Italian participation). Multi-shareholder (from
  Italy only). Multipurpose.
• Netherlands European Carbon Facility. Joint IFC
  35 million and World Bank 38 million (closed).
  Netherlands Ministry of Economic affairs. JI
  projects.
• Spanish Carbon Fund. 202.7 million (open to
  Spanish participation). Multi-shareholder (for
  from Spain only). Multipurpose.
• Danish Carbon Fund. 64.1 million (closed).
  Multi-shareholder (for from Denmark only).
  Multipurpose.
• Umbrella Carbon Facility. 810 million (Tranche
  One closed). 2 HFC-23 projects in China.

3
Impact of Carbon Finance on Project Financing
4
IFCs Carbon Finance Activities

• Carbon Finance Unit
• In-house resource for all carbon finance-related
  issues
• Manages 150M in 2 carbon finance facilities
  INCaF NECaF on behalf of the Government of the
  Netherlands
• Takes lead in development of new products for the
  carbon market
• Newly Adopted Strategy
• Move beyond intermediation
• IFC to take risk for its own account
• Several new structured finance products ready
• Additional carbon facilities under development

5
IFCs Carbon Finance Activities

• Two facilities to purchase carbon credits
  established in cooperation with the Dutch
  Government
• INCaF (IFC-Netherlands Carbon Facility)
• recently expanded
• 120 M to buy credits from CDM projects in Latin
  America, Asia, Africa
• NECaF (Netherlands European Carbon Facility)
• 35 M to buy credits from JI projects in Central
  Eastern Europe
• Current Status
• 25 M committed in 3 CDM projects
• 35 M committed to 4 more CDM projects in Q1 2006
• 30 M to be committed by June 2006 in 5 more CDM
  and JI projects

6
Delivering New Financial Products

• Leverage IFCs ability to manage and take long
  term project and credit risk in emerging markets
• Move beyond intermediation
• Provide flexible financing to carbon-rich
  projects including equity
• 10M invested in AgCert pre-IPO
• Guarantee delivery of CERs by 2012
• Provide buyers with comfort qualifying sellers
  get a premium
• Monetize future cashflows from CER sales
• Mezzanine finance structure

7
IFC Guarantee for Delivery of CERs

• Delivery of CERs depends on risks that are par
  for the course
• Generation of credits (project performance risk)
• Compensation for underperformance (project credit
  risk)
• Other (regulatory, political, etc.)
• IFC will pool CERs and provide a unique AAA-rated
  delivery guarantee for
• Compliance buyers unwilling to take emerging
  market risks
• Traders/funds/government wanting to manage
  portfolio risk
• Physical or financial settlement
• IFC will structure deals with qualifying
  companies so they get 1.5-2x current market
  prices for their CERs
• Premium possible as market-based pricing for AAA
  counterparty
• Company will provide guarantee to IFC
• Seniority, volume considerations