Download Slide 0 - Astana Economic Forum 2013

ADB
Climate
PPP
Fund:
An Overview
May 2013
strictly private & confidential
Disclaimer
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“Investment Company Act”)) and “accredited investors” (as defined in Rule 501(a) under the Securities Act).
CONFIDENTIAL
1
Climate Finance Market
Sustainable investing is an increasingly mainstream area that
will impact MDB’s positioning in the market
There is significant partnership potential with institutions that have common goals and
complementary capabilities
Reputation +
Sustainability
Drivers
+
Financial Returns
Partnership
Potential
Private Sector
Investors
Call for
all MDBs
SRI
Players
MDBs
Current space
Trends
_
_
Development Impact / Sustainable Investing
+
Note: For illustrative purposes. Several sources were consulted but exact position/proportion of shaded areas could vary
CONFIDENTIAL
3
Investment space and risks
Infrastructure
Biomass
Geothermal
Landfill Gas Waste-Energy
Green Transportation
Real Estate
Hydro
Solar
Technology
Wind
Clean Fuels
Smart-grid
Lighting
Batteries
Component
Manufacturing
Recycling
Waste water
Fisheries
Forestry
Waste-Heat
Combined
Clean
Advanced
Materials Heat & Power Transport Recovery
Nature base
assets
CSP/
Desalination
Renewable
Energy
Water
Resource
Efficiency
CONFIDENTIAL
Sustainable Environmental
Agriculture Remediation
Environment
4
Market: Growth potential/upside particularly for those who can
address current bottlenecks
Investors interest in
environmental finance
investments
US 620 bn*
Yearly investment needs
in environmental finance
US 780 bn*
Current
Mkt Size
US 120 bn*
Bottleneck factors …
 Regulatory uncertainty
 Information and knowledge gaps
 Lack of scale and high transaction costs
… that require
 Exposure to regulators and policy makers and skills
that go beyond the traditional banking/investment
managers
 Cross disciplinary team with ability to build
synergies across environmental sectors: investors,
knowledge, network, brand reputation
 Strong network and access to niche opportunities
 Infant sector with underdeveloped risk tools
 Tailored and customized risk approaches
* Estimates based on New Energy Finance publications, EBGC calculations of demand from Pension funds, SWF, insurance companies, other institutional investors, HNWI and Family Offices,
Stern Report and World Bank “Winds of Change” estimates
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5
Opportunities
Benefits of intersection area
Public sector funding2
Private sector funding2,3
Number of facilities: 50+
Number of funds: 75+
Average size: ~$300 million
Players: Managed mostly by MDBs
and other development agencies
Growth prospects: Limited
Average size: ~$200 million
PPP
Fund
Players: Managed by fund managers
mostly in the private equity space
Growth prospects: Significant, particularly
with new incentives/instruments
Notes: (1) Data is based on best available information as provided by Preqin, climatefundsupdate.org, ADB, and World Bank. (2) Data refers to facilities/funds with exposure to Asia.
(3) This information includes Private Equity Funds that are both closed and currently raising capital.
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7
MDBs value addition in a JV with private operator
 ADB has a long track record in areas like infrastructure, cleantech, water, and agriculture
1
Expertise
2
 29 offices across developing Asia including frontier countries important for deal sourcing
Reach
and monitoring activities. Additionally, ADB has access to regulators and policy-makers and
benefits from an institutional reputation that private sector operators value
 ADB has several unique risk-mitigating facilities that are relevant for players who want to
3
Risk mitigating
instruments
4
enter/reinforce their emerging market presence. Investment vehicles (such as CP3) are
recognized by the World Economic Forum as highly applicable to emerging market
conditions: one-stop shop for debt, equity and grants, complemented by policy dialogue
 ADB has privileged relationships with other DFIs and public sector sources of finance.
Access to new
investors
5
that, due to environmental constraints, are becoming increasingly attractive to
mainstream investors
Environmental,
Social and
Governance
Additionally, ADB reputation and development credentials appeal to socially responsible
investors (SRI)
 Most private sector institutions do not possess ADB’s capabilities in ESG and development
impact measurement that is becoming essential for risk mitigation and reputation
purposes
CONFIDENTIAL
8
How do we reduce risk or add value? (grey areas = differentiators)
Partners and Public
Sector Agenda
Investors


Fund Manager



Debt

Project finance

Guarantees
Grant

Dedicated TA

Other climate
change related
facilities managed
by ADB
Fundraising: Public and private investors
Deal Sourcing: > 40 offices in the region
Execution: Team of 12* combined ADB/FM staff
Monitoring: Unique risk mitigators
Exit: Strong historic track record
Country dialogue
Support
Financial +
Facilities
Investment
Program
+
Support
Knowledge
Facilities

Regulatory framework / Policies

Political risk mitigation
ESG Assessment

Dedicated resources

SRI compliance
Climate Change
Knowledge Pool
Returns
> 10%**
High
Develop. Impact

Historic project/country information

Conferences & seminars
*Note: Based on a $1B fund size
**Note: The statement of target return amounts is not a representation that the fund will only make investments whose individual expected returns are in excess of the target return. No implication shall
be drawn as to the advisability of investing in the fund.
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9
PPP Fund re-engineered to match target investors needs
and risk profiles ...
PPP Fund offers:
Pension funds and SWF are
looking for:
Infrastructure

Long term capital protection and
inflation hedge


GreenTech
Natural Res.
Investment drivers anchored in long term macro fundamentals and inescapable
environmental constrains. Additional likely upside from future public/regulatory support
Renewable power and real assets may benefit from a variety of long-term contractual
arrangements specifically designed to provide revenue certainty over 15-20 years with
inflation protection

Non correlation with financial
markets

Private equity investments less vulnerable to equity markets and offer diversification
value. Additionally high growth expected in Asian markets given lag to EUR/US

Clear structures and solid risk
mitigation mechanisms

Partnership between reference player in the private equity industry and ADB unique risk
mitigating instruments
Diversification across a wide range of sectors, geographic regions and investment
structures within a rigorous investment process with multi-party, interdisciplinary due
diligence and on-site monitoring


Strengthening of SRI, “impact
investing“

ADB champion of sustainable and triple bottom line investing with high environmental &
sustainability investment standards
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10
… and to offer a new product specifically designed to minimize
climate finance risks
+
Private Equity


Return
PPP Fund



Project Finance



_

>10% ; 0.75%/7.5%
Mix of sectors including infrastructure
within env. finance
Global Inst. investors and DFI
6-12%; 1-2%
Mostly infrastructure
Local Financial Inst. and Dev.
Fin Inst. (DFI)



_
>20%; 2%/20%
Niche or high potential but undercap. sectors
that could offer diversif. /arbitage opport.
HNWI, Asset managers, SWF, Pensions, FoF
Risk
CONFIDENTIAL
Returns & Fees
Sectors
Typical Investors
+
11
PPP Fund within climate change finance
Instruments
Effectiveness1
Offset markets
and voluntary
3
Carbon Offset
flows
3

Carbon
markets
2
Policy
incentives
NE

Grants
4

Sources
Allocation &
Growth Potential2
($, bn)
Carbon
taxes
7
Domestic
public
budgets
NE
General
tax revenues
NE
Global
capital
markets
55+
Notes:
Bilateral
agencies/
banks
24
Multilateral
agencies/
banks
15
Concession
loans
13

Market
rate loans
56

Public
funding
sources
42
2%
CP3 Space
Private
sector
finance
55
Equity
18

Private
funding
sources
55
10%
(1) Based on multiplier and refinancing effect (2) CAGR 2011-2016
Source: Climate Policy Initiative (CPI) , ADB, 2011. Boxes and flows not drawn to scale
Legend:
CONFIDENTIAL
Public money
Offset money
Private money
NE Not Estimated
12
PPP Fund: Differs from existing public sector facilities…
Differentiator factors
Pure Public Sector Facilities
PPP Fund
Leverage/Resource
mobilization
Marginal % of private
sector investors
Leverages public funding
to mobilize private capital;
Targets multiper effect of >200x
Vehicle‘s suitability to address
market constraints
Deployment ratios below
expectations due to market
conditions and disbursement criteria
Recognized by World Economic Forum
as highly applicable to market conditions:
one-stop shop for debt, equity and grants
Knowledge and
technology transfer
Limited ability to attract
new players to the region
Partnerships with best-in-practice fund
managers and industry players to promote
FDI and knowledge/technology transfer
Reach
Policy/regulatory work separated from
investment opportunities; Limited reach
beyond DFIs and government institutions
Financial facilities combined with policy dialogue that
could effectively change investment environment in this
sector; Diverse set of investors, players and agencies
operating under a common platform
Returns
Primarily loans and grants, not
reinvested into this space
Private equity, commercially-driven
returns model with revolving effect
Scope
Often capacity-building and investments
in adaptation/mitigation areas
Pan-Asian, diversified strategy targets wide
spectrum of infrastructure, technology, and naturebased investments with positive climate impact
Impact
Limited due to reach, scope, and lack
of private sector leverage effect
1
2
3
4
5
6
7
CONFIDENTIAL
Unique impact on job creation (>5,000 jobs/year),
CO2 reductions (2.5M TCO2/year),
and technology transfer (90%)
13
The Climate PPP Fund concept
1
A vehicle that will mobilize capital
at scale from global public and
private sector investors …
3
… through an unique investment management
platform that combines private operators and
MDBs with equity, debt and grant facilities …
Fund Manager
Fund
$1bn
2
… to invest in environmental finance in Asia …
Fund Investments
Co-investments
4
… designed to maximize impact and
complement existing initiatives in this
space.
Climate
Fund
+
Clean
energy
initiatives
CONFIDENTIAL
14
Contact information
Duarte Henriques da Silva
Project Coordinator/PPP Fund
Private Sector Operations Division
Capital Markets and Financial Sectors
Asian Development Bank
6 ADB Avenue, Mandaluyong City
1550 Philippines
(p) +63 2 683 1829
[email protected]
Brian Liu
Investment Specialist
Private Sector Operations Division
Capital Markets and Financial Sectors
Asian Development Bank
6 ADB Avenue, Mandaluyong City
1550 Philippines
(p) +63 2 683 1765
[email protected]
CONFIDENTIAL
15
Key takeaways
Compelling
Investment
Opportunity
Experienced
Investment
Manager
Fund Manager
CP3
Risk
Return
Customized
Investment
Strategy
Unique
Program
Attributes
• Robust macro drivers in sector and
region
• Maturing PE market well positioned for low
carbon and resource efficiency
• Natural resource limitation
• Early mover advantage and window of
opportunity for scaled investment
• Deep sector expertise
• Track record and sector exposure above
benchmarks
• Extensive local presence brings
extraordinary sourcing and coverage
• Public private partnership supported by
environment finance reference investors
• Focus on optimizing risk-adjusted
returns in emerging markets
• LP preference for scale diversification and
SRI exposure
• Unique ability to mitigate risk
• Hybrid fund and co-investment approach
• Efficient fee structure
• Low correlation with financial markets and
hedge on climate / fossil fuel risk
• Stable, inflation protected revenues
with substantial upside
• Significant anchor commitments and strong
alignment of interest
CONFIDENTIAL
16
Climate PPP Fund expected development impact
Public Sector Loan Operations
Private Sector Equity Operations
Climate PPP Fund
Public sector avg catalytic effect
Private sector avg catalytic effect
Catalytic effect
Job creation (#) / Taxes
generated ($m)
Public sector operations
Yearly private sector (PE) Op. impact
Yearly Fund impact
NA
4,391 jobs / $472m paid taxes
5,000 jobs / $885m paid taxes
Technology & Skills Transfer (%
inv. with + impact)
Public sector operations
Total private sector portfolio
Fund investments
NA
72%
90%
Greenhouse gas emission
reduction (tCO2-eq/year)
Public sector yearly average
Private sector yearly average
Fund expected yearly average
18,560,131
3,268,145
2,500,000
Total multiplier effect of $100m
MDB Investment
Environment, Social and
Governance (ESG) compliance
Foreign direct investment
promotion (%)
Non Reg. Inv./Financiers
Local investors
Public sector track record
Private sector track record
At entrance/investment relying in
At entrance/investment relying in
most cases on 3rd parties implement. most cases on 3rd parties implement.
Average project
Average project
< 20%
< 30%
CONFIDENTIAL
Fund
MDB in the drivers seat with direct
impl. responsibilities on ESG issues
Fund
< 70%
17
Climate PPP Fund expected development impact (cont.)
Public Sector Loan Operations
Geo exposure & promotion of
regional integration
Definition of space and exposure to
new markets
Partnership bet. public& private
op.& strengthening of donors'
collab. agenda
Scope of interventions and
resources
Private investors participation (%)
Average project
Average project
Mostly country focus
Mostly country focus
Average project
Average project
Climate PPP Fund
Fund
Regional, allows for divesification at
scale
Fund
Climate change mitigation or adaptation
Mostly renewable energy projects
In addition to RE/EE, introduction of a
third pillar-nature based assets (sust.
agri, water, forestry, fisheries)-that
reinforces SRI and mega trends inv. case
Public sector track record
Private sector track record
Structure & Implement. Arrange.
Medium
Medium
Wide platform of donors and PPP effect
Traditional Interventions
Traditional Interventions
Knowledge dissemination, technical
assistance, policy dialogue and public
financing
Participation in projects originated by
private sector operators. MDB
intervention mostly as financier
Average project
Private sector Invest.
DFIs & Public Invest.
Returns (%) / Revolving effect
Private Sector Equity Operations
Average project
< 10%
Fund platform
Combination of policy dialogue and grant,
debt & equity facilities under the same
platform to address market bottlenecks
Fund
< 60%
< 40%
Average project
Average project
Fund
IRR < 10%
IRR > 8%
IRR > 10%
CONFIDENTIAL
18
I. Concept
CP3: Unique insight, expertise and investing capabilities


A leading global banking platform (est. 1856) with a customized PE fund investment team (est. 1999)
An AAA-rated, Asia-focused multilateral development bank (est. 1966), with 67 member countries


Approx. $28B of client commitments under management from institutional investors, financial institutions, family
offices and high net worth investors; 433 fund investments and 97 co-investments
$17B in approved financing in 2010; $800M+ in private equity funds under management


$1.3B in sector-relevant investments, via 35 co-investments and 30 fund investments
$7.2B invested in 139 clean energy projects since 2003; several carbon funds totaling $300M

Comprehensive Pan-Asia climate investing strategy across three sectors: (1) alternative energy generation, (2)
energy efficiency, (3) natural resources & environmental services
Unique approach




Synergetic and complementary joint venture
Customized strategy offering diversification at scale
Global perspective and local execution
Proprietary risk mitigating facilities and policy/regulatory expertise
Investment team


Dedicated execution team supported by full fledged platform – 10+ nationalities – 10+ languages
Expertise in clean technology, private equity, environmental finance, and project finance
Support platform




Over 200 energy investment bankers, including 43 professionals in Asia
Over 30 alternative energy analysts, including 10 in Asia
Over 40 policy dialogue, environmental safeguards, and regulatory support experts
Access to debt financing, concessional/grant financing, technical assistance facilities, and guarantees
Sourcing and
monitoring


Extensive local presence, exceptional networks, and proprietary databases to deliver unique knowledge/deal flow
Proprietary monitoring system that provides 24/7 web-based access to portfolio information and reports
Background
Assets and Investors
Sector exposure
Investment thesis
CONFIDENTIAL
20
The ADB/FM partnership: Synergetic and complementary,
combining extensive local presence and sector expertise
The Asian Development Bank features a
network of over 2,800 employees operating in
more than 29 countries and a track record of
$7.2 billion invested in 139 clean energy
projects since 2003.
Astana
Tbilisi
Almaty
Tashkent
Yerevan
Baku
Ulaanbaatar
Beijing
Bishkek
Beijing
Dushanbe
Ashgabat
Tokyo
Seoul
Kabul
Shanghai
Kathmandu
Pakistan
New Delhi
Guangzhou
Dhaka
Mumbai
Kolkata
Hanoi
Taipei
Hong Kong
Vientiane
Pune
Hyderabad
Bangalore
Chennai
Colombo
FM Offices
Manila
Manila*
Bangkok
Phnom Penh
Kuala Lumpur
The Fund Manager capitalizes on global
opportunities through its network of over
50,000 employees operating in more than 50
countries. The bank has a significant presence
in Asia, with 21 office locations in 10 countries
and approximately 3,400 professionals across
the Continent.
Labuan
Singapore
ADB Offices
* ADB HQ
Jakarta
Dili
CONFIDENTIAL
Port Moresby
21
Strategy: Designed to maximize upside of the investment
case and leverage on market trends
…within a conservative investment strategy…
Focus on countries with favorable investment conditions…
Policy
Support
E&Y Renewable
Energy Attractiveness
World Index 2011
1st
3rd
NA
NA
NA
NA
NA
E&Y Private Equity
Attractiveness
EM Index 2009-10
3rd
6th
1st
17th
23rd
5th
22nd
Legend:
High
Non-control fund
investments
30% allocation targeting leading fund managers
Non-control coinvestments
70% allocation alongside leading fund managers in
portfolio companies
Leverage
The Fund does not anticipate using leverage, but
underlying funds and portfolio companies will
Exit Strategy
IPO on global exchanges, M&A to strategic buyers,
secondary sale to financial investors
Low
Source: Investment Environment and Government Policy for Climate Change Adaptation and
Mitigation Funds, John Sawdon, 2011, ADB, E&Y 2007 and 2011
…through a well diversified set of investment vehicles*…
Infrastructure
Private
Equity
Total
Target
# deals
Fund
Investments
20%
10%
30%
10-15
CoInvestments
40%
30%
70%
25-35
Total
60%
40%
100%
35-50
Source: CFIG and ADB, 2011
…that will benefit from ADB-managed debt/grant facilities.
Facility Name
Asian Solar Energy Initiative
Small Wind Initiative/Quantum Leap in Wind
Clean Energy Financing Partnership Facility
Asia Pacific Carbon Fund
Future Carbon Fund
Asia Climate Change & Clean Energy Venture Cap Initiative
Climate Change Fund
Carbon Capture & Storage Fund
Amount
($, mn)
9,500*
1,000*
250
150
115
100
40
20
* Including co-financing. Source: ADB, 2011
*Note: This sample investment strategy is presented for illustrative purposes only and is based on a number of assumptions regarding available investments that may not
provide to be correct in the future.
CONFIDENTIAL
22
Portfolio construction and target returns
Investment strategy

Funds



Co-Investments


Joint Ventures




Target experienced GPs with track record in
the region in low carbon sectors
Attract global managers with Asia teams to
establish sector-focus funds
Seed platforms in Asia with global managers
entering sector and region
Diverse portfolio of mature infrastructure
technologies at utility-scale with contracted
cash flows and government incentives
Buyouts in industrials with rapid growth in
low carbon sectors
Growth investments in companies with
significant revenue, bottom-line traction and
margin improvement opportunities
Target Size
No. of deals
~450mn
10-15
Target return
15-20%
~1,050mn
25-35
Fund manager relationships
Renewables equipment manufacturers
Engineering-procurement-construction
ADB/FM existing portfolios
CONFIDENTIAL
23
Well-defined deal sourcing strategy
Deal sourcing abilities
CP3 2013 Pipeline
Sources1
Fund Manager
Funds
Network
& platform


Funds invested/
to invest


Co-investments with
corporates /
industry players


Joint Ventures with
regional players


CONFIDENTIAL
6
Funds
pre-selected
Co-Investments
12
Co-Investments
pre-selected
Note:
1) An additional source of deals not captured here are the large
volume of unsolicited investment opportunities from managers
interested in establishing a relationship with either ADB or the FM.
24
CP3 fund and co-investment focus list
An initial focus list of fund investments and co-investments for CP3 is as follows:
(all figures in USD million)
Potential fund investments
Asia Growth Fund
Global Renewable Fund
Asia Mezzanine Fund
Asia Infrastructure Fund
Regional Renewable Fund
China Renewables and Cleantech Fund
Potential co-investments
Project Dragon
Project Suriya
Project Tiger
Project Elephant
Project Wind
Project Rose
Project Power
Project Renewables
Project Hydro
Project Tree
Project Green
Timing
Committment
Geography
Primary Strategy
2013
2013
2013
2013
2013
2013
$25
$40
$25
$30
$25
$25
Asia/Regional
China
Asia/Regional
Asia/Regional
Vietnam/Cambodia/Laos
China
Growth/Buyout
Growth/Buyout
Mezzanine
Energy Infrastructure
Growth
Growth
Timing
Committment
Geography
Type of business
2012/2013
2012/2013
2012/2013
2012/2013
2012/2013
2012/2013
2012/2013
2012/2013
2012/2013
2012/2013
2012/2013
$25
$30
$15
$6
$12
$25
$25
$12
$12
$12
$12
China
Thailand
Southeast Asia
India
China
China
India
China
Caucasus
Southeast Asia
India
Hydro
Solar
Energy storage & handling
Building management services
Wind
Sustainable Agriculture
Wind, small hydro
Wind, solar
Hydro
Forestry
Wind, small hydro
CONFIDENTIAL
25
Terms
Target Fund Size
 U$ 1.5 billion
Anchor Investors
 [GBP 60 million] (UK DFID)*
 [U$100 million] (ADB)*
 3% of the total commitments, up to $50 million (Fund Manager)
Term
 Twelve (12) years including five (5) years for investment
Target Returns
 15-20% per annum**
Hurdle Rate
 8% per annum
Management Fees
Performance Fees
 0.65% for fund investments, 1.15% for co-investments
 5.0% for fund investments, 10.0% for co-investments
Potential Investors
 Pension funds, sovereign wealth funds, foundations, family offices, and other
institutional private sector investors
Minimum Subscription
 U$25 million
Fund legal structure
 Cayman-exempted limited partnership***
Anticipated First Close
 Q1 2013 (TBD)
Anticipated Final Close
 Q1 2014 (TBD)
* Subject to approval
** The statement of target return amounts is not a representation that the fund will only make investments whose individual expected returns are in excess of the target
return. Return targets are included herein for the sole purpose of illustration and do not reflect any management fees, carried interest, taxes, transaction costs in connection
with the disposition of unrealized investments, and other expenses borne by investors, which in the aggregate may be substantial. No implication shall be drawn as to the
advisability of investing in the fund.
*** CP3 may create additional jurisdictions to accommodate some investor’s preferences.
Note: This summary of selected terms and conditions is qualified in its entirety by reference to the program's operative documents as finalized by FM, ADB and the client.
CONFIDENTIAL
26
II. CP3 within current climate change finance
Climate change finance market
Sources
Instruments
Allocation &
Growth Potential1
($, bn)
Offset markets
and voluntary
3
Carbon Offset
flows
3
Carbon
markets
2
Policy
incentives
NE
Carbon
taxes
7
Domestic
public
budgets
NE
General
tax revenues
NE
Global
capital
markets
55+
Grants
4
Bilateral
agencies/
banks
24
Concession
loans
13
Multilateral
agencies/
banks
15
Market
rate loans
56
Private
sector
finance
55
Equity
18
Public
funding
sources
~42
2%
Private
funding
sources
~55
10%
Source: Climate Policy Initiative (CPI) , ADB, 2011. Boxes and flows not drawn to scale
Notes:
(1) CAGR 2011-2016
Legend:
Public money
Offset money
Private money
CONFIDENTIAL
NE Not Estimated
28
CP3 sits in a narrow universe for public-private capital
focused on climate-related investing1
Public sector funding2
Private sector funding2,3
Number of facilities: 50+
Number of funds: 75+
Average size: ~$300 million
Average size: ~$200 million
CP3
Players: Managed mostly by MDBs
and other development agencies
Players: Managed by fund managers
mostly in the private equity space
Growth prospects: Limited
Growth prospects: Significant, particularly
with new incentives/instruments
Notes: (1) Data is based on best available information as provided by Preqin, climatefundsupdate.org, ADB, and World Bank. (2) Data refers to facilities/funds with exposure to Asia.
(3) This information includes Private Equity Funds that are both closed and currently raising capital.
CONFIDENTIAL
29
Main public sector climate change facilities
Facility name1
Year Administrator2
Size
($, mn)
Facility
type
Sector
Funding
Returns
Asia
focus
Asia Climate Change & Clean Energy VC Initiative
2010
ADB
100
Equity/Grant
Clean Energy
Public
Commercial
100%
Clean Energy Financing Partnership Facility
2007
ADB
250
Grant
Clean Energy
Public
Non-commercial
100%
Clean Technology Fund
2008
World Bank
4,433
Debt/Grant
Cleantech/Carbon
Public
Non-commercial
30%
Climate Change Fund
2010
Govt. of Indonesia
18
Grant
Adaptation/Mitigation
Public
Non-commercial
100%
Forest Investment Program
2009
World Bank
599
Debt/Grant
Mitigation/Forestry
Public
Non-commercial
<10%
Global Climate Partnership Fund
2010
KfW
500
Equity/Grant
Mitigation
Public
Commercial
<40%
Global Energy Efficiency and Renewable Energy Fund
2008
EIB
170
Equity/Grant
RE3
Public
Commercial
<30%
IFC Climate Catalyst Fund
2011
IFC AMC
500
Equity
Climate change
Public/Private
Commercial
50%
Indonesia Clean Technology Fund
2009
CTF Partners
250
Equity
Cleantech/RE
Public
Commercial
100%
International Climate and Forest Initiative
2008
Govt. of Norway
517
Debt/Grant
Mitigation/Forestry
Public
Non-commercial
<50%
Least Developed Countries Fund
2002
GEF
415
Grant
Adaptation
Public
Non-commercial
<30%
Pilot Program for Climate Resilience
2008
World Bank
982
Grant
Adaptation
Public
Non-commercial
30%
Scaling Up Renewable Energy in Low Income Countries
2009
World Bank
352
Debt/Grant
Mitigation
Public
Non-commercial
30%
SDIC Innovation (Beijing) Investment Fund
2009
SDIC
95
Equity
Cleantech/RE
SOE4/Private
Commercial
100%
Climate Public Private Partnership (CP3) Fund
2012
ADB and Fund
Manager
1,500
Commercial
100%
Technology, infrastructure,
Debt/Equity
and nature-based assets in Public/Private
Guarantee/Grant
climate change space
Notes: (1) Data is based on best available information as provided by Preqin, climatefundsupdate.org, ADB and World Bank. This is a selected list of public facilities most comparable to the CP3
platform. The full list is provided as an excel attachment. 2) ADB = Asian Development Bank; CTF = Clean Technology Fund; EIB = European Investment Bank; GEF = Global Environment Facility; IFC
AMC = International Finance Corporation Asset Management Company; KfW = (German Development Bank); SDIC = State Development and Investment Corp. (3) RE = Renewable Energy. (4) SOE =
State-owned Enterprise
CONFIDENTIAL
30
CP3: Differs from existing public sector facilities…
Differentiator factors
Pure Public Sector Facilities
CP3
Leverage/Resource
mobilization
Marginal % of private
sector investors
Leverages public funding
to mobilize private capital;
Targets multiper effect of >200x
Vehicle‘s suitability to address
market constraints
Deployment ratios below
expectations due to market
conditions and disbursement criteria
Recognized by World Economic Forum
as highly applicable to market conditions:
one-stop shop for debt, equity and grants
Knowledge and
technology transfer
Limited ability to attract
new players to the region
Partnerships with best-in-practice fund
managers and industry players to promote
FDI and knowledge/technology transfer
Reach
Policy/regulatory work separated from
investment opportunities; Limited reach
beyond DFIs and government institutions
Financial facilities combined with policy dialogue that
could effectively change investment environment in this
sector; Diverse set of investors, players and agencies
operating under a common platform
Returns
Primarily loans and grants, not
reinvested into this space
Private equity, commercially-driven
returns model with revolving effect
Scope
Often capacity-building and investments
in adaptation/mitigation areas
Pan-Asian, diversified strategy targets wide
spectrum of infrastructure, technology, and naturebased investments with positive climate impact
Impact
Limited due to reach, scope, and lack
of private sector leverage effect
1
2
3
4
5
6
7
CONFIDENTIAL
Unique impact on job creation (>5,000 jobs/year),
CO2 reductions (2.5M TCO2/year),
and technology transfer (90%)
31
…and offers tax-payers an efficient vehicle to tackle
climate change challenges at scale
Donor Country1
Australia
Germany
Japan
United Kingdom
Initiative
International Forest
Carbon Initiative
International Climate
Initiative
Fast Start Finance
International Climate Fund
Administrator
Australia’s Department of
Climate Change /
AusAID
Germany’s Federal
Ministry for the
Environment2
Japan’s Ministry of Finance
UK Treasury, DFID, DECC,
DEFRA, FCO and others3
Year of launch
2007
2008
2010
2011
Pledge size ($, million)
225
800
15,000
4,590
Funding
Public
Public
Public and private
Public
Facility type
Grant
Debt/Equity4/Grant
Debt/Equity/Grant
Equity/Grant
Delivery method
Funds
Direct and via funds
Direct and via funds
Direct and via funds
Focus on Asia (%)
>80
30
N/A
N/A
CP3 applicable?
Yes
Yes
Yes
Yes
($100M earmarked)
Notes: (1) Data provided is based on best available information, as provided by climatefundsupdate.org, ADB and World Bank. This is a selected list of bilateral public initiatives targeting climate
change. (2) The International Climate Initiative is administered by the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) of the German government. (3) The
International Climate Fund will be managed by a cross-departmental team with representation from the Department for International Development (DFID), the Department for Environment and
Climate Change (DECC), the finance ministry (Her Majesty’s Treasury), The Department for Environment, Food and Rural Affairs (DEFRA), and the Foreign and Commonwealth Office (FCO). (4) In
addition to debt and grant facilities, the International Climate Initiative where appropriate, via ‘project-based contributions’ to international funds (climatefundsupdates.org).
CONFIDENTIAL
32
Main private sector climate change funds
Sector and Regional Exposure
+
Macquarie
LEGEND
Keystone
Sindicatum
AIF Capital
SAIL
Equis
SBI
Challenger
Mitsui
Berkeley
Westly
Element
Prax
Abundance
Nature
Elements
_
Standard
Chartered
IL&FS Asia
Infra
ADB/Fund Manager
CP3
South
River
_
Everbright
Aloe
Enviro
Fund
CLSA
Inter
-Vest
Raising funds
Public-Private investors
1B
Robeco
iD
Tech
Tsing
CEF
Mostly private investors
JP Morgan
Capital
Asia Infra
Dynamics
& Resources
KTB
700M
400M
100M
Vantage
Point
Aqua
Int’l
Track Record and Support Platform
+
Source: Preqin, Company Reports, ADB, 2011
CONFIDENTIAL
33
CP3: Differs from existing private sector funds…
Differentiator factors
Pure Private Sector Facilities
CP3
Size and opportunity
Average $200 million;
Anchored on powerful macro
drivers in sector and region
Up to $1,500 million;
Window of opportunity for
scaled investment platform
Risk-mitigation
Unmitigated exposure to
political and regulatory risk
Private sector diligence/execution, combined with
unique set of risk-mitigating facilities (guarantees, bloans, grants), and access to policy makers
Environmental, Social
and Governance
Not core business;
Typically dependent on third parties
Reference institution in ESG compliance;
Vehicle SRI1 compliant
Deal sourcing and
track record
Mostly new players with local presence
limited to 1 or 2 markets
Combined ADB/FM team augments traditional
deal-sourcing across the whole region;
>10 years track record in this space
Diversification
Limited either by scale (fund size)
or by scope (geography/sector)
Diversification at scale across sectors, regions,
and investment vehicles
Traditional 2/20 fee structure
Competitive fee structure
below market rates and significant
anchor committments
1
2
3
4
5
6
Fee structure
Notes: (1) SRI = Socially Responsible Investing
CONFIDENTIAL
34
... and was re-engineered to match target investor’s
needs and risk profiles
CP3 offers:
Pension funds and SWF are
looking for:
Infrastructure

Long term capital protection and
inflation hedge


GreenTech
Natural Res.
Investment drivers anchored in long term macro fundamentals and inescapable
environmental constrains. Additional likely upside from future public/regulatory support
Renewable power and real assets may benefit from a variety of long-term contractual
arrangements specifically designed to provide revenue certainty over 15-20 years with
inflation protection

Non correlation with financial
markets

Private equity investments less vulnerable to equity markets and offer diversification
value. Additionally high growth expected in Asian markets given lag to EUR/US

Clear structures and solid risk
mitigation mechanisms

Partnership between reference player in the private equity industry and ADB unique risk
mitigating instruments
Diversification across a wide range of sectors, geographic regions and investment
structures within a rigorous investment process with multi-party, interdisciplinary due
diligence and on-site monitoring


Strengthening of SRI*, “impact
investing“

ADB champion of sustainable and triple bottom line investing with high environmental &
sustainability investment standards
*Note: SRI = Socially Responsible Investing
CONFIDENTIAL
35
III. CP3 platform
Full fledged, triple-bottom line platform in enviro. finance
Partners
Investors


Fund Manager



Debt

Project finance

Guarantees
Grant

Dedicated TA

Other climate
change related
facilities managed
by ADB
Fundraising: Public and private investors
Deal Sourcing: > 40 offices in the region
Execution: Team of 12* combined ADB/FM staff
Monitoring: Unique risk mitigators
Exit: Strong historic track record
Country dialogue
Support
Financial +
Facilities
Investment
Program
+
Support
Knowledge
Facilities

Regulatory framework

Political risk mitigation
ESG Assessment

Dedicated resources

SRI compliance
Climate Change
Knowledge Pool
Returns
15-20%**
High
Develop. Impact

Historic project/country information

Conferences & seminars
*Note: Based on a $1.5Bfund size
**Note: The statement of target return amounts is not a representation that the fund will only make investments whose individual expected returns are in excess of the target return. Return targets are
included herein for the sole purpose of illustration and do not reflect any management fees, carried interest, taxes, transaction costs in connection with the disposition of unrealized investments, and other
expenses borne by investors, which in the aggregate may be substantial. No implication shall be drawn as to the advisability of investing in the fund.
CONFIDENTIAL
37
CP3 will provide deal sourcing opportunities for existing
facilities
Name
Period
Amount
($ mn)
Focus Areas
CP3 Specific
Technical Assiatance Project Development
Facility
2012+
30
Clean energy &
environ. finance
Innovative
Finance
Aggregating Market/
Technology Transfer
Technical
Assistance Facilities
Donor
funds mgd
by ADB
ADB funds
Asian Solar Energy Initiative
Carbon Capture and Storage Fund
2010-2013 500/9000* Solar
2009+
20
Asia Climate Change & Clean Energy VC
2010-2018
9/100**
Low Carbon Technology Exchange
2010-2013
8
Small Wind Init./Quantum Leap in Wind
2009-2015
4/1000*
Carbon Capture
Clean Energy

















Wind
Asia Pacific Carbon Fund
2007+
150
Carbon
Clean Energy Fin. Partnership Facil.
2007+
250
Clean Energy
Future Carbon Fund
2008-2015
115
Carbon
ADB funds
Climate Change Fund
2008+
40
Climate Change
2008-2015
N/A
Access to Energy
Asian Clean Energy Forum
2006+
N/A
Clean Energy
Apac Clean Energy Governance & Regul.
2010+
N/A
Clean Energy
Policy/ Knowledge

Solar/Wind/EE
Donor
funds
managed
by ADB
Energy for All Initiatives
Ability of CP3 to …
… leverage additional
… benefit from
resources / cofinancing knowledge/policy
opportunities
dialogue



Note: (*) Denotes total investments including co-financing, (**) Denotes equity investment in facility
Source: ADB, 2011
CONFIDENTIAL
38
The CP3 advantage to investors, investees, and partners
CP3 Platform
Investors
Investees
Partners in the CP3 network
Access to co-investment
opportunities
Yes
Yes
To be negotiated
Joint fundraising activities
Yes
To be negotiated
To be negotiated
Yes
Yes
Yes
Yes
Yes
Yes
Logistical support through
network of 24 offices in the
region
Yes
To be negotiated
To be negotiated
Mentioning of CP3 in Fund
Manager’s marketing materials
Yes
Yes
To be negotiated
1
2
3 Access to ADB risk-mitigating
instruments, as well as debt
and grant products
4 Access to ADB policy dialogue
and climate change-related
initiatives
5
6
CONFIDENTIAL
39
CP3 platform aims to achieve partnerships with industry
players
Corporate Partners
Major Japanbased industrial
conglomerate
Major Koreabased industrial
conglomerate
Strategic advantage for corporates
Major USAbased industrial
conglomerate
Venture-stage
clean energy
firms
Risk sharing opportunities
Access new set of investors
Ability to globalize portfolio
Chinese
photovoltaic
manufacturer
Danish
wind turbine
manufacturer
India’s largest
power utility
company
German
electronics
multinational
CP3 Investment Program
Access government institutions and regulators
Access CS and ADB debt and grant facilities
Value addition to CP3
New deal-sourcing pillar
Funds
Direct/CoInvestments
Corporate
Joint Ventures
Partnership with industry leaders
Access new industry developments
Investment opportunities in Asia
CONFIDENTIAL
Facilitate technology transfer to Asia
40
IV. Development impact
With a multiplier effect more powerful than other
ADB inv., CP3 leverages > resources into this space
CP3
Traditional LP Investment
Loan
(US$m)
Multiplier effect
219x
25x
Multiplier effect
21,875
Multiplier effect
4.0x
2,500
100
ADB
Loan
300
400
Total debt
Total
component resources
(debt+
equity)
1,500
400
100
ADB
Equity
100
Total equity
Investment
Total
resources
(debt+
equity)
CONFIDENTIAL
ADB
Equity
CP3 Size
Total
resources
(debt+
equity)
42
CP3 expected development impact
Public Sector Loan Operations
Private Sector Equity Operations
CP3
Public sector avg catalytic effect
Private sector avg catalytic effect
CP3 catalytic effect
Job creation (#) / Taxes
generated ($m)
Public sector operations
Yearly private sector (PE) Op. impact
Yearly CP3 impact
NA
4,391 jobs / $472m paid taxes
5,000 jobs / $885m paid taxes
Technology & Skills Transfer (%
inv. with + impact)
Public sector operations
Total private sector portfolio
CP3 investments
NA
72%
90%
Greenhouse gas emission
reduction (tCO2-eq/year)
Public sector yearly average
Private sector yearly average
CP3 expected yearly average
18,560,131
3,268,145
2,500,000
Total multiplier effect of $100m
MDB Investment
Environment, Social and
Governance (ESG) compliance
Foreign direct investment
promotion (%)
Non Reg. Inv./Financiers
Local investors
Public sector track record
Private sector track record
At entrance/investment relying in
At entrance/investment relying in
most cases on 3rd parties implement. most cases on 3rd parties implement.
Average project
Average project
< 20%
< 30%
CONFIDENTIAL
CP3
MDB in the drivers seat with direct
impl. responsibilities on ESG issues
CP3
< 70%
43
CP3 expected development impact (cont.)
Public Sector Loan Operations
Geo exposure & promotion of
regional integration
Definition of space and exposure to
new markets
Partnership bet. public& private
op.& strengthening of donors'
collab. agenda
Scope of interventions and
resources
Private investors participation (%)
Average project
CP3
Average project
CP3
Mostly country focus
Mostly country focus
Regional, allows for diversification at
scale
Average project
Average project
CP3
Climate change mitigation or adaptation
Mostly renewable energy projects
In addition to RE/EE, introduction of a
third pillar-nature based assets (sust.
agri, water, forestry, fisheries)-that
reinforces SRI and mega trends inv. case
Public sector track record
Private sector track record
CP3 structure & Implement. Arrange.
Medium
Medium
Wide platform of donors and PPP effect
Traditional Interventions
Traditional Interventions
CP3 platform
Participation in projects originated by
private sector operators. MDB
intervention mostly as financier
Combination of policy dialogue and grant,
debt & equity facilities under the same
platform to address market bottlenecks
Average project
CP3
Knowledge dissemination, technical
assistance, policy dialogue and public
financing
Average project
Private sector Invest.
DFIs & Public Invest.
Returns (%) / Revolving effect
Private Sector Equity Operations
< 10%
< 60%
< 40%
Average project
Average project
CP3
IRR < 10%
IRR > 8%
IRR > 10%
CONFIDENTIAL
44
Annex 1: ADB Credentials
ADB’s financial capacity and clean energy exposure
ADB approved $17.51 billion worth
of transactions in 2010…
$, millions
…of which $2.36 billion was deployed in
non-sovereign investments.
$, millions
20,000
15,000
2010: $2,358
2009: $1,054*
243
10,000
5,000
0
220
2007
2008
2009
2010
Equity
231
80
103
220
243
TAs, Grants, Guarantees
895
961
896
1,452
2,139
Co-Financing
970
534
1,275
3,418
3,669
7,264
9,516
9,899
13,216
11,462
Loans
550
1,053
2006
ADB made $4.8 billion worth of clean energy
Investments in 2008-2010…
438
Equity
Guarantees
Co-Financing
396
512
Loans
*2009 figure does not include ADB’s Trade Finance Program
…resulting in significant clean energy outputs
throughout the Asia region.
Energy Efficiency
318
Clean Energy
192
Cleaner Fuel
1,674
1,234
3,074
Hydro
638
556
206
Wind
Solar
$, millions
71 million tons
CO2/year abated
Renewable
Energy
112 TWHequivalent
saved
14GW
Installed
generating
capacity from
renewable
energy
Other
CONFIDENTIAL
46
ADB’s Private Equity Fund business
Current portfolio totals > 40 funds amounting to > $850m
widely distributed across the continent …
… ADB has played an evolving industry
incubator role and its performance has been
in line with the market
Avg. yearly investments and market share
0.5%
0.5%
0.6%
Performance
12.0%a)
11.6%b)
2001-04
2005-07
2008-10
Support
Consolidate
Further
early stage relationships w/ expansion to
industry
promising
frontier mkts &
players
sectors
… focusing on
sectors with
growth potential
and development impact …
SME
Restructuring
Infrastructure
Environment
Source: Asia Private Equity Review, EMPEA, Preqin, ADB, 2011
a) Preqin Performance Indicators (net IRR) based on a pool of 251 Asian (excl Japan & Korea) funds with vintage years 2001-2009
b) Value-weighted pooled net IRR of active ADB fund investments with vintage years 2001-2009
CONFIDENTIAL
47
ADB’s Private Equity Funds and portfolio companies
Investments in over 40 funds, resulting in over $850 million in committed capital…
…providing capital to over 400 portfolio companies throughout the Asia region.
CONFIDENTIAL
48
Tombstone of ADB clean energy investments
Solar
Wind
Hydro
Thailand: Bangchak Solar Power
India: Tata Power Wind Energy
Financing
India: Himachal Pradesh Clean
Energy Development Program
THB 4.2 billion
INR 2.05 billion
$800 million
2010
2007
2008
Water
Transport
Waste To Energy
PRC: Songhua River Basin Water
Pollution Control
PRC: Lanzhou Sustainable Urban
Transport
PRC: Everbright Environmental
Energy Limited
$10 million Equity
CNY 250 million Loan
CNY 100 million B Loan
2010
$150 million
$100 million loan
$100 million B Loan
2009
2009
Energy Efficiency
Cleaner Fuel
Clean Energy Fund
Azerbaijan: Garadagh Cement
Expansion and Energy Efficiency
PRC: Municipal Natural Gas
Infrastructure
Regional: Clean Energy PE/VC Funds
Initiatives
$27 million
$200 million
$100 million
2010
2010
2010
CONFIDENTIAL
49
ADB direct equity investment in climate change
Company
Sector
Country
Equity investment
($, mn)
IRR1
Exit strategy
Company A
Energy
(Cleaner fuel)
India
9.2
43%
Exchange /
Block sale
Company B
Energy
(Cleaner fuel)
India
2.6
6%
IPO pending
Company C
Energy
(Cleaner fuel)
China
24.0
18%
Exchange /
Block sale
Company D
Energy (Supply
side energy
efficiency)
Pakistan
2.8
18%
IPO / Trade sale
/ Put option
Company E
Energy (Hydro)
China
16.8
12%
IPO / Trade sale
/ Put option
Company F
Environmental
protection
China
9.1
10%
IPO / Trade sale
/ Put option
* Unrealized IRR Based on ADB estimate, including guaranteed IRR under the put option.
CONFIDENTIAL
50
The investment case: Why are LPs so
interested?
Market snapshot: Asia driving global growth
New clean energy
investments per year
Europe
($bn)
North America
Asia & Oceania
Middle East & Africa
South America
Source: Bloomberg New Energy Finance, UNEP, ADB, 2011
CONFIDENTIAL
52
Investors perspective: Keen to invest in the space,
particularly long term institutional investors
Most attractive regions for cleantech invest. opport. in 2011
Proportion of Respondents
Breakdown of cleantech funds by firm HQ
Asia
Source: Prequin, 2011
Expected
timeframe
for
Source:
Prequin,
2011
North
America
Europe
Greater
China
South Australasia
America
MENA
Africa
Source: Prequin’s survey of 100 limited partners conducted in December 2010.
next commitment to a cleantech fund
Breakdown of cleantech investors by type
Proportion of Investors
Source: Prequin’s survey of 100 limited partners conducted in December 2010.
Source: Prequin, 2011
CONFIDENTIAL
53
Understanding their motivations: Investment case
anchored on powerful long term economic drivers …
Investment case drivers
US
Europe
Asia
(Data refers to ∆ % between 2010 and 2020)
Long Term
Macro Trends
Environmental
Constraints
Population
8%
1%
11%
GDP per Capita
28%
21%
84%
Urbanization
-6%
-6%
8%
Energy demand
3%
1%
48%
Water per capita
-5%
-3%
-32%
Population at risk by sea rise
1.0x
3.4x
26.9x
CO2 emissions
2%
-2%
28%
Avg Animal Protein, Paper and Wood
consumption
12%
14%
40%
Forest Area
0%
1%
-19%
Note: Data refers to ∆ % between 2010 and 2020, except for GDP (2010-16) and deforestation (1990-2005)
Source: World Bank, Asian Development Bank, OECD, IEA, World Forests Report
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54