Download Private Sector Perspective

Asia
CDM : Private sector
perspectives
N Y Dinesh Babu
Asia Carbon International B.V
CDM : lessons learned and future options
21 May 2005
Expectations from CDM
CDM benefits (short, medium and longterm) vis-à-vis complexities



Financial flow, technology transfer
Sustainable development benefits
Efficiency improvement, resource
conservation
Sectors priorities / preferential treatment


Small scale projects
Rural development oriented projects
contd…
Expectations from CDM
Proactive role of FIs (dom.& int.)
Improvements in investment climate –
investors’ confidence
Integration of carbon finance with underlying
project finance
High price levels for CERs
Risk mitigation tools
Financial models for high SD rural projects
Expert poll conducted by Point
Carbon (www.pointcarbon.com)
While CDM is a means of increasing the
return on investment, it will rarely
change a bad investment into a good
one as long as carbon prices are low.
Therefore, the CER stream is rarely the
most important factor deciding whether
a CDM investment is sound or not. It is
just the glazing of the cake. It is much
more important that a potential project is
economically and financially sound as
such.
The investment question
Investment from Annex I not forthcoming
So is Technology Transfer
CER : mere purchase without ownership
CER price : low to influence an investment
decision
Unilateral CDM - inevitable
The investment question...contd
Mainstream financing is yet to formally engage
in CDM transactions.
CER revenues yet to be recognized by FIs for
leveraging financing

Low awareness levels and skills

Low CER revenues
Bilaterals’ & Multilaterals’ funding for PDD
development : no guarantee for purchase of
CERs !
Leading to……….
Only companies with strong balance
sheet have access to finance
Inability of other promoters to bring in
equity and to raise loans
Lack of development of project ideas and
promoters for small community projects
Challenges
#1
Environmental integrity vs
stimulating project development
#2
Project portfolio and sustainable
development
Possible solutions
#1
Accelerate integration of private sector perspectives in
the CDM decision making process
#2
Influence FIs to leverage and innovate financial tools
#3
Channelize SMEs efforts to contribute to mitigating
climate change (+ sectoral CDM)
#4
Orientation of grass root NGOs in ensuring and
propagating the integral element of climate change :
sustainable development
The Asia Carbon Group
“Total carbon solutions”
Capacity Building
•Region specific
focussedCapacity
focused
Capacity
Building.
•Backed by clearly
defined pilot projects
•Development of local
expertiese
expertise
Project & Carbon
Advisory
ACaDF™
•Identification of CDM
project opportunity
•Evaluation & Initial
documentation
• Preliminary CDM due
diligence
Project / Carbon
Finance
•On approval –
assisting with the
fund raising
•Carbon Asset
Management.
•Effective structuring
of the investment
•Complete alignment
of interests – there is
no scope for conflicts
of interests.
•ESCO model in case
of energy projects
•Framing the PIN
•Mentoring service for
local consultants
•Set up
up Local
LocalCenter
Centerofof
Excellence
Excellence
qPDD expertiese
qPDD
expertise
qLocal
q
LocalOE
OE– operating
operatingatat
local
costs
local costs
•Pitching to investors
•Framing the PDD
•Taking the project thru
the whole approval /
certification process
ACX-Change™
•VC + incubation
model – hand hold
the local developers
• Portfolio / mutual
fund approach
provides better
valuation + scope for
non performance
insurance.
•A Win-Win solution
•Lowest Transaction
costs in the sector
Asia Carbon
Fund™
•Manage CDM related
investments into Asia
•Set up project
execution +
Management team
•Advantages
– Adequate safe guards
– Quality management
– Complete transparency
– Exit option after
harvesting CERs
– Return on investment to
cover cost of funds +
premium for risk
– Structured finance – to
optimise local debt
component
Complete
Carbon
Solution
Project
finance
Advisory
&
syndication
CER Trading
Baseline study
Low
Medium
High
Product/market attractiveness
Fund
Management
Venture
Project
finance &
Mgmt.
documentation
Carbon
Advisory
Medium
Low
Competitive position
Project
Carbon
Advisory
High
The Asia Carbon Group
“Total carbon solutions”
Carbon
Trading
Propeller for future growth –
The Complete Carbon Solution
Thank you
N.Yuvaraj Dinesh Babu
Head, Climate Change
Asia Carbon International B.V
(Incorporated in The Netherlands)
150, Cecil Street, #10-03
Singapore-069543
Ph:+65 62251791
Fax:+65 62251562
[email protected]
www.asiacarbon.com