financial support for clean coal technology by jbic

Financial Support for

Clean Coal Technology

by JBIC

Munetaka Horiguchi

Executive Officer for Asia and Pacific

Japan Bank for International Cooperation (JBIC)

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1. Profile of JBIC

2. Major Financial Instruments

3. Project Finance to Coal-fired Power Project under PPP

4. Financial Support for Clean Coal Technology

4-1 First Financing for Ultra Super Critical Coal-fired Power Project

4-2 Carbon Capture and Storage (CCS) through Enhanced Oil Recovery (EOR)

Contents

1. Profile of JBIC

• Governor : Mr. Hiroshi Watanabe

• Supervised by: Ministry of Finance of Japan

• Total Assets*: JPY 16,346bil (USD 160.5bil)

• Net Assets*: JPY 2,341bil (USD 22.9bil)

• Capital (100% owned by Government of Japan) **:

JPY 1,391bil (USD 13.6bil)

• Overseas Rep Offices: 16

• Number of Employees: 531

• Ratings: Moody’s Aa3 (stable), S&P AA- (negative)

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* Figures as of March 31, 2014

** Figures as of June 27, 2014

USD amount calculated on the basis of USD=JPY101.79 for the reference

1. Profile of JBIC

Mission:

JBIC’s mission is to contribute to the sound development of

Japan and the international economy and society by

conducting its operation in the following fields:

(1) Promoting the overseas development and securement of resources

which are important for Japan

(2) Maintaining and improving the international competitiveness of

Japanese industries

(3) Promoting the overseas business having the purpose of preserving

the global environment, such as preventing global warming

(4) Preventing disruptions to international financial order or taking

appropriate measures with respect to damages caused by such

disruption

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2. Major Financial Instruments

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Export loans are provided to overseas

importers and financial institutions to support

finance exports of Japanese machinery,

equipment and technology mainly to

developing countries.

Overseas Investment Loans

Export Loans

Overseas investment loans support

Japanese foreign direct investments. They

are extended to Japanese companies

(investors), overseas affiliates including joint

ventures where Japanese companies have

equity interests and governments or financial

institutions that make equity participations in

or extend loans to such overseas affiliates.


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Acceleration of Infrastructure Development through Public-Private Partnership (PPP)


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Independent Power Producer (IPP) project is a good example of solution of infrastructure development in the

power sector under PPP initiative.

Optimal and appropriate risk sharing among parties concerned (Public or Private) is a key to achieve

successful development of the project.

JBIC supports development of IPP projects through provision of the Project Finance.

IPP Project

Company

Equity

Project

Finance

Loans

Offtake Contract

(PPA)

Project

Sponsor

Project

Sponsor

Electricity

Offtaker

Co-financing banks

Coal

SupplierEPC

Contractor

O&M

Contractor

Coal Supply EPC O&M

Host

Country

Governme

nt

Government

Support


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• Trade-off between technology and up-front initial cost

Sub Critical Super Critical Ultra Super Critical

Initial Cost $1,787mil $1,897mil $1,931mil

Efficiency (LHV) 38.2% 41.1% 42.1%

CO2 Emission 5.6 mil ton/year 5.2 mil ton/year 5.1 mil ton/year

Generation Cost $6.85cent/kWh $6.79cent/kWh $6.77cent/kWh

Assumption: Capacity 1,000MW, Coal CV 4,000kcal/kg, Coal Price $50/ton, Expected IRR 9.5%

• JBIC supports for longer term financing of higher up-front initial cost

Source: ERIA study for Strategic Usage of Coal

Higher up-front initial cost of Clean Coal Technology(CCT) project demands

for longer term financing. JBIC plays an important role in longer term

financing, including extending Project Finance under IPP structure.


4-1. First Financing for Ultra Super Critical Coal-fired Power Project

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Morocco/ Ultra supercritical coal-fired power project

JBIC provided finance for the first time to USC project(“Safi”) in September 2014,

1,250MW(625MW×2) ultra supercritical coal-fired power project. This project is the

first ultra supercritical coal-fired power project in Africa.

http://www.jbic.go.jp/ja/information/press/press-2014/0919-29148

Project

CompanyIslamic Development Bank

GDF SuezMitsui &

Co

Equity

Loans

Commercial

Banks

Guarantee

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Project Financing for Thermal Power Generation

Project in the Kingdom of Morocco

Supporting First Ultra Super Critical Coal-fired Power Plant in Africa, Participated by

Japanese Company

September 19, 2014

1. The Japan Bank for International Cooperation (JBIC; Governor: Hiroshi

Watanabe) signed on September 18 loan agreements, in project financing*1, totaling

up to approximately USD718 million and EUR147 million (JBIC portions)

respectively with Safi Energy Company S.A. (Safi), invested by Mitsui & Co., Ltd.

(Mitsui), Electrabel S.A.(Electrabel), a Belgian company which is a subsidiary of

French company GDF SUEZ S.A., and Nareva Holding S.A. (Nareva), a company in

the Kingdom of Morocco (Morocco), for financing the Safi coal-fired power

generation project. The loans are co-financed with private financial institutions

including The Bank of Tokyo-Mitsubishi UFJ, Ltd., Sumitomo Mitsui Banking

Corporation, The Mizuho Bank Ltd., Sumitomo Mitsui Trust Bank, Limited*2, and

Islamic Development Bank, bringing the overall co-financing amount to the

equivalent of approximately USD2.107 billion*3.

2. These loans are intended to finance Safi to build and operate the Ultra Super

Critical Coal-fired Power Plant with a capacity of approximately 1,250 MW (625

MW x 2 units) in the city of Safi located approximately 300km South-west of Rabat,

the capital of Morocco, and will sell the electricity generated by this power plant to

the Office National de l'Electricité et de l'Eau Potable (off-taker) for a period of 30

years after the completion of the construction. JBIC's support for this project

through these loans, will contribute to maintaining and strengthening the

international competitiveness of Japanese industries.

3. This is the first Ultra Super Critical Coal-fired Power Plant project for JBIC and for

the Africa region. The Government of Japan claims, in the "Strategy relating

Infrastructure Export and Economic Cooperation" revised June 2014, the

implementation to strengthen business support and orders of the system, including

designing, construction, operation and management of infrastructure by public

finance, and in the "Strategic Energy Plan" revised also in June 2014, the

implementation to promote the conversion of power generation facilities to

high-efficiency thermal power generation which will also contribute to reducing

CO2 emissions in emerging economies and developing countries. In addition, the

Japanese government claims to support developing countries in the climate change

sector in the "Actions for Cool Earth" (ACE) announced in December 2013. Thus,

these loans are consistent with such government measures.

4．The promotion of investment and trade through collaboration between the public

and private sector in the African region was announced by the Government of

Japan at the TICAD V, and these loans are made, under the JBIC Facility for

African Investment and Trade Enhancement ("FAITH")*4, to support the promotion

of private sector-led growth and the acceleration of infrastructure development in

African countries. In recent years, Morocco registers an annual average rate of

about 7% increase in electricity demand backed with the steady economic growth,

and the project will become the important power source for Morocco*5.

5．As Japan's policy-based financial institution, JBIC will continue to support

overseas deployment of infrastructure business of Japanese companies and

contribute to maintaining and strengthening of the international competitiveness of

Japanese industries, by drawing on its various financial facilities and schemes for

structuring projects, and performing its risk-assuming function.

Note

1. *1 Project finance is a financing scheme in which repayments are made solely from cash flows

generated by the project and secured only on the project assets.

2. *2 Other private financial institutions include BNP Paribas, Crédit Agricole Corporate and Investment

Bank, Société Générale S.A., Standard Chartered Bank, and local Moroccan financial institutions

including Attijariwafa Bank and La Banque Centrale Populaire.

3. *3 Nippon Export and Investment Insurance (NEXI) will provide the insurance for the part of

co-financed portion by the private financial institutions.

4. *4 See News Release on June 3, 2013.

5. *5 JBIC signed a memorandum of understanding (MOU) on comprehensive strategic partnership with

the Government of Morocco in March 2011 to enhance economic relationships in view of a potentially

large business opportunity in the country. See Press Release on March 8, 2011.


4-1. First Financing for Ultra Super Critical Coal-fired Power Project

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USA/ CO2-Enhanced Oil Recovery (EOR) project

JBIC provided finance in July 2014 to the project which is a post-combustion carbon

capture-enhanced oil recovery project. The borrower builds a carbon capture and

storage system in the coal-fired power plant and increases oil recovery at an oil field

in Texas, by injecting the CO2 removed from the flue gas of the power plant.

http://www.nrg.com/business/wholesale/carbon-capture/wa-parish-ccs-project/

Increase of oil

production

500b/d to

12,000b/d

CO2 emission

reduction

1.6million tons/y


4-2. Carbon Capture and Storage (CCS) through Enhanced Oil Recovery (EOR)

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4-2. Carbon Capture and Storage (CCS) through Enhanced Oil Recovery (EOR)

Project Financing for Post-Combustion Carbon

Capture-Enhanced Oil Recovery Project in the

United States

Supporting Acquisition of Interest and Development of Oil Field of Japanese Company

and Large-scale Carbon Capture Technology to be provided by Japanese Company

July 15, 2014

1. The Japan Bank for International Cooperation (JBIC; Governor: Hiroshi

Watanabe) signed on July 14 a loan agreement, in project financing*1, totaling up to

USD175 million (JBIC portion) with Petra Nova Parish Holding LLC (PNPH) in the

United States of America, which is owned equally by JX Nippon Oil & Gas

Exploration Corporation (JX NOEX) and NRG Energy Inc. (NRG), an American

company. The loan is cofinanced with Mizuho Bank, Ltd. (MHBK), bringing the

total cofinanced amount to USD250 million, and MHBK's portion will be insured by

Nippon Export and Investment Insurance (NEXI).

2. The project is a post-combustion carbon capture-enhanced oil recovery project, in

which PNPH builds a carbon capture system*2 in the W.A. Parish coal-fired power

plant owned by NRG's subsidiary in Texas and increases oil recovery at West Ranch

oil field in Texas, by pressure injecting the carbon dioxide (CO2) removed from the

flue gas of the power plant. JX NOEX is participating indirectly in the project by

investing equity for 50% in PNPH, which makes 25% of the interests in West Ranch

oil field and enables to acquire a disposal right of crude oil production

commensurate with the existing interests. The loan will partially fund the capital

required for the acquisition of the interests and procurement of plant facilities.

3. In this project, it plans to pressure inject CO2 into the oil field from the 4th quarter

of 2016, increasing daily production to an average of 12,000 barrels from 500

barrels of its current crude oil production. Although EOR utilizing CO2 have been

popular globally, this EOR utilizing CO2 from the flue gas of a coal-fired power

plant will be the world's first large-scale commercial project and enables to produce

additional crude oil from the existing oil field, as well as reducing CO2 emission by

1.6 million tons annually into the atmosphere from the W.A. Parish coal-fired

power plant, and thus this project is expected to contribute to both the increased

production of energy resources and mitigate the impact on the global environment.

4．As Japan's policy-based financial institution, JBIC will continue to actively

support the development and interest acquisition of important resources by

Japanese companies, by drawing on its various financial facilities and schemes for

structuring projects, and performing its risk-assuming function.

Note

1. *1 Project finance is a financing scheme in which repayments are made solely from cash flows

generated by the project and secured only on the project assets.

2. *2 The carbon capture system will be built by a consortium of Mitsubishi Heavy Industries America,

Inc., a US subsidiary of Mitsubishi Heavy Industries, Ltd., and The Industrial Company, a major US

construction company, and will be the world's largest CO2 capture plant with a production capacity of

4,776 tons a day.