Investing in climate-smart business:

IFC’s experience in Europe & Central Asia

Istanbul, 23 November 2012

Patrick Avato

Lead, IFC Climate Business

Europe & Central Asia

Agenda

IFC in Context

Climate Smart Business in IFC

Case Study: Renewable Energy in the Balkans

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IFC in context: who we are

• IFC is the private sector lending arm of the World

Bank Group

• IFC is the world’s largest private sector IFI investing

in developing countries

• Commitments in FY2012 of approximately US$15.5

billion + $4.9 billion mobilized

• FY12 Advisory program of $197m

• Offers a full range of products from advisory to

equity, mezzanine to debt

• S&P / Moody’s AAA rating

IFC FY2012 Highlights

Portfolio $56.4 billion

Committed (FY12) $15.5 billion

Mobilized (FY12) $4.9 billion

# of Companies 1,825

# of Countries 102

We bring global experience… … with a local presence

•Established in 2010, IFC’s Istanbul

Operations Centre covers 50

countries in EMENA (Europe, Middle

East and North Africa) region

Solutions for climate mitigation / adaptation and sustainable development

How does IFC define climate business?

ENERGY: Low carbon generation,

energy efficiency, storage, smart

grids, sustainable energy access

TRANSPORTATION: Energy

efficient components, fuels and

logistics

WATER: Capture, treatment,

conservation, wastewater

treatment, access

AIR & ENVIRONMENT: Carbon

credits, trading and offsets

BUILDINGS: Low carbon strategy,

energy efficiency, sustainable

materials.

MANUFACTURING: Green chemicals,

RE/EE supply chain, cleaner

production.

AGRICULTURE & FORESTRY: Land

mgmt, low carbon and adaptation

strategies, biomass.

RECYCLING & WASTE: Recycling

and waste treatment services

IFC Climate business targets:

20% of IFC’s long-term finance and 10% of trade finance by FY15

Commercial Finance (Equity, Debt and Mezzanine)

• Renewable energy generation and supply chains

• Resource efficiency (Energy, Waste, Water)

• Credit lines and guarantees for Financial Institutions to lend for RE & EE

• Climate Change Private Equity Funds

• Cleantech growth capital

• Carbon Finance

Blended Concessional Finance

• Concessional funds for investment and advisory services

Convening industry players for research / standard setting

Pioneer investments in early market movers…

…and opening up new markets for Climate

Smart Investments

Market Barriers

Deficiencies in policy and

regulatory framework

Limited experience and high

risk perception in the market

High development costs for first

projects in a country

Difficult access to finance, e.g.

limited project finance, banks

not familiar with the sector, etc.

Project developers lack

experience and appropriate

balance sheets

IFC Advisory Solutions

Policy advice: e.g. feed-in tariffs,

permits, PPAs, housing efficiency

regulations

Awareness and skills for firms: e.g.

cleaner production audits, capacity

building for project developers & banks

Transaction support to demonstrate

new business models, e.g. PPPs for

concessions in renewable energy

generation/access, energy distribution,

solid waste, water

Best practices, industry benchmarks

and lessons learned

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Technical and economic potential for Energy Efficiency & Renewable Energy is

huge, but commercial opportunities are often constrained by market barriers

Recent Investment in Efficiency and Clean Supply Chains

India:

VicatSagar (cement) $9m loan(*)

Apollo Tires III (low rolling resistance

tires and waste heat recovery)

$30m loan

Jain Irrigation (micro/drip irrigation

systems) $60 million loans/equity

Philippines:

Sunpower

(solar cells)

$75m loan

Mexico:

Optima

Energia

(hotel ESCO)

US$10m loan

Tanzania:

Green Resources

(biomass/plantation)

$18m loan

Turkey: Trakya Cam

glass producer (energy

efficiency and solar )

$55m loan

Russia: Borets

(energy efficient

motors/pumps)

$33m loan(*)

Ghana:

Ashesi

University

(“green

building” incl.

biogas use)

$0.2m loan(*)

Note (*) financing for climate

friendly project; was part of a

larger total IFC investment

China:

Suntech (solar

cells) $50m

convertible debt

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commercial finance

Recent Renewable Energy Investments

$40,000,000

Loan Project Financing

Panama

Lender

Pando Montelirio

Hydro

$75,000,000

Sub Debt and Debt

Mexico Wind

Eurus

$30,750,000

Loan Project Financing

Chile

Lead Lender of

US$60.75m financing

Wind

Norvind

Lead Lender of

US$375m financing

US$23,200,000

Loan Project Financing

China Hydro

Lender

Zhongda Hydro

$60,800,000

Loan Project Financing

Romania Wind

Lender

Cernavoda Wind

$14,930,000

India

Equity

Biomass

Shalivahana

US$2,700,000

Equity

Thailand Solar

Solar Power Company

$750,000

Equity

Senegal Solar

Office National

d’Electriciie

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US$75,000,000

Loan Project Financing

Philippines Geothermal

Lender

Energy Dev II

$50,300,000

Loan Project Financing

Lender

Nicaragua Geothermal

San Jacinto

Electron Investment

commercial finance

$52,000,000

Georgia

Lender

Hydropower

Paravani

IFC Advisory: Opening up new markets for climate-

smart investment

Solomon Islands: Tina River

14 MW hydro-power to

substitute diesel generation

Mexico: Toluca & Tlalnepantla

Hospitals: Green/EE

hospitals buildings with

LEED Silver certificate

equivalent (Dec /2010*)

Turkey: GeoFund

program supports

geothermal power

sector

Russia & Ukraine: Resource eficiency: Focus on

Resource Efficiency in heavy industry,

SMEs and Efficient Housing

Renewables: Support to regional

govts on RE legislation & firm-level

support for early movers

Balkans:

PPPs: for HPP, Solid Waste &

Power Distribution HPP, Wind, Biomass regulatory

support and capacity building for

banks

Kenya:

KMIP: PPP for various

Green/EE special economic

zone at Athi River

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advisory services

India: Solar-

based power

generation through

PPP in Gujarat.

Maldives: Solid Waste Management: SWM

concession including waste-to-

energy power plant (June/2011* )

Male Airport: Green/EE airport

terminal building with LEED Silver

certificate equivalent (June/2010* )

Saudi Arabia: Medina Airport:

Green/EE airport

terminal building

Philippines: Olongapo Power:

Private sector

participation in electricity

distribution including

technical losses

reduction goals

(Aug/2010*)

Peru: Electrolima: Sale of

electricity generation and

Lima distribution system

(includes technical losses

reduction) (1994/1995*)

Liberia:

LEC: Management

contract for electricity

distribution in Monrovia

including technical

losses reduction goals

(April/2010) *

Case Study: Opening up

Western Balkans for RE

investment Opportunity

• High cost of electricity, expensive energy imports

• Significant small-hydro, biomass and wind potential, export potential to EU

• Interest by government, banks and industry to develop the RE sector

IFC approach • Comprehensive program in Albania, Bosnia, Kosovo, Macedonia, Montenegro and

Serbia:

1. Regulatory reform: support governments with developing feed-in tariffs,

streamline licensing and standardizing contracts (e.g. PPA, wheeling etc.)

2. Access to Finance: provide long-term financing & risk-sharing to banks for

RE credit lines, coupled with technical support on project assessment &

direct investment in individual projects

3. Capacity building: Support project developers with technical advice and

access to international partners & finance early mover projects

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Annex

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•Senior Debt

•Equity

•Mezzanine /

Subordinated

Debt

• Any number of structures/flavors of subordination

• Subordinated loans, income participating loans, convertible loans

• Senior Debt (corporate finance, project finance)

• Fixed/floating rates, USD, EUR and local currencies available

• Long maturities: 8-20 years, appropriate grace periods

• Range of security packages suited to project/country

• Mobilization of funds from other lenders and investors

• Corporate

• JV (early equity investments, Infraventures)

• Typically up to 20% shareholding

• Long-term investor, typically 6-8 year holding period

IFC products

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IFC exposure guidelines

• IFC’s investment size on its own account is set by the following criteria:

Greenfield with total cost >= $50 million Up to 25% of project cost

Greenfield with total cost < $50 million Up to 35% of project cost

Expansion or rehabilitation Up to 50% of project cost

• IFC can deliver the following complements to its own debt investment

“B loans” – Syndicated loans where IFC is lender of record, typically with funds

provided by international commercial bank.

Parallel loans – IFC can mobilize parallel lenders, typically DFI or local lender

• IFC is able to work alongside co-lenders as part of lender group

• IFC’s equity investment typically cannot exceed 20% of total share capital

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Cumulative experience of 7.7 GW of RE investments

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• Hydro:

Long standing experience, with well over 4,500 MW of HPP investments, across more

than 40 projects in all regions.

• Wind:

IFC’s first investment in 2008, with over 1,500 MW since then in over 15 projects;

approximately 40% in SEE.

• Solar:

More than 10 PV investments over the last 3 years, totaling 165 MW.

A pipeline of CSP projects, and further PV investments in development

• Geothermal:

A difficult but promising sector in which IFC has made investments totally over 1,300

MW, in Guatemala, Nicaragua, and Philippines.

• Biomass

275 MW of investments, from Brazil to China

Case Study: Financing HPPs in Armenia

1. Supporting RE and EE financing through local banks

Ameriabank CJSC: AS from ASEF + IFC $15 million for small hydropower

plant (SHPP) financing

Results: 11 SHPPs financed; installed capacity of 33.2 MW; annual

generation of 101.8 GWh; GHG reduction 40,720 tCO2e/year

HSBC Armenia CJSC: AS from ASEF + IFC $15 million for SME EE

financing

Results: 6 projects in pipeline for $13.05 million; 6.5 GWh/year

savings, GHG reduction of ~2,500 tCO2e/year

Byblos Bank Armenia CJSC: AS from ASEF + IFC $5 million for

Residential EE financing

Results: bank has launched a broad marketing campaign and started

to provide loans

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