Supported by the

Supported by the

Sourcing JI and CDM credits:The ESSB case study

EcoSecurities-Standard Bank Carbon Facility - Summary• An open-ended carbon purchasing facility• Provides assistance in developing JI/CDM projects• Purchases emission reduction (ER) credits from these

projects on behalf of participants• Open for government and private sector participation, as a

tool to facilitate compliance with Kyoto and the EU ETSCurrent participants: • Government of Denmark, anchor investor in JI programme• Austrian Government – CDM credits from small scale

projects

JI/CDM Program: Danish Government

• Anchor investor = Government of Denmark, who contributed to the development of the Facility

• Initial investment of € 10 million by the Danish Ministry of the Environment

• Denmark’s objective: Acquisition of JI projects in Eastern Europe Compliance with Kyoto and EU ETS Fostering participation of Danish private sector Part of wider Danish programme

Danish participation part of wider climate change strategy:

DEPA• Direct (DEPA managed)

– Direct programme

– Tender

• Indirect (outsourced)

– ESSB CF Min. of Foreign Affairs also has programmes for the

development of CDM projects

Danish Facility:

Geographic focus:

Balkan states (Albania, Bosnia-Herzegovina, Croatia, Macedonia, Montenegro, Serbia, Slovenia)

Baltic states (Lithuania, Latvia, Estonia) Central Europe (Bulgaria, Czech Republic, Slovakia,

Hungary, Poland, Romania) Eastern Europe and Central Asia (Armenia,

Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan)

Small Scale CDM Program: Austrian Government• Anchor investor = Government of Austria• Initial investment of € 6.5 million by the Austrian

Government• Austria’s objective:

Procurement of credits from small scale CDM projects

Social and developmental benefits Compliance with Kyoto and EU ETS Part of wider Austrian programme

Management Team

The ESCF is managed by:

EcoSecurities, responsible for credit procurement • Project identification• Project structuring

Standard Bank London, responsible for financial services

• Financial due diligence• Financial management• Transactions

Both organisations has presence or maintain strong networks in JI and CDM countries

EcoSecurities is a group of companies dedicated entirely to all aspects of

Climate Change mitigation

Voted “Best JI and CDM advisory firm” in 2001, 2002 and 2003, by the reader’s survey of

Environmental Finance, London

What is EcoSecurities Group?What is EcoSecurities Group?

JI procurement results

• An initial list of 130 projects • Located in 15 countries in Central and

Eastern Europe• Based on 24 technologies

Number of Project Leads in CEE and FSU Countries

0

2

4

6

8

10

12

14

16

18

20

Country

Num

ber o

f pro

ject

lead

s

Technologies screened

0

2

4

6

8

10

12

14

16

18

20

Technologies

Num

ber o

f pro

ject

lead

s

Barriers for JI project development

• No JI Supervisory Committee leads to uncertainty about overall application of rules

• DNA systems in many countries are still incomplete. None are able to use Track 1 yet

• Some host countries uncertain about priorities and C trading strategies, and thus reluctant to approve projects

• Privatisation of some sectors causing additional problems in some countries

• Lack of capital prevents some deals

Barriers for JI project development

Accession to the EU adds extra problems: • Acquis communautaire – even though some countries will

not meet it, JI disallowed. E.g., landfills, etc.• Different requirements for each sector in each country –

complex• Linking directive and the issue of double counting –

confusion among developers and government as to which path to follow and which instrument to use

• Governments busy with NAPs, neglecting JI rules.

CDM procurement results

• EcoSecurities current CDM pipeline includes 45 projects (plus 20 sinks projects)

• Located in 13 countries in Asia, Latin America and Africa

• Using 15 technologies • Abating 50 million t CO2e until 2012

EcoSecurities project pipeline: Biomass Energy – Brazil, El Salvador, Malaysia, Thailand Anaerobic Digestion – Thailand, Philippines, Nicaragua,

Nepal Landfill Gas – Brazil (5 Locations) Hydro – Peru, Guatemala, Brazil Wind Power - Jamaica Geothermal – Kenya, Nicaragua Municipal Waste Management – Argentina, Philippines Biodiesel – Argentina, Malaysia Coal Mine Methane – China Generation Efficiency – Colombia Etc.

Barriers for CDM project development

• Under-resourced CDM EB, leading to incomplete set of methodologies and procedures and to a lengthy project cycle

• DNA systems in many countries are still incomplete. No rules for project approval leading to long delays. This is a major hurdle in some cases

• Too high expectations from developers, governments and public observers, leading to antagonism to some projects

• Too high requirements from private sector buyers, who demand transaction terms which make some project unfeasible or heavily discount them

Main differences

• CDM is operational, and there is some experience with the system

• Although convoluted, at least CDM process is known and transparent

• Less uncertainties with the EU ETS

Final points

• Kyoto mechanisms can assist in promoting new technologies and generating large amounts of ERs

• While progress has been slow, it is much closer to a workable framework

• The ESSB is currently working with a large pipeline, illustrating the potential of JI and CDM

• While uncertainties remain, need to deal with risk• Aggregation structures are an obvious approach to

diversify exposure and mitigate risk and uncertainty

Further information

www.essbcarbonfacility.com

or contact

The ESSB CF Deputy ManagerEcoSecurities [email protected]. (44) 1865 297 489

Standard Bank

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Wherever your business takes you, Standard Bank is there

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As at 31 December 2002Total: 909 employees

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Johannesburg(SBL Headquarter)

The Standard Bank Group

A reliable partner with a global perspective

• Standard Bank built its reputation in emerging markets – we understand that what many European and American banks call currency, market, and political risk represents a business opportunity

• A reliable partner with a global perspective, Standard Bank offers a complement of trading, risk management, financing, and advisory services

• Standard Bank London Limited (SBL) is the Principal International Investment Banking Subsidiary of The Standard Bank Group

• The Energy Group is part of Standard Bank London Ltd. (“SBL”)*

* A member of The London Stock ExchangeAuthorized and Regulated by the Financial Services Authority

For more information on the suite of products and services we offer, visit our website at

www.standardbank.com

Standard Bank Energy Group

A niche player, the Energy Group offers a comprehensive service

• Established in 1998 as part of Resource Banking, the Energy Group is staffed by highly experienced industry professionals

• SBL has trading relationships with all the major dealers in the energy markets

• SBL’s Energy Group has representation in London, New York, Oslo, Dubai, Miami and Sao Paolo

Energy & Project Advisory

Energy & Project Finance

Energy Risk Mgmt & Trading

Energy Group

Power & Infrastructure GroupExamples of successful project finance transactions:

Nampower, Namibia - US$ 180,000,000 Construction of 400kV Transmission Line, Project Finance Adviser and Arranger

MTN, Uganda - US$ 68,500,000 Second National Operator’s License, Project Finance Adviser and Arranger

Union Fenosa/Wartsilla, Mauritius - US$ 70,000,000 Independent Power Project 68MW Plant, Financial Adviser and Arranger

CGE, Brazil - US$ 55,000,000 Emergency Power Project 3-year Financing, Financial Adviser and Arranger

Engebra/Cummins - US$ 25,000,000 Emergency Power Project 3-year Financing, Financial Adviser and Arranger

Successful Presence in Central and Eastern Europe

Further informationwww.ecosecurities.com www.standardbank.comor contact

The ESCF Manager Mary O’CarrollEcoSecurities Ltd. Standard [email protected]. (44) 1865 202 635 (44)207 815 2723

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