Transcript Sovereign Window - IVACE Multilateral

Multilateral Carbon Credit Fund
A climate change initiative
From EBRD and EIB
Madrid, 23/24 May 2006
Christopher Knowles, EIB & Jan-Willem van de Ven, EBRD
Objectives of the MCCF
•
•
•
•
•
Procure quality carbon credits from
EBRD/EIB financed projects in the 27
Countries in Transition
Increase investment flows in low-carbon and
clean technologies
Support the development of emission trading
Encourage private sector involvement
Promote dissemination of best practices
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MCCF Countries in Transition and
applicable emissions trading regimes
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Key features of MCCF
• Co-sponsored and managed by EBRD and EIB
• Open to:
– shareholders of EBRD or EIB,
– and also private companies and other public entities
(compliance/voluntary buyers)
• Aims to buy credits under JI, CDM, and ETS
– from EBRD- and/or EIB- funded projects
• Can also facilitate Green Investment Schemes;
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Contractual Framework for
Project-based Carbon Credits
MCCF: Contractual Framework
Private Master
Off-Take ERPAs
gr
ee
m
en
nc
eA
re
Ad
he
Co-Management
Arrangements
Carbon
Managers
Special Purpose Vehicle
Trusts (Funds / Carbon
Credits)
EIB
Financing
Private
Participants
EBRD
Sovereign Master
Off-Take ERPA
Co-Operation
Fund Agreement
t
Sovereign
Participants
ProjectERPAs
Project
Companies
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MCCF Management
• MCCF secretariat - light:
– Develops legal framework / structure
– Interface with Participants, Carbon Managers, Project
Companies, and Governments
– Co-ordinates with EBRD and EIB via a high-level
Steering Committee
• Carbon Managers – 2-3 private firms:
– Individual project carbon due diligence
– Completion of baseline study
– Structure and negotiation of individual project ERPAs
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Key features of MCCF
• Off-take per project: 100ktCO2 to 5mtCo2
• All sellers will be:
– Located in a country in transition
– Financed by either EBRD or EIB
• Buyers bear delivery risk and Kyoto risk
• Phasing:
– Investment period 2006-2008,
– Delivery period 2008-2013 (2014)
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The “Sovereign Window” (I)
• Open to all shareholders of EBRD or EIB
• Cooperation Fund between EBRD and each
Participant
– Funds channelled through the Cooperation Fund
– EBRD purchases credits from Carbon Managers for the
account of Sovereign Participants (via Master Off-take
ERPA)
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The “Sovereign Window” (II)
• Assembly of Participants at least once a year
– to review progress, agree business plans, approve
accounts and budgets
• Launched when at least three countries have
signed a contribution agreement for a minimum
aggregate €15 million
• Can proceed ahead of Private Window
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The “Private Window”
• Parallel to the Sovereign Window
• Joint Governance with Sovereign Participants
• MCCF will set further participation criteria:
– Compliance buyers,
– minimum rating/financial strength and integrity
• Different participation mechanism, with no EBRD
intermediation:
– Direct off-take of Carbon Credits from Carbon
Managers
– Direct payments for Carbon Credits to Carbon
Managers
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Project identification, development and
approval – Stage 1
• MCCF Secretariat identifies potential
transactions within EBRD/EIB pipelines
• CM undertakes first stage due diligence:
– Project Identification Note, Carbon Mandate Letter,
Letter of Endorsement,
• MCCF Secretariat circulates PIN to all
Participants
• Participants provide indicative, non-binding
indications of interest
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Project identification, development and
approval – Stage 2
• Carbon Manager develops Carbon transactions
(input/assistance for PDD, approvals)
• Carbon Manager negotiates ERPA
• MCCF Secretariat seeks final approval from
interested Participants:
– Sign-off on draft Project-ERPA
– Confirmation of off-take quantities
• Documentation concluded
– Project ERPA between Project Company and CM
– Off-take ERPA between CM and EBRD (for the
account of Sovereign Participants)
– Off-take ERPA between CM and each non-sovereign
Participant
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Carbon Credit Transaction steps
from origination to delivery
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Financial aspects (I)
• Budget approved by all Participants in the
Assembly
• Cost sharing and funding partially ‘a la carte’
• Fixed costs paid by all Participants pro-rata to
MCCF commitments on a six-monthly basis
• Project specific costs paid by all Participants
expressing a Stage 1 interest
• Off-take costs paid by all Participants making a
Stage 2 commitment
• GIS cost to be charged on a separate basis to
participating Sovereigns
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Financial aspects (II)
• Total costs over the life of MCCF estimated at
[12%] assuming
–
–
–
–
Total MCCF commitments of €100m
Carbon Credit price of € [7.5] / ton CO2
Broad split of Carbon Credit types
Project ERPAs agreed with [30] sellers
• Budget calls 6 months ahead and participants to
transfer funds
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Legal Documentation
• Sovereigns
– Contribution Agreement
– General Conditions (of Cooperation Fund)
• Other Participants
– Adherence Agreement
– Master off-take ERPA with Carbon Managers
• All Participants
– Rules
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Acceptance of Commitments
• Maximum commitments - €150m
• Target minimum commitments under each
Window - €50m
• Reduced demand under one Window can be
transferred to the other Window
• Maximum individual commitment - €35m
• Minimum individual commitment - €2m
(Sovereign) and €5m (Private)
• All commitments accepted on a first come first
served basis,
• non-sovereigns subject to due diligence
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How EBRD / EIB add value
• Unique knowledge of Countries in Transition,
potentially the largest global supplier of Carbon Credits
• One of the main non-governmental investors in the
region
• Strong commitment to energy efficiency and renewable
energy; growing pipeline of emission reduction projects
• High standards of underlying project due diligence
(financial, integrity and environment)
• Carbon finance expertise
• Direct Host Government access and track record in
policy dialogue
• Catalyst for private sector involvement
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• Risk mitigation through size and diversification
20 Mton MCCF target for Project-based
Carbon Credits: a realistic target
• Both EBRD and EIB have set targets for the
financing of EE and RE
• Active pipeline being developed in both JI and
CDM
• Currently [x] projects in an advanced stage of
due diligence for project financing, potentially
generating [y] tons of CO2
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Green Investment Schemes
facilitated by MCCF
Transfer of AAUs
Agreement
Green Investment
Scheme
incl. TOR RSECF
Host Country
Buyer(s) of AAUs
Steering Committee
Payments in advance
Contribution Letter
EBRD
Incentives to Participating Banks
ice
nts Serv
Consulta ract
Cont
Kyoto Compliance
Consultant
/ Legal Counsel
ice
rv
Se
ts ct
n
a
ta r
ul nt
ns Co
Co
and Sub-borrowers
Host Country
Sustainable Energy
Co-operation Fund
at the EBRD
Co
ns
ul
Co tant
nt s S
ra e
ct rv
ic
[€ 50 mln] Credit Line
Facility for Romanian
Sustainable Energy
Projects
e
Participating Banks
[4 - 8]
Rational Energy
Utilization Plan
Consultant
Project
Development
Assistance
Sub-loans
Sub-borrowers
Sustainable Energy
Projects
Project
Completion
Validation
Independent
Energy
Expert
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Next Steps
• Finalise participation of first round Sovereign
Participants
• Active marketing to the private sector
• After 1st closing of Sovereign Window:
Engagement of Carbon Managers
• of (Sovereign) Participants
– Approval of General Conditions
– Approval of 1st budget
• 1st Joint Assembly of all Participants
– Approval of Rules
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Contact us
EBRD
EIB
Mr. Jacquelin Ligot
Director
Energy Efficiency and Climate Change Team
Phone + 44 20 7338 7022
E-mail [email protected]
Mr. Christopher Knowles
Associate Director, Structured Finance
Phone +352 4379 7306
E-mail [email protected]
Mr. Jan-Willem van de Ven
PPC Officer
Energy Efficiency and Climate Change Team
Phone + 44 20 7338 7821
E-mail [email protected]
Messrs Andrew Vince or Nicholas Jennett
Senior Loan Officers, Structured Finance
Phones +352 4379 7011 / 7320
E-mail [email protected], [email protected]
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