Programmatic CDM Projects Financing

Experiences and Challenges

Carbon Bazaar 2009

K. Umamaheswaran
Deputy Team Leader, GTZ-International Services
Carbon Procurement Unit

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 About GTZ International
Services

GTZ IS is an extended
business arm of GTZ

GTZ IS-CPU India is a conducive Carbon Markets platform

between India and Germany

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 CPU: Operational Model

End-to-end solutions including Project Development Assistance

and Emission Credits Trading Assistance

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 GTZ IS-CPU Services
 Identify eligible GHG emission reduction
projects
 Facilitate / finance CDM project
documents preparation and approvals in
line with the CDM/GS VER project
development cycle
 Introduce high qualified/rated big buyers in
Germany (Compliance Buyers)
 Facilitate Financing / Carbon Emission
Credits Trading in all stages for GHG
mitigation projects
 Facilitate Buyers with Monitoring
Management to timely and reliable delivery
 Facilitate transfer of advanced clean
technologies from Annex I countries

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 GTZ IS- CPU Clients…….

1. Reliance Energy
2. IL&FS Ecosmart Limited
3. Integrated Sustainable Energy and Ecological Development
Association (INSEDA)
4. Aster Silicates Pvt. Ltd.
5. Malavalli Power Plant (P) Ltd.
6. Hanjer Biotech Energy Private Limited
7. Ravi Mettalics
Total CERs contracted = ~ 6 Million till 2012
8. Ganesh Mettalics
Carbon Financing = ~ 5 Million Euros = 30 CRs
9. Energy Marketers
10. Raja Bhaskar Power Generation Limited
11. Anu Solar Power Private Limited
12. Satish Sugars Limited
13. Santoshimata Power Generation Limited
14. Dhampur & Asmoli Sugar Mills

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 GTZ IS- CPU Advantages….
» … is associated with AAA rated Compliance Buyers -
end users of emission credits
» … is widely networked in Indian and European carbon
market
» … has long-term involvement with project developers
worldwide
» … has credible experience in the carbon market
» … provides complete solution from CDM project
development to transaction of carbon credit with reputed
buyers
» … is cost/risk free to the project developer

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 PoA –Programme of Activities

As per UNFCCC definition

» PoA - Voluntary action by a

private or public entity, PoA
coordinates and implements
any policy/measure or stated
goal

» leads GHG emission reductions

or increase net GHG removals
by sinks
CPA
» that are additional to any that CPA
would occur in the absence of
the PoA
CPA
» via an unlimited number of
CDM project activities (CPAs)

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 Financing
» Project finance, financing projects based upon a financial
structure where debt and equity are used to finance the
project. Debt is repaid using the cash flow generated by
operation of the project, rather than the general assets or
creditworthiness of the project sponsors

» Carbon finance, financing of projects based upon financial

structure where debt, equity, carbon emission reductions.
Debt is repaid using the cash flow generated by operation of
the project, Carbon Emission Reductions are transferred based
on pre agreed price

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 Financing Models for PoA…
1. Public Private Partnership - Government Agencies
(Program Financing / Complete Program)
» implementation of GHG mitigation policies
» Transportation / EE Programs
1. Financial Institutions
» Re Financing - Financial Assistance (Sectoral Emission
Reductions)
» Projects with fast return and high Capex
1. Private Entities – with plausible projects pipeline (Project
Specific / CPAs)
» Project Developers (RE power projects)
» Technology Suppliers

1. Industrial Development Associations

» Industrial Promotions

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 Project Idea

Banks

Government CER potential

Upfront Payment
Project Developer
CER Buyer
(equity)

Investor

Technology provider

Project Implementation

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 Investment Perception…

» Investment - Project Specific (CPA) / Program (PoA) ????

» Project Specific 

» Program Specific 

» CER Generation – Per CER Cost

» Transaction Cost

» Technology and Operation of Project

» Return on Investment

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 Challenges - CDM Regulatory …
» Additional liabilities on Validators

» Reflections on Additional Validation Expenses

» PoA has to be revalidated every time its baseline

methodology is revised (Increased TC)

» Complication in CER Issuance: CERs are issued to the PoA

not CPA Specific

» Credibility of PoA Manager

» Long Term Risks – Investment Returns

» CPA Inclusion

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 Challenges – Project Related …

» Regulatory
• Regulatory clearances of the Project
» Institutional
• Creditworthiness of Project Owner
• Stability of the political and investment climate of the project parties
» Technology
• Creditworthiness of the technology
• Penetration of the technology
• Project Proponent technical expertise
» Miscellaneous Risk
• Environmental and social compliance + additional benefit
• General Market Risks

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 GTZ IS- CPU: Experience
Grid Connected Biomass Power Project
implemented in India

» Project Participant: Green Planet Energy Private

Limited & Others…

» Coordinating Agency: Malavalli Power Plant (P)

Limited (PoA Manager)

» Present CDM Stage: Under Development

» No: of CPAs – 12 Nos. (6 MW each)

» Financing Model: Private Entities

» CPA specific Investment

» Equity against CERs

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 Carbon Financing

PROJECT
DEVELOPER

ERPA Equity Partner

Debt

Carbon Credit
Buyer
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 Thanks for your attention!

K Umamaheswaran
Deputy Team Leader
uma.krishnan@gtz.de
+919899853564 / 9810422689

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