Baltic Sea Region Testing Ground Facility May 2004

TGF established in December 2003 Initial subscribed capital € 10 million Governments of Denmark, Finland, Iceland, Norway and Sweden as founding investors. Discussions ongoing with Germany.The intention is to also invite private investors Fund management services provided by NEFCO

PURPOSE OF TGF To facilitate & finance a number of concrete pilot projects and acquire cost effective carbon credits for the benefit of the Investors To develop the JI mechanism, in particular seeking to clarify rules and methodological issues in the context of concrete projects To implement the testing ground

PHASE I GOVERNMENTS PHASE II ENTERPRISES INVESTORS’ COMMITTEE NEFCO TGF PROJECTS

MODALITIES The TGF operates as a “purchase fund”, acquiring ERUs and, if possible, AAUs Payments against delivery. Possible up-front payments to be decided case-by-case Technical assistance can be financed only case-by- case

Incremental investment TGF Incremental investment Loans Non-incremental investment Investor funds Sponsor’s equity Co-financing with other sources, including NEFCO (which fund the “baseline” investments)

Potential host countries for the time being: Russia, Estonia, Latvia, Lithuania, Poland. The intention is to identify projects in all host countries Track 2 procedure (until Track 1 may become possible) A call for projects to be issued in 2004, but projects are also identified continuously

Supplier of equipment and services Buyer of AAUs / ERUs THE ROLE/S OF THE PRIVATE SECTOR Project owner/sponsor Investor in TGF Supplier of equipment and services Buyer of AAUs / ERUs