Geothermal: The Environmental Answer to Non-Intermittent Generation? Jan P. Mumenthaler Principal Insurance Officer, Insurance Services Group Asia Istanbul,

IFC: Part of the World Bank Group 2 Conciliation and arbitration of investment disputes Guarantees of private sector investment’s non- commercial risks Interest-free loans and grants to governments of poorest countries Loans to middle- income and credit- worthy low-income country governments Solutions in private sector development IBRD International Bank for Reconstruction and Development IDA International Development Association IFC International Finance Corporation MIGA Multilateral Investment and Guarantee Agency ICSID International Center for Settlement of Investment Disputes

3 Fiscal Year 2013 Highlights Investments: 612 new projects in 113 countries Advisory services: $232 million in program expenditures $24.8 billion in financing: $18.3 billion for IFC’s own account, $6.5 billion mobilized $49.6 billion committed portfolio IDA countries account for almost half of IFC projects overall: $3.5 billion invested in Sub-Saharan Africa

Geothermal: Unique Risk Profile 4 Geothermal projects face unique risks throughout the project life-cycle Suitability of Equity vs. Debt Finance needs to be structured properly to reduce lenders’ risk exposure

Active throughout the Geothermal Project Cycle Surveying and TG drilling Exploration drilling Production drilling Power plant construction Operation and Maintenance 5 IFC Advisory Services Provides technical assistance to geothermal companies to reduce exploration risk, through: (1)Exploration best practices (2)Exploration risk insurance IFC Investment Provides financing: (3)Can make investments at various points throughout the project implementation phase (4)Can mobilize other banks to provide financing alongside IFC

6 IFC has partnered with IGA to define and roll-out best practices for geothermal exploration IFC will work directly with geothermal developers to implement best practices Benefits to developers:  Brings projects in line with international Best Practices  Reduces project risks by providing a systematic framework for resource exploration  Reduces costs by improving well targeting  Improves access to finance Establishing Best Practice

Study Evidences the “Learning Curve” Effect 7 Exploration DevelopmentOperation

Sharing Exploration Risk through Insurance IFC has partnered with Munich Re to support their Exploration Risk Insurance Benefits to developers:  Reduces financial exposure to resource finding/productivity risk Insures the thermal output of the wells  Success is based on pre-defined criteria  Coverage assessment is tailored to each project  Can be for production well(s) and/or injection well(s) When does IFC engage:  Either leads on from best practices support, or towards end of above-ground surveying activities IFC can provide: 1.Expert, independent, high-level assessment of projects, 2.Streamlined introduction to insurer 3.Support to developers with insurance negotiations, if required 4.Grant funding to reduce cost of insurance Note: Grant funding is dependent on project specifics and cannot be guaranteed

Financing Geothermal under different Structures 9 San Jacinto $50.3 million Lead arranger / Lender Nicaragua November 2010 PNOC $50 million Equity - IPO Philippines December 2006 Orzunil B Loan: $15 million Lender Guatemala April 1998 A Loan: $13 million Equity: $1.1 million Energy Dev Corp $83.5 million Lender Philippines November 2008 Energy Dev Corp II $75 million Lender Philippines May 2011

Steam Provider 10 Steam Supply Contract Power Plant BOO/BTO with Steam Off-take “Brown field”: resource development completed, financing power plant only “Green field”: financing resource development and power plant concurrently Project Finance : Already developed : To be financed : The Borrower Orzunil, Ormat, Guatemala San Jacinto, Ram Power, Nicaragua IFC experience Multiple existing assets and financing expansions Corporate Finance EDC, Philippines Easier Harder Geothermal Financing Options ?? Plant Construction Resource Development

Thank You