International Investment Funds in Bioenergy and Energy Efficiency Susan Legro, Eco Ltd. “Issues and Solutions in Bioenergy….” December 11, 2007 Minsk

Overview Types of Funds Investor Requirements Lessons Learned Conclusions “Рубить дерево по плечу”

Types of Funds Private Equity Investment Funds Dedicated Renewable Energy Funds Bioenergy Development Fund UNECE/SwissRe Fund Fuel and power companies Shell GE Energy Financial Services

Types of Funds Other project equity investment Foreign partner Sawn wood companies Furniture companies Foreign partner + investment fund Company + NEFCO Vendor financing Carbon equity investments Emission reduction purchase agreement Combination of project and carbon equity

Types of Funds Debt Loan from a multilateral financial institution (MFI) EBRD, IBRD/IFC On-lending Combination of Debt and Equity Common within projects Some MFIs offer both

Other Types of Intl. Support Credit Enhancement Products Investment guarantees Political risk insurance “Market development” support

Investor Requirements Risk management Project risk Country risk Risk vs. return The market--and the competition--is global

Investor Profiles Interest in private sector Interest in small and medium enterprises (SMEs) Interest in combined project and carbon equity

Investor Requirements Project investment document The more data, the better History of site and equipment Details on owners and investors Details on consumers (residential, industrial) What kind of document? Project documents should provide a “starting point” for investors Individual investors have their own unique templates, methodologies, and due diligence procedures

Lessons Learned, 1 of 2 Energy efficiency investments should be made before or concurrently with supply- side investments, not after Heat demand may be overestimated Innovative financial mechanisms = need for very specialized legal expertise

Lessons Learned, 2 of 2 Potential conflict of interest: private sector partners may want maximum heat consumption. Contracts are the key means of managing risk Need to coordinate timing of funding Relatively low internal rate of return (IRR) can make it difficult to attract investors

Conclusions Re-visit pipeline of projects for “niche” investors Emphasize risk management Continue to include private sector projects Follow status of emissions market

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