Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEXFinancing Structures and.

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Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEXFinancing Structures and CDM Project Risks Amr Abdel-Aziz, Ph.D. Integral Consult

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX CDM Project Cycle Risk CER Price

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEXFinancing Structures

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX Direct Sale of CERs from a Host Country Driven CDM Project CERs sold directly to an Annex I Purchaser No further involvement of the purchaser in the project Simple Emission Reduction Purchase Agreement (ERPA) to sell the CERs through a direct sale transaction CER Purchaser is limited to paying for CERs once they have been delivered (Less risk  Higher Price)

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX Provision of Debt Finance in Return for Part Payment in CERs Annex I project participant can be involved as financier to the underlying project Provides a portion of project finance in the form of a loan Receives CERs as part payment of a fixed proportion of the interest for that loan

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX Equity Investment in Return for Revenue Stream from CERs Annex I Investor offers equity investment in a project In return for equity in the project and a share of the CERs arising from the project Project Participants and the investor may create a separate company to hold the CERs Annex I investor may take equity in the form of shares in this company

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX Technology Swap in Return for CERs Investor provides or licenses technology to a project Cost of technology paid for partially with CERs from the project

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEXCDM Project Risks

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX POLITICAL RISKS POLITICAL RISKS Political stability Business environment Legal infrastructure Investment culture Changes in economic and energy related policies Failure to obtain national approval for a CDM Project

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX TECHNICAL, COMMERCIAL AND BUSINESS RISKS Technical Risk – Underperformance of projects Business Risk – Force-Majeure Commercial Risk - CER prices fluctuation Investment culture

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX CDM PROJECT SPECIFIC RISKS Possibility of rejection of the project by the CDM Executive Board (Additionality, Baseline) Establishing legal title to the CERs Community or NGO opposition to a CDM project Inaccurate Monitoring or Verification of Emission Reductions

Financing Structures and CDM Project Risks Cairo, April 4 th –April 5 th, 2005 TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX Negotiations Issues with Investors CER Price Duration of Contract (first crediting period or project duration) Financing Structure Split of CERs (% for each party) Investors entry point in project cycle Sale of Verified Emissions Reductions (VERs) or Certified Emissions Reductions (CERs)