EcoSecurities Group Ltd CONFIDENTIAL Carbon Finance and Oil and Gas Context Paul Soffe – Senior Adviser Africa Oil and Gas Conference April 2004 NOT AN OFFICIAL UNCTAD RECORD

EcoSecurities Group Ltd CONFIDENTIAL 1) What is the opportunity? The owners of sustainable assets in energy, natural resources, and environmental technology have the potential to develop, capture and sell rights to the positive environmental performance they engender. The monetization of these environmental benefits is a rapidly growing business opportunity.

EcoSecurities Group Ltd CONFIDENTIAL $$$ conventional revenue stream Clean energy or forestry investment Carbon credits 1) Opportunity: An additional value from “clean” sector projects

EcoSecurities Group Ltd CONFIDENTIAL Types of qualifying projects in the energy sector Modification/ replacement of existing plant, equipment, infrastructure practice or process E.g., fuel switching, energy efficiency, methane capture “Retrofits” Construction of new power plants to meet a growing demand for power “Greenfield”

EcoSecurities Group Ltd CONFIDENTIAL All things equal, carbon trading would enhance competitiveness of clean energy technologies

EcoSecurities Group Ltd CONFIDENTIAL 1)Opportunity: Monetizing carbon credits can increase project IRR’s

EcoSecurities Group Ltd CONFIDENTIAL A Fugitive Methane Project Example BLUE Indicates Extra Debt Capacity

EcoSecurities Group Ltd CONFIDENTIAL 1) Opportunity: Leverage investment in ‘clean’ sectors Project Equity Carbon Debt “Carbon capital” could leverage a much larger amount of investment in the real assets

EcoSecurities Group Ltd CONFIDENTIAL 3) The carbon market: What is it and where is it ?

EcoSecurities Group Ltd CONFIDENTIAL 3) Market: CO2 market and environmental regulation (to 1998 only) Forestry projects, to 1998 only. Source: Moura Costa & Stuart 1998

EcoSecurities Group Ltd CONFIDENTIAL Carbon market volumes (Source: Point Carbon: Global Market Outlook, 2003)

EcoSecurities Group Ltd CONFIDENTIAL The greenhouse gas emissions trading market is expected to grow from $300 mm today to $15 billion annually by 2012 Estimated size of the market for GHG emissions trading Carbon Transactions 0 5,000 10,000 15,000 20,000 25, US$ millions Transaction Fees Other Services

Secondary markets and liquidity

EcoSecurities Group Ltd CONFIDENTIAL Kyoto compliant World Bank Prototype Carbon Fund (PCF) and BCF Dutch Government ERUPT and CERUPT Programme: JI & CDM Dutch government IFC and PCF funds Obligated companies under the UK ET Scheme, & under EU ET programme (2005) and other trading schemes Private sector companies in Europe, Japan and Canada Non- Kyoto compliant US schemes, states and cities (Seattle, Oregon, Massachusetts, Chicago) and federal levels Canada – BC Hydro Australia 3) Markets: Existing Buyers

EcoSecurities Group Ltd CONFIDENTIAL Kyoto compliant PCF – U$ 2.5 to 3.5 / t CO2 ERUPT first round: € 5.00 to € 9.00 ERUPT 2 and CERUPT: expected max € 4.00 Private sector investors: U$ 3 to U$ 4 Non- Kyoto compliant U$ 0.50 to U$ 2.00 EU trading system: € / t CO2 estimated 3) Markets: Current price range

EcoSecurities Group Ltd CONFIDENTIAL 4) Rules for participation : How does it work, and what are the requirements -Additionality -Host country approval -Sustainable development benefits -Project cycle

EcoSecurities Group Ltd CONFIDENTIAL 4) Rules: Additionality and Baseline GHG emissions Time Project commissioned “With project” emission level “Without project” emission level Carbon credits

EcoSecurities Group Ltd CONFIDENTIAL 4) Rules: CDM project cycle Pre-investment phase Project design: Baseline report PDD Project validation / host country approval Project registration Monitoring Verification Issue of CER Implementation Certification Investment & Operation

EcoSecurities Group Ltd CONFIDENTIAL 5) Sectors and Project Types under the CDM Energy Supply Side - Renewables, Technological Upgrades, Biomass, Fuel Switching Energy Demand Side - End Use Efficiency Fugitive Methane Emissions Control - Landfill Gas, Coal Mine Methane, Water Treatment, Anaerobic digestion Agriculture Wastes Sinks - Forestry, Land Use Change, CO2 Scrubbing, Long Term Sequestration

EcoSecurities Group Ltd CONFIDENTIAL Oil & Gas Options 1. Energy Efficiency E.g., – BP & Shell have used carbon trading as driver to improve energy efficiency (oil & gas processing and delivery) E.g., Rang Dong, oil production, gas flaring Why? Saves money, makes money, makes sense. 2. Clean Technologies – Renewables E.g., – Petroleum Company of Jamaica – wind project E.g., - Fiji Electricity Authority – building wind, hydro, geothermal plants Why? Increasing cost of oil, security of supply, national interest, environmental concern, carbon finance

EcoSecurities Group Ltd CONFIDENTIAL The Economics of waste to energy projects are especially attractive Wind farm project: 20 MW installed capacity 50,000 t CO 2 ER’s p.a.(10 years) Project costs: US$20m (+) Carbon $3/ t CO 2 = $5/ t CO 2 = $2.87m Proportion of project $3/ t CO 2 = $5/ t CO 2 = 14.35% Waste to energy project: 2 MW installed capacity >50,000 t CO 2 ER’s p.a.(10 years) Project costs: US$3.5m Carbon /t CO 2 = /t CO 2 = $2.87m Proportion of project $3/ t CO 2 = $5/ t CO 2 = 82.0%

EcoSecurities Group Ltd CONFIDENTIAL NovaGerar Landfill gas-to-energy Project – Brasil

EcoSecurities Group Ltd CONFIDENTIAL Jamaican Wind Project

EcoSecurities Group Ltd CONFIDENTIAL Olkaria geothermal project in Kenya

EcoSecurities Group Ltd CONFIDENTIAL Pipeline: Transactional Services Project Country TypeCO2e(t/yr) Status Okaria 3 Kenya Geothermal 75,000LOI with World Bank Felda Malaysia Biomass 50,000in negotiation PhilBio Philippines Anaerobic Dig. 150,000In negotiation Licorcia Nicaragua Anaerobic Dig. 100,000 Patagonical Argentina Landfill 500,000 AT Biopower Thailand Biomass 200,000LOI with IFC V&M Brazil Biomass 1,000,000ERPA with IFC EEN El Salvador Biomass 30,000 SWI Thailand Anaerobic Dig. 250,000In negotiation Nobracel Brazil Biomass 100,000Buyer term sheet signed. Unidos Brazil Forestry 100,000 NovaGerar Brazil Landfill 300,000ERPA agreed with World Bank t

EcoSecurities Group Ltd CONFIDENTIAL In summary:  Flexibility mechanisms have the potential to provide a substantial boost to clean energy sector  The market for ERs will be in the U$ billions, leveraging even more in other forms of capital  There is the potential for a large number of good projects to be developed  Need for policy certainty  Need to support entrepreneurial early movers  Need to support small scale projects

EcoSecurities Group Ltd CONFIDENTIAL For further information, please contact: EcoSecurities Group Ltd.

EcoSecurities Group Ltd CONFIDENTIAL Paul Soffe at EcoSecurities  5 years employment since leaving EcoSecurities  Difficult market & risky – how risky – Russian ratification or EU Burden sharing agreement  Activities – policy analysis & development, project development & structuring. Particular interest in transaction side of the business:  Recent Activities  EcoSecurities & Standard Bank London Carbon Fund for European Government  Spoke last week in Moscow at Carbon Forum – Illarionov!  Finalising Jamaica CDM Wind Project – Executive Board and buyer.  Capacity building – guidelines for a bank, workshops in ACP countries  Fiji hydro project CDM development

EcoSecurities Group Ltd CONFIDENTIAL A Wind Project Example BLUE Indicates Extra Debt Capacity