Impact of Carbon Finance on Project Financing Prototype Carbon Fund April 17, 2002

Impact of Carbon Finance on Project Financing at $3/t CO2e CountryProjectTot. $mERs $mIRR w/oIRRw/ER  IRR NicaraguaBagasse GuyanaBagasse KenyaBagasse BrazilBiomass NicaraguaBiomass RomaniaEnergy Eff-DH PolandGeothermal-DH ChileHydro LatviaMethane IndiaMethane MoroccoWind JamaicaWind PolandWind Preliminary data on selected transactions

Impact of Carbon Finance on Project Financing at $3/t CO2e Technology  IRR Hydro Wind Bagasse Energy Eff.-District Heating~ 2.0 Gas Flare Reduction2-4 Biomass2-7 Municipal Solid Waste>5 Based on preliminary data

Methane-capture projects: carbon finance can turn “dogs” into “cash cows” “Traditional” renewables: boost return by % –Off-grid projects have higher carbon factors –Makes marginal deals bankable –Reduces subsidy required – may attract ODA (addl boost) Improves project’s access to capital markets thru: –Certain, contractual flow of FX from reliable counterparty –“Seal of approval” –Improved Quality of cash flows  Sponsor can borrow against contract (like PPA) Impact of Carbon Finance on Project Financing at $3/t CO2e

Methane project : India SWM Gasification of solid waste 15 MW plant, 95 GWh/ann, $38m cost ERs from: –Power generation displacing fossil fuel (40%) –Methane capture & conversion (60%) Project IRR Equity IRR Without carbon finance14% 16% With carbon finance19% 25% Impact of Carbon Finance on Project Financing at $3/t CO2e

AnnualUgandaCosta Rica Chile Chocosuela off-grid grid ERs (000 t) * Net Gen.(GWh) CO2 ERs/GWh ER (USc/kWh) * Gas vs coal BL Hydro: Off-grid vs. Grid

Conclusions: High financial impact on Methane projects Catalytic for traditional renewables as well –Improved financial viability Quality of cash flows Quality of asset – SRI features  Enhanced ability to attract financing + donors –Greater impact for off-grid solutions –Local environmental, social benefits –Long crediting period is critical for renewables Impact of Carbon Finance on Project Financing