1. Structuring Credit Facilities for Carbon
Bas Marteijn
Regional Head - Fortis Energy & Utilities Group
XXX Ask Communication for new picture
30 December 2018
Designator | author

2. Agenda JI in Russia Today Credit Assessment
Credit Assessment – Carbon Specific Credit Risks
Fortis Carbon Financing Solutions

3. JI in Russia Today – Building the Framework
Regulatory Status:
Regulatory/Administrative platform finalized in February 2008
Ministry of Economic Development & Trade (MEDT) designated as lead agency
Cap set at 300mt for 2008 – 2012 Kyoto period
JI Track II Approval – case-by-case mandatory international verification
Framework Challenges:
Regulatory/Procedural – Recently finalized gaining experience
Limited Kyoto phase II window, phase III and post?
JI Sector developments - Russian Gas/Electricity market reform and Gas flaring
Market Mechanics - International Transaction Log
Greenhouse Gas emissions approaching 1990 levels - less available for sale, ERU’s for compliance
Environment versus Economic Growth
XX Rational behind the cap of 300 mt?
Market Mechanics - International Transaction Log, XXCountry Registry??

4. JI in Russia Today – Sector Distribution
Concentration in Fugitive Emissions
Gas/Electricity/Heat sector reform
Gas flaring debate increases momentum and may become a JI sector
Sector distribution of JI projects in process Million tons Co2 (Total ~ 210)
XX Who are the Discos shareholders? What are their view
Gas flaring debate increases momentum and may become a JI sector
XXIs JI Sector/methodology
Concentration in Fugitive Emissions (low hanging fruit, ERUs vital to project implementation by Discos)
Gas/Electricity/Heat sector reform can provide incentive through penalties for JI projects
Source: Fortis Research

5. JI in Russia Today – Project Pipeline
MEDT Cap 300 mt
Russia has excess of > 3,000 millions tons of CO2 potentially available for sale (= 1990 emission level -current emissions)
Prospective JI Projects representing ~ 210 million tons CO2 are currently in approval process
Cap set by MEDT at 300mt for 2008 – 2012 to avoid market disruption; split according to sector: Energy (68%), Industrial (8%), Chemical (2%), Agriculture (10%), Waste Treatment (5%), CO2 Absorption – Forestry (7%)
First Russian projects might achieve Final Determination end of Q3 – beginning of Q4 2008
XXProcess Time/Project size distribution in Jumbo

6. Credit Assessment - Predictability & Stability of Cash Flows
Sponsors (Owners)
External Risks
Market
Regulatory
Country
Environmental Risks
Equity: Gearing (Equity /Debt)
Sponsor Support: Explicit/Implicit
Supply
PROJECT
Off-take
Fixed Price/Volume
Supplier Performance Risk
Fixed Price/Volume (Merchant Risk)
Offtaker Performance Risk (Tolling)
Construction & Maintenance
Contractors
Construction Risk (Pre- and Post Completion)
Operations & Maintenance
Equipment – Guaranties / Warranties

7. Credit Assessment – Carbon Specific Credit Risks
Delivery
Conversion (AAUs to ERUs)
Price Volatility / Market Risk
Regulatory (Kyoto Phase III)
Transfer (Int’l Transaction Log)
Security (Work-Out / Value)
Sponsors (Owners)
External Risks
Market
Regulatory
Country
Environmental Risks
Equity: Gearing (Equity /Debt)
Sponsor Support: Explicit/Implicit
Supply
PROJECT
Off-take
Fixed Price/Volume
Supplier Performance Risk
Fixed Price/Volume (Merchant Risk)
Offtaker Performance Risk (Tolling)
Construction & Maintenance
Contractors
xx do ERUs get registered like CER
Construction Risk (Pre- and Post Completion)
Operations & Maintenance
Equipment – Guaranties / Warranties

8. Fortis Carbon Financing Solutions
Project Financing
Credit Support
Monetization
Non-Recourse
Limited Recourse
Corporate Finance
Bonding
Mezzanine Finance
Convertibles
Equity
Security of payment flow
Security of ERU flow
Advancing Credit
Cash
Letter of Credit
Carbon SWAP lines
ERU Repayment/Security
Price Hedging
Basis Hedging
xx wording to check
XX Trust Work for ERUs & Swaps work

9. Thank you bas.marteijn@nl.fortis.com + 31 10 401 59 13
30 December 2018
Designator | author