1. Possible Modalities of Government Support for Private Clean Energy Investments/Financing Government support could be in different forms depending on types of “barriers” perceived by private investors & lenders: –TA (grants) to help develop business; enhance capacity of lenders & borrowers –Grants/concessional loans to make projects economical (investment costs; transaction costs); to address lenders’ liquidity –Guarantees to mitigate risks that private lenders cannot take/are reluctant to take, for example: Credit risks of borrowers (start-ups, SME sponsors) Risks as to the stability of emerging clean energy regulations IBRD support requires sovereign government indemnity

2. Possible Modalities of IBRD/CTF Support Guarantee support could mitigate different risks Types of Projects Government Role IBRD Instrument to support GOT CTF Instrument Private Projects (SME-type RE &EE) Partial Guarantor ( credit risk of private entities through FI administrator ) IBRD Loan ( to backstop GOT obligations ) CTF Loan Public Infrastructure Projects Partial Guarantor ( credit risk of public borrowers ) IBRD Partial Credit Guarantee CTF Loan or CTF Guarantees Public-Private Infrastructure Projects Partial Guarantor ( limited contractual undertaking ) IBRD Partial Risk Guarantee CTF Loan IBRD can provide Loan and Guarantee for the same project, depending on specific project needs

3. Partial Credit Guarantee Program Escrow Account GOV Local Commercial Banks Entities engaging in clean business (renewable SPPs, ESCOs etc.) Guarantee Program Administrator ( Local Guarantee Company, etc. ) World Bank (IBRD) IBRD-supported Local Partial Credit Guarantee Program with a Local Guarantee Company as Program Administrator How to address the credit risk of borrowers that banks will not take fully? ownership Partial Credit Guarantees (could be portfolio guarantee) for risk sharing between GOV and lenders Guarantee Program Implementation Agreement IBRD Loan Agreement withdraw upon guarantee call withdraw upon guarantee signing loans CTF

4. Partial Credit Guarantee Program Escrow Account Local Commercial Banks Entities engaging in clean business Guarantee Program Administrator (Guarantee Company) IBRD-supported Local Partial Credit Guarantee Program with a Local Guarantee Company as Program Administrator How to leverage GOV resources? Partial Credit Guarantees loans 1. Risk sharing between GOV and lenders under Partial Guarantees 2. Professional management & close monitoring to result in truly revolving nature of fund resources 3. Borrowers’ own resources for borrowing discipline & to become credible borrowers guarantee fee income to offset the cost of the Guarantee Program

5. 5  For sovereign or agency borrowing in the commercial market for IBRD countries, chiefly in support of public projects/fiscal support  Cover a portion of debt service payment for bonds/loans:  Principal and/or interest (e.g., late maturities)  Coverage can be structured flexibly  Two types of credit guarantees:  Partial Credit Guarantees (PCG) for investment projects: borrower can be Government/agency  Policy-Based Guarantees (PBG) for Development Policy Lending (i.e., fiscal support)  PCG can be offered for local currency debt What are World Bank Partial Credit Guarantees ?

6. World Bank Support for Principal Repayment A. World Bank’s guarantee of a single coupon payment on a rolling basis PV=56% PV=3% Single Coupon Payment USD 300 m 100 B. World Bank’s guarantee of the principal World Bank Partial Credit Guarantees (PCG) PCG can be structured flexibly

7. 7 What are World Bank Partial Risk Guarantees? Partial Risk Guarantee (PRG) covers lenders in case of debt service default caused by Government not meeting its commitments to private projects Commercial Lenders Project Company Government Guarantee Indemnity Agreement Government Undertakings Loans World Bank

8. Government Indemnity Project Company (Wind Power, Hydro Power, Urban Transport Etc.) Commercial Bank Private Investors Equity Project Loan World Bank (IBRD) Partial Risk Guarantee For Limited-Recourse Debt or Sponsor Loan Possible application for Clean Energy/Transport Projects Sponsor Loan Government Undertaking or Guarantee Repayment of commercial debt covered by PRG for government risks PRGs can also be structured with a deemed loan or a letter of credit structure to benefit project companies (i.e. equity investors) as well. CTF Incremental Cost Support

9. Clean Technology Fund CTF Guarantee Instruments for Public Sector Operations CTF resources may be deployed as guarantees to promote low carbon technology projects and programs CTF support “incremental risks” (vs. conventional risks) that are not assumed by sponsors & lenders –Technology & economic performance risks: Application of commercially viable technologies in new markets Unfamiliarity resulting in requirement for higher returns Unwillingness of manufacturers to warranty performance Increase in O&M costs; degradation of performance beyond warranty –Commercial & financial risks: Perceived credit risks resulting in unavailability of financing Small project scale and high transaction costs [Country & political risks: CTF would not address these risk for “public sector” projects]

10. Clean Technology Fund CTF Guarantee Instruments for Public Sector Operations Guarantee support can be structured flexibly and may take various forms, but two categories have been proposed: –Loan Guarantee: up to 100% (but sharing in encouraged) to extend the maturity of commercial loans –Contingent Finance: disbursed to the project upon underperformance of a low carbon technology (not commercially insurable or beyond the insurable period) Borrower: government, sub-national governments, SOEs, etc. MDB issues guarantees/provide contingent finance backed by funds in the CTF - no sovereign government indemnity required Guarantee charge: 0.1% per annum US dollars only