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

2. Impact of Carbon Finance on Project Financing at $3/t CO2e CountryProjectTot. $mERs $mIRR w/oIRRw/ER  IRR NicaraguaBagasse3.10.314.618.23.6 GuyanaBagasse5067.27.70.5 KenyaBagasse32.84.8322.122.50.4 BrazilBiomass53134.010.96.9 NicaraguaBiomass3.90.610.1812.091.9 RomaniaEnergy Eff-DH375.516.918.92.0 PolandGeothermal-DH6.01.811.512.61.1 ChileHydro36.07.059.7510.520.8 LatviaMethane162.511.418.87.4 IndiaMethane4030.113.819.55.7 MoroccoWind2001412.7141.3 JamaicaWind26417181.0 PolandWind25.34.6010.911.91.0 Preliminary data on selected transactions

3. Impact of Carbon Finance on Project Financing at $3/t CO2e Technology  IRR Hydro0.8-2.6 Wind1.0-1.3 Bagasse0.4-3.6 Energy Eff.-District Heating~ 2.0 Gas Flare Reduction2-4 Biomass2-7 Municipal Solid Waste>5 Based on preliminary data

4. Methane-capture projects: carbon finance can turn “dogs” into “cash cows” “Traditional” renewables: boost return by 0.5-2.5% –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

5. 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

6. AnnualUgandaCosta Rica Chile Chocosuela off-grid grid ERs (000 t) 49 61 79-138* Net Gen.(GWh) 30 75 160 CO2 ERs/GWh1664 807 494-860 ER (USc/kWh) 0.50 0.24 * Gas vs. 0.15-0.26 coal BL Hydro: Off-grid vs. Grid

7. 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