2. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 1 Capacity Development for CDM Second National Workshop for Egypt Cairo, 12-13 January 2004 Financial issues in relation with CDM projects Samir Amous, APEX, Tunisia Regional Centre for North Africa and Middle-East Tel : +216 71 848 094 --- Fax : +216 71 843 453 amous.apex@gnet.tn amous.apex@gnet.tn

3. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 2 Aspects to be considered : CDM Financing issues Financial viability Funding Scheme and mobilization of resources Disbursement issues Risk Management

4. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 3 CDM as a part of a broader Funding scheme involving other sources

5. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 4 Important to avoid confusion and frustration : CDM is not a panacea CDM is not about to meet all funding needs  CERs x carbon rate Might not contribute to investment, but rather to increase annual cashflows  project profitability CDM is not about to fund all types of projects  CO2 reduction+fit CDM criteria Need to involve classical funding mechanisms and sources

6. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 5 The CDM Carbon market will determine to which extent CDM investors can contribute CDM funding contribution : likely to be an Add-on rather than core funding Needs for close linkage with WB, Regional Banks, UNDP, Bilaterals (linkages with ODA), etc.

7. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 6 Total Investments : US$ 50 million (transaction costs not included) Emission reductions : 1.4 million T- CO2 eq. over the lifetime of the project (20 years) CDM as a subcomponent in a broader financial context : cogeneration development in Tunisia

8. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 7 CDM as a subcomponent in a broader financial context : cogeneration development in Tunisia

9. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 8 Total Investments : US$ 155 million (transaction costs not included) Emission reductions : 8.2 million T- CO2 eq. over the lifetime of the project (30 years) CDM as a subcomponent in a broader financial context : Wind power development in Tunisia

10. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 9 CDM as a subcomponent in a broader financial context : Wind power development in Tunisia

11. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 10 Total Investments : US$ 1.2 million (transaction costs not included) Emission reductions : 0.2 million T- CO2 eq. over the lifetime of the project (10 years) CDM as a subcomponent in a broader financial context : Efficient Residential Lighting (CFLs)

12. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 11 CDM as a subcomponent in a broader financial context : Efficient Residential Lighting (CFLs)

13. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 12 Need to develop capacities not only on CDM but also on financial issues Imagine and prepare a complete funding scheme, with parallel contact with various co-investor CDM as a subcomponent in a broader financial context

14. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 13 Lifetime implications

15. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 14 CDM as a subcomponent in a broader financial context : cogeneration development in Tunisia

16. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 15 CDM as a subcomponent in a broader financial context : Wind power development in Tunisia

17. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 16 Financial Viability

18. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 17 CDM allows planned project to enhance their financial performance, depending on: Quantity of CERs Price of CERs Transaction costs

19. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 18 Quantity of CERs generated will depend on: Crediting period selected : 10 years without renewal, or 7 x 3 years Risks associated with the project Volatility of the CERs Price of CERs generated will depend on: Current Carbon Market (US$3-5) Future prospects for PK and CDM implementation Willingness to promote a technology Existence of guarantees Other collateral impacts (positive or negative)

20. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 19 Transaction costs: Feasibility studies (PDD) Preparation of Funding scheme and fund raising Governmental permits Contractual arrangements Operational Entity fees (Validation, Verification) Monitoring and Reporting Registration and Certification Updating the baseline Adaptation Levy (2%) Share of Proceeds

21. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 20 The issue of Transaction Costs How to reduce TC How to establish a balanced portfolio : equalization system of TC ?? Better take the development priorities into account CDM as a subcomponent in a broader financial context US$ 1.5 /TCO2 0.25 Cts/TCO2

22. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 21 Fund raising for CDM projects

23. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 22 Fund raising Complementary funding should be estimated Contact with possible funders – either grants, loans or equity funds  national, bilaterals, multilaterals)

24. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 23

25. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 24 Disbursement schedule from CDM investor

26. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 25 CDM as a subcomponent in a broader financial context : Disbursement Schedule from CDM investor 12% End of the First Commitment Period

27. Capacity Development for CDM - Egypt, Second National Workshop - Phase II - Cairo, 12-13 January 2004 26