v2.0 DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH Financing Climate investments in Emerging Markets, The Role of DFIs The Copenhagen Summit – Results and Opportunities for investors 12 November 2009

Climate Change Mitigation & Adaptation Energy efficiency Renewable Energy Biofuels Avoided Deforestation

Energy efficiency

Renewable Energy

Biofuels

Avoided Deforestation

Globally: Renewables Diversification in non- OECD countries has not yet been achieved

New investments in Renewables since 2002

Renewables in Germany 2002-2008 Impetus by legal framework [GWh]

Public Co-Financing effective support for Renewables political will is the starting point : Incentives In emerging markets, Renewable Energy is just about to take off (except for hydro power) In order to reach a mature technological status, these technologies require some backing and support in the beginning

political will is the starting point : Incentives

In emerging markets, Renewable Energy is just about to take off (except for hydro power)

In order to reach a mature technological status, these technologies require some backing and support in the beginning

PPP – important part in Climate Change public funds close a crucial financing gap

Financial Crisis with deep impact Regulation and Promotion stimulate investment Rewards for renewable energies 63 countries/states/provinces have regulations that positively discriminate energy supply by renewables 49 countries/states/provinces are committed to quotas for renewables These jurisdictions are able to attract main financing resources Bi- and Multilateral development finance Increasing support during the crisis KfW Group, EIB, IFC, GEF, ADB und IDB play an important part to mobilise private capital

Rewards for renewable energies

63 countries/states/provinces have regulations that positively discriminate energy supply by renewables

49 countries/states/provinces are committed to quotas for renewables

These jurisdictions are able to attract main financing resources

Bi- and Multilateral development finance

Increasing support during the crisis

KfW Group, EIB, IFC, GEF, ADB und IDB play an important part to mobilise private capital

Necessary Steps to be taken How can the positive development be broadened and rolled out? Providing Risk Capital for Developers and „brave“ pioneers. Strengthening local markets. Transfer funds to flexible mechanisms (CDM) Support the financial sector Reduce Investitment risk. Manage Forex-risk Provide First Loss – Capital and Credit Guarantees Political Risk Insurance Setting the Regulatory Framework. Regulation Support Setting of Standards

How can the positive development be broadened and rolled out?

Providing Risk Capital for Developers and „brave“ pioneers.

Strengthening local markets.

Transfer funds to flexible mechanisms (CDM)

Support the financial sector

Reduce Investitment risk.

Manage Forex-risk

Provide First Loss – Capital and Credit Guarantees

Political Risk Insurance

Setting the Regulatory Framework.

Regulation

Support

Setting of Standards

DEG – Private sector Specialist within the KfW Banking Group DEG Finances and structures investments of private companies in emerging markets and developing countries Offers experience and has been in the markets for 47 years Climate Change is a strategic focus since 2007 invests Risik Capital in project development Tailor-made equities or flexible Mezzanin-solutions Long-term loans with local collateral

DEG

Finances and structures investments of private companies in emerging markets and developing countries

Offers experience and has been in the markets for 47 years

Climate Change is a strategic focus since 2007

invests Risik Capital in project development

Tailor-made equities or flexible Mezzanin-solutions

Long-term loans with local collateral

Fallbeispiel DEG: OLKARIA – Geothermiekraftwerk – Kenia Best EMEA Sustainability Deal 2008 OrPower Inc GEOTHERMIEKRAFTWERK Gesamtinvestition: 150 Million USD Aufbau und Betrieb des Kraftwerks Investitionsprojekt: - Kapazitätserweiterung des im Jahr 2000 errichteten Geothermkraftwerks Olkaria III von 13 MW auf 48 MW - Lage: Rift Valey Province, 100 Km nordwestlich von Nairobi im Hells Gate Nationalpark Langfristiger Stromlieferungsvertrag mit staatlichem Stromversorger Kenya Power Lightning Company EK-Partner/Sponsoren: - ORMAT International Inc. 100 % FK-Geber: DEG als Lead Arranger (40 Mio. USD davon KfW 20 Mio. USD) European Finance Partners/ E FP (40 Mio. EUR) FMO (15 Mio. USD) Proparco (15 Mio. USD) Emerging Africa Infrastructure Fund (15 Mio. USD)

Investitionsprojekt:

- Kapazitätserweiterung des im Jahr 2000 errichteten

Geothermkraftwerks Olkaria III von 13 MW auf 48 MW

- Lage: Rift Valey Province, 100 Km nordwestlich von Nairobi im Hells Gate Nationalpark

Langfristiger Stromlieferungsvertrag mit staatlichem Stromversorger Kenya Power Lightning Company

FK-Geber:

DEG als Lead Arranger (40 Mio. USD davon KfW 20 Mio. USD)

European Finance Partners/ E FP (40 Mio. EUR)

FMO (15 Mio. USD)

Proparco (15 Mio. USD)

Emerging Africa Infrastructure Fund (15 Mio. USD)

Fallbeispiel DEG. Projektentwicklung. The Solution Cooperation with a German company PCC with broad experience in electricity trade Support by experienced technical consultant The Challenge Financing of up to 30 small hydro power plants in different countries High leverage Value Added by DEG Long standing international experiences Deep knowledge of financing of renewable power projects PCC DEG Renewables GmbH Up to 30 small hydro power plants in South East Europe with an estimated capacity of 45 MW total. Equity: up to EUR 9 million

The Solution

Cooperation with a German company PCC with broad experience in electricity trade

Support by experienced technical consultant

The Challenge

Financing of up to 30 small hydro power plants in different countries

High leverage

Value Added by DEG

Long standing international experiences

Deep knowledge of financing of renewable power projects

Best Practice Report. Respondents.

Best Practice Report. Type of Climate Opportunity seen. The survey found: For respondents offering specialized financing products or targeted investments in climate-related areas, renewable energy (20 respondents or 31 percent), industrial energy efficiency (18 respondents) and waste management (18 respondents) lead in activity. The least active area is adaptation-related services (2 respondents), an area that over time will require substantially increased investment in developing countries. The most common investment area for commercial banks surveyed is industrial energy efficiency, while development banks are focused on waste management and investment funds are focused on renewable energy projects. Only one participant had any involvement in Carbon Markets

The survey found:

For respondents offering specialized financing products or targeted investments in climate-related areas, renewable energy (20 respondents or 31 percent), industrial energy efficiency (18 respondents) and waste management (18 respondents) lead in activity.

The least active area is adaptation-related services (2 respondents), an area that over time will require substantially increased investment in developing countries.

The most common investment area for commercial banks surveyed is industrial energy efficiency, while development banks are focused on waste management and investment funds are focused on renewable energy projects.

Only one participant had any involvement in Carbon Markets

Get in touch! Kai Buntrock Senior Investment Manager Climate Change DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH Kämmergasse 22 50676 Köln Deutschland Telefon: 0221 4986 - 1808 E-Mail: Kai.Buntrock@deginvest.de Mobil: 0172 234 6867 Internet: www.deginvest.de