Engaging the private sector for green growth and climate change, PROPARCO's experience

1. Engaging the private sector for green growth
and climate change, PROPARCO‘s Experience
OECD Workshop – 1st March 2016

2. PROPARCO AT A GLANCE
72 facilities EUR 1.1bn commitments
180 staff members13 regional offices
EUR 3.8bn portfolio370 clients
KEY FIGURES 2014
SHAREHOLDERS
63%
22%
12%
2%
1%
FUNDS AND
ETHICAL
FOUNDATIONS
CORPORATES
INTERNATIONAL
FINANCIAL
INSTITUTONS
FRENCH
FINANCIAL
INSTITUTIONS
AFD
In % of the total portfolio at 31 December 2014
BANKS &
INTERMEDIATION
› Financial institutions
› Microfinance institutions
› Insurance and
reinsurance
› Investment funds
SECTORSPRODUCTS
EQUITY
› EUR 0.5m to EUR 20m
› 5 to 8 years
LOANS
› EUR 3m to EUR 100m
› 5 to 20 years
GUARANTEES
& OTHERS
› EUR 3m to EUR 100m
› 5 to 20 years
47%
INFRASTRUCTURE
› Energy
› Transport
› Telecoms
› Mines
› Water / waste
23%
CORPORATES
› Agribusiness
› Health
› Education
› Tourism
› Industry
30%
11% 89% >1%
ACTIVITY 2014
P u r s u i n g t h e s u s t a i n a b l e d eve l o p m e n t g o a l s t h r o u g h
p r i v at e s e c t o r s u p p o r t

3. A BROAD GEOGRAPHICAL MANDATE WITH A STRONG
FOCUS ON AFRICA

4. PROPARCO, A NETWORK PLAYER OFFERING A WIDE
RANGE OF SOLUTIONS

5. FIGHT AGAINST CLIMATE CHANGE : PROPARCO’S 10-
YEAR COMMITMENT

6. OUR CLIMATE STRATEGY : 3 PILLARS & 5 PRIORITIES

7. RENEWABLE ENERGY

8. ENERGY EFFICIENCY

9. SUSTAINABLE TRANSPORT / WATER

10. F O C U S O N F I N A N C I A L I N S T I T U T I O N S
S I N C E 2 0 0 9 , P RO PA RC O P ROV I D E D € 4 5 0 M TOW A R D S
G R E E N F I N A N C E
» €450 M OF PROJECTS SIGNED BETWEEN 2010- 2015
» 5 COUNTRIES AND 1 MULTI- COUNTRY PROJECT IN LATIN AMERICA, ASIA AND MIDDLE EAST
» 14 CLIENTS
LATIN AMERICA &
THE CARIBBEAN
€ 120m
MEDITERRANEAN &
MIDDLE EAST
€ 170m
ASIA
€ 160m

11. » RENEWABLE ENERGY PROJECTS: HYDRO, WIND,
BIOMASS, SOLAR…
PROPARCO is involved in several renewable energy projects for more than €330M,
as:
- Hydro power and wind turbine in Turkey with Garanti Bank for € 50m,
- Hydro or wind power plants in Sri Lank with NDB for $ 60m,
- Hydro power plant in Panama with Banco Aliado for $ 20m
» ENERGY EFFICIENCY: GREEN BUILDING,
COGENERATION, TRANSPORT, …
PROPARCO supports the financing of energy efficiency projects in Turkey and
China with:
- AKLEASE: financing energy efficiency projects by way of lease contracts:
finance a tri-generation system to provide electricity, heating and cooling
energy for a shopping center
- IS BANK: € 50m dedicated to housing loans meeting Turkish energy efficiency
standards
- FEH in China: € 25m to finance clean buses via a guaranty
G R E E N F I N A N C E I S D E F I N E D A S R E N E W A B L E
E N E RG Y O R E N E RG Y E F F I C I E N C Y

12. F I N A N C I N G V I A LO N G T E R M C R E D I T FAC I L I T Y
 Amount: $ 15- 60M
 Currency: EUR or USD
 Term: up to 10 years with grace
period
 Commercial terms: market related
terms (Euribor/ Libor + margin)
 Eligible projects: renewable
energy or energy efficiency
 E&S Requirement:
implementation of an ESMS
CONDITIONS
 Currency mismatch- projects
must generate EUR or USD income
or swap market must be available
 Resource adequacy: credit
terms (rates), timeline for
disbursment…
 Need for technical assistance
to better identify and assess the
projects in the field of energy
efficiency
 Reputational risk:
Responsibility of E&S DD and
impacts?
LIMITS

13. C A S E S T U DY 1 - E N E RG Y E F F I C I E N C Y I N T U R K E Y
One of the few countries where we have been able to finance
energy efficiency projects
» Housing loans for new houses complying with local EE regulation
» Financing of tri-generation equipment for a shopping center
Drivers:
 Primary demand for energy is growing rapidly due to
demographic growth as well as economic growth.
 Turkey is a net importer of energy, which relies on imports of
fossil fuel for its thermal production
Public policy promoting energy efficiency to reduce the growing
demand of energy
But generally, those projects are hardly financed without technical
assistance to support LFI
for energy audits, project structuring, assessment of projects
eligibility…

14. C A S E S T U DY 2 - F I N A N C I N G O F R E N E W A B L E
E N E RG Y I N PA N A M A
A country with important potential for renewable energy
» $20m facility: 3 hydro power plants on Rio Piedra in Chiriqui Province
» $30m facility : 4 hydro power plants in Chiriqui Province and 1 wind power
project
Rationale
 Willingness of the government to promote these new sources of
energy
 Strong involvement of commercial banks in financing those
projects
However, hydro projects are considered as high risk project from
an E&S point of view and Chiriqui river a sensitive area
E&S REQUIREMENTS
» Development and implementation of an ESMS according with E&S
action plans negociated between the borrower and Proparco
» Assessment criteria and action plans for high risk projects more
restrictive than those laid down by the ANAM (local agency for the
environment)
» Definition of eligibility criteria for hydro power plants (capicity max
of 20MW – height of dam limited to 15m)

15. E n t r e p r e n d r e p o u r u n a v e n i r d u r a b l e
THANK YOU

16. PROPARCO’s principles and key strengths
• GOALS
• Stimulating growth
and job creation.
• Developing and
deepening financial
markets.
• Promoting
responsible
and sustainable
economic models.
• PRINCIPLES
• Subsidiarity:
Not to substitute local
private stakeholders
when they are in a
position to take action.
• Additionality:
Stepping in where market
forces prove insufficient,
while having effect on
development.
• Patient investment:
Offer its partners
long-term resources.
• Leverage:
Catalyze private
investment in
Southern countries.
• Responsibility:
Finance investments
with strong
developmental impacts.
• KEY STRENGTHS
• Climate expertise:
Renewable energy, energy efficiency
• In-depth knowledge and experience of Africa:
Nearly 40 years of continuous presence,
through 5 regional offices.
• Role as promoter of development:
Support for projects with effect on development.
• A network of partners:
Multilateral institutions, European Development
Finance Institutions (EDFI), private investors
and commercial banks.
• Environmental and social approach:
Assisting clients in improving their environmental
and social performance.
• Multi-sector expertise:
Financial and technical know-how.
• Synergies between PROPARCO and AFD :
Extensiveknowledgeof countries,directcontactwith
localauthoritiesandmaindonors,possibilityof co-
financing.
• High standard due diligence procedure :
Anti-money-laundering and counter-terrorism
financing procedures, environmental and social
impact measurement.

17. Large network of partners
PROPARCO fulfills its function as a catalyst, thanks to its large network of public and private sector partners.
COOPERATION BETWEEN
EUROPEAN DFIs
• Since 1992, PROPARCO
has been an active
member of the EDFI,
the association of
European Development
Finance Institutions.
• Creation of two co-
financing facilities:
- EFP (European
Financing Partners) :
special purpose vehicle
for co-financing of
private-sector enterprises
in ACP countries(Africa,
Caribbean, Pacific);
- ICCF (Interact Climate
Change Facility) : a
facility endowed today
with €406m in resources
that finances climate
change and climate
efficiency projects.
3-WAY COOPERATION:
PROPARCO, DEG AND FMO
• Joint financing facility
signed in October 2012
between PROPACO, DEG
and FMO.
• Purpose: to facilitate co-
financing for projects by
pooling resources
throughout the
examination, investment,
negotiation and
monitoring phases.
• 30 joint projects signed
in 2012 and 2013.
• 25% of 2012 and 2013
commitments
co-financed with FMO
or DEG.
PARTNERSHIP AGREEMENT
WITH IFC
• In 2009, PROPARCO
entered into a Master
Cooperation Agreement
with IFC.
• Purpose: to facilitate
co-financing for projects
in developing regions
that commercial banks
tend to bypass.
• In 2013, PROPARCO
contributed funding to 5
IFC projects focused on
agribusiness in India,
telecommunications in
Bangladesh, as well as
renewable energy
and energy efficiency
in the Ivory Coast, India
and Southeast Asia.
OTHER PARTNERSHIPS
• Development banks:
African Dev. Bank (AfDB);
Asian Development Bank
(ADB); Dev. Bank of South
Africa (DBSA); Korea Exim
Bank; European Bank for
Reconstruction and
Development (EBRD);
European Investment
Bank (EIB); Interamerican
Dev. Bank (IDB)
• Private development
finance companies:
Emerging Africa
Infrastructure Fund
Limited (EAIF).
• Investment funds
• Shareholder network :
~30 private and public
shareholders from the
North and the South
(financial institutions,
corporates, funds and
ethical foundations)

18. SEC TOR A L EXPER TISE
RENEWABLE ENERGY : OUR STRATEGY
› Contribute to limiting climate change and diversifying energy mix
› Finance profitable projects without feed-in tariffs as a priority
› Promote and support the introduction of new technologies in emerging
countries
› Establish partnerships with promoters specialized in their sector for tried-
and-tested technologies
› Evaluate our financing: Private Sector & Development Magazine in May
2010, “Private equity and clean energy: how to boost investments in
emerging markets?”
IMPACTS AND KEY FIGURES
TOTAL INSTALLED CAPACITY IN THE PORTFOLIO
4646,2 MW, I.E. 58% OF ENERGY PROJECTS
HYDRAULIC
2,449 MW
WIND
1018MW
SOLAR
250,2 MW
GÉOTHERMAL
71 MW
CO2 EMISSIONS RÉDUCTION (*)
919,900TONNES P.A.
Contributionexpectedfromprojectsfinancedand
cofinancedbyPROPARCOin2014

19. Cobra
Peru
2015
2 Senior Loans
USD 29 m
Wind
SEC TOR A L EXPER TISE
RENEWABLE ENERGY
EoloNica
Nicaragua
2012
Loan
USD 26,5m
Wind
Hidrotenencias
Panama
2012
Equity
USD 7,5m
Hydro
T Solar
Peru
2011
Mezzanine Loan
USD 7,15m
Solar
Brennand
Brazil
2011
Loan
EUR 40m
Hydro
Belen/Eolos
Turkey
2012/2010
Loan
EUR 31 and 11,5m
Wind
Eurus
Mexico
2010
Loan
USD 35m
Wind
Theun Hinboun
Laos
2009
Loan
USD 40m
Hydro
Polesine
Uruguay
2013
Senior Loan
USD 40 m
Wind
Solarpack
Chile
2013
Senior Loan
EUR 25m
Solar
Electra
Brazil
2013
Senior Loan
EUR 30m
Hydro
NRPPL
India
2013
Equity
INR 825m
Solar
Vesa
Honduras
2013
Senior Loan
EUR 21m
Wind
Sindicatum
Asia
2013
Senior Loan
USD 15m
Biomass
Oryx, GLAE and
EJRE
Jordan
2014
Senior Loan
USD 50 m
Solar
Itezhi Tezhi
Zambia
2014
Senior Loan
USD 36 m
Hydro
Penonome
Panama
2014
Senior Loan
USD 20 m
Wind
Terra Solar
Honduras
2014
Senior Loan
USD 12 m
Solar
Lake Turkana
Kenya
2014
Senior loan
EUR 50 m
Wind
Khi Solar
South Africa
2012
Senior Loan
USD 30 m
Solar
Solaire Direct
Chili
2015
Senior Loans
USD 23 m
Solar
Krnovo
Montenegro
2015
Mezzanine
USD 20 m
Wind

20. A GROWING AND DIVERSIFIED ACTIVITY
2015 :
 €960 M NEW COMMITMENTS
 67 COUNTRIES OF INTERVENTION
 75 NEW TRANSACTIONS

21. NEW CHALLENGES FOR 2016
• New ambitions: growing from 1.1 Bn€ in 2015 to 1.9 Bn€ in
2020 in support of the Sustainable Development Goals.
• A new step for 2016: target of 1.25 Bn € of new authorised
commitments including 600 M€ on the African continent (530
M€ in Sub-saharan Africa)
• Focus on climate change: 30% of new commitments to
contribute to climate change mitigation or adaptation.
• More value added: focus on equity, quasi-equity & additional
support through technical assistance for our clients.
• Mobilising new funding: develop new products with EU finding
and Global Climate Fund and develop existing initiatives.

22. A WIDE RANGE OF FINANCIAL INSTRUMENTS
EQUITY, QUASI-EQUITY, LOANS, GUARANTEES (EUR, USD, LOCAL
CURRENCIES).
Longtermloans
•Diversified loans :
senior, mezzanine, etc ...
•In EUR, USD or local
currencies
•From 3 to 100 M€
•From 5 to 20 years
•Cofinancing with other
development finance
institutions
Equityinvestments
•Direct investments in
equity or quasi equity
(convertibles,
preference shares, etc
…) of financial
institutions or
corporates.
•Investments through
specialised or generalist
private equity funds.
•From 0,5 to 20 M€
•Always minority
investments, with a
horizon of 5 to 8 years.
Guarantees
•Helping clients to
mobilise local currency.
•Guarantees for bonds or
bank loans.
Guarantees for long
term local currency
loans.