TFS - ADB CE Forum Presentation June 3 08

8/14/2019 TFS - ADB CE Forum Presentation June 3 08

1/15

Carbon Market Overview:Highlighting Sustainable Development

In the Demand & Supply Agenda

Presentation made for theADB ASIA Clean Energy Forum

byRey A. Guarin

CDM Business Development


2/15

Outline of P resentation

Identifying Risk Factors Affecting

CDM P roject Investment Viability

TFS Green as a ADB DMC Sellers Representative:Y our P artner in Sustainable Development

How to Leverage Sustainable Development amongstDeveloping M ember Countries (DMC)

Curren t Demand and Supply P icture: Not So Idyllic


3/15

Total Carbon Market as of 2007*: EU ETS: The Biggest Allowance Market having 98% of market

volume valued at USD 50B CDM: Biggest Project based Credits having 90% of marketvolume valued at USD 12.9B

Secondary CDM at 27% in volume valued at USD 5.5B Primary CDM volume to 63% in but in value by 40%

CER/ERU demand

Potential CER/ERU demand

CER/ERU supply AND VER supply

VER demand

Global M arket of CO2

*Source: State and Trends of the Carbon Market 2008,World Bank


4/15

Current EUA Market Situation:Bullish

0

5

10

15

20

25

30

35

J a n - 0 6

F e b - 0 6

M a r - 0 6

A p r - 0 6

M a y - 0 6

J u n - 0 6 J u l - 0 6 A u

g - 0 6 S e p - 0 6

O c t - 0 6

N o v - 0 6

D e c - 0 6

J a n - 0 7

F e b - 0 7

M a r - 0 7

A p r - 0 7

M a y - 0 7

J u n - 0 7 J u l - 0 7 A u

g - 0 7 S e p - 0 7

O c t - 0 7

N o v - 0 7

D e c - 0 7

J a n - 0 8

F e b - 0 8

M a r - 0 8

A p r - 0 8

M a y - 0 8

2 0 0 6 2 0 0 7

2 0 0 8 2 0 0 9

2 0 10 2 0 11

2 0 12

EUA Prices on an up-trending channel Higher Oil and Gas prices (cheaper to use

Coal thus the need to offset more emissions) Need to hedge/cover CER supply shortfalls

due to project delays and/or failures in aportfolio (project portfolio write-offs)

Bigger short position of EU community dueto increasing emissions brought about by

inclusion of new industries (aviation) by 2011 Estimated EU Demand for CERs= 285M/ year


5/15

CER Prices on Uptrend;Spreads Betw een EAU and CER

P rices Continue to W iden

Bullish Factors-Lieberman-Warmer Climate Security Act-Global Post Kyoto Mechanism-Australian Demand and possible linking-SRI /CSR Demand for quality CERs via

Trust receipts

Bearish Factors-No Post Kyoto Treaty after 2012-Limited entry or exclusion of CERs in theEUETS Phase 3 in the absence of acollective post Kyoto mechanism? (~280MT)-International Transaction Log delays

Source: http://www.reutersinteractive.com/Carbon


6/15

Current CDM Supply P icture:Good But Can Be Better

Number of CDM projects in Asia bycountry

Others1%

Sri Lanka1%Vietnam

1%Thailand

2%

South

Korea2%

Indonesia3%

Philippines3%

Malaysia

5% India36%

China46%

Number of projects in Asia by type

Affore-

station &Refore-station

0%

Agriculture1%

Fuel switch3%

HFC & N2Oreduction

2%

Demand-side EE

6%

Landfill etc10%

Supply-sideEE

12%

Renewables

66%

Volume of CERs until 2012 in Asia by typeAfforestation

&Reforestatio

n, 0%

Agriculture,0%

Fuel switch,

8%

HFC & N2Oreduction,

32%

Demand-side EE, 1% Landfill etc,

13%

Supply-sideEE, 13%

Renewables, 32%

Source: http://cdmpipeline.org/publications/CDMpipeline.xls

Volume of CERs until 2012 in Asia bycountry

Others2%

Sri Lanka0%

Vietnam1%Thailand

1%

South Korea5%Indonesia

2%

Philippines1%

Malaysia3%

India19%

China66%

EcoSecurities 247

Carbon Asset ManagementSweden 111

EDF Trading 83

IBRD 78

Cargill International 64

RWE 59

ENEL 58

Trading Emissions 57

Agrinergy 55

AgCert 51

Mitsubishi 51

Noble Carbon 46

MGM Carbon Portfolio 42

Marubeni 39

CAMCO 38

Carbon Resource Management 39

Climate Change Capital 37

Kommunalkredit 36

Danish Ministry of Climate &Energy 35

Energy Systems International 33

Whos buying? Whos Selling? Whats Selling?


7/15

Good New s But

Good News:1. Many Small scale projects: 46.15%

small vs. 53.85% large out of 1077

projects2. 54.28% are Energy Related (RE and

Non RE W/ 37 methodologies

3. Asia Pacific CDM projects accountsDMCs for 63.88%

4. Expected annual average CERs fromregistered parties 216M

5. Total Issued CERS by Host party =149M

But.1. India and China still dominate small

scale market at ~ 80%

2. Energy Efficiency (supply side,transport, demand side) still quitelow Reason: lack of successfulprojects on a big scale; fewmethodologies in place

3. Asia Pacific is dominated by China(21%) and India (32%); 20% by ROW

4. China accounts 51%, India (14%),Korea at 6.74%, Indonesia 1.18%,Malaysia-1.12%, ROAP-


8/15

Outline of P resentation

TFS Green as a ADB DMC Sellers Representative:Y our P artner in Sustainable Development

How to Leverage Sustainable Development amongstDeveloping M ember Countries

Demand and Supply P icture: Not so I dyllic


9/15

Source: UNFCCC Web site

Adopt Existing Best P ractices inCDM P roject Development:

Us e Th e Go l d St a n d a r d

ProjectProponent(s)

1

34

5

6

2

GS CERs

GS process help preserves environmental integrity and ensures sustainable development.GS projects get price premium due to its stature as a quality project.

http://www.cdmgoldstandard.org/how_does_it_work.php

G.S. CERs1) 10-20% Premium

over normal

CERs

2) 85% successrate for upfront

finance


10/15

Better DNA Systems:Take the Lead of Philippine DNA

Build in key elements of the Gold Standard in the DNA processes. This ought to help validatorsestablish benchmarks on how to assess sustainable development and stakeholders consultation.

Sustainable Development Benefits Description Interim Guidelines for the Conduct of Stakeholders

Consultation A/R Criteria and Indicators Proofs of Legal Capacity

Documentation of Permits, Licenses, Certificates


11/15

Sample Deal Structure of anAggregated Carbon Offset P roject

CarbonOffsetBuyer

Project Developer / Technology Provider assumes total project development and finance risk.

CDMProject

Developer/Integrator

InstitutionalInvestor

In underlyingproject

InvestmentAgreement

TS & ERPA

CDMProject

PDD Developer

ServiceContracts

Ownership& Management

TFSGreen

Clean energyCDM Project bundle

(small scaleBiogas/ Biomass/WTE

Projects)

Power Off-take&

BOT Contracts

BrokerageAgreement

Project Host 1

Project Host 2

Project Host 3

Project Host 4

Project Host 5

Project Host 6

Project Host 7

BrokerageAgreement


12/15


13/15

Benefits in Dealing w ith TFS Greenas a DMC Sellers Representative

Packaging the DMC SellersCDM Project

Offering the DMC Sellers Project

Conducting the Bidding Process

Term Sheet (TS) and ERPANegotiation & Signature

A Seller Centred Approach

Choice of a wide array of quality Buyersor Pre-selected Buyers to match

Sellers requirements

Best route for optimizing value ofSellers CERs

Access to markets Best Practices onTS & ERPA negotiations and signing

Deal Settlement Monitoring Commitment to guide and adviseto ensure smooth settlement of the Deal

TFS G 3 P d A h


14/15

TFS Greens 3-Pronged Approachin Helping P romote Sustainable

Development

Awareness & Advocacy

Campaigns on theCDM Market

Capacity Buildingin CDM

Project Development

Efficient & Cost EffectiveRoutes in

CER Commercialization

Information sharing and educational thrust onCDM Market Risks and opportunities or relevant

stakeholders in DMCs(i.e. Govt, Business Association, finance inst)

Provision of Technical Advise and Guidancein over-all CDM Project Development(i.e. structuring CERs to enhance investmentviability; sharing of best practices in CDM projectDevelopment)

Technical Advise, Guidance, and Management in- CDM Term Sheets Development (Seller Centered Approach)- CERs Bidding process (access to quality buyers),- Emission Reduction Purchase Agreements

(ERPA) development and signing,- Transaction monitoring over a 2 year period


15/15

Thank YouRey A. Guarin

Office: +44 20 7198 1600Mobile: +63917 627 [email protected]

www.tfsgreen.com
mailto:[email protected]:[email protected]

Documents

TFS - ADB CE Forum Presentation June 3 08