financing structures and cdm project risks cairo, april 4 th –april 5 th, 2005 tims/eeaa...
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Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
Financing StructuresFinancing Structuresand and
CDM Project Risks CDM Project Risks
Amr Abdel-Aziz, Ph.D. Integral Consult
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
CDM Project CycleCDM Project Cycle Risk CER Price
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
Financing StructuresFinancing Structures
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
Direct Sale of CERs from a Host Country Direct Sale of CERs from a Host Country
Driven CDM ProjectDriven CDM Project CERs sold directly to an Annex I PurchaserNo further involvement of the purchaser in the projectSimple Emission Reduction Purchase Agreement (ERPA) to sell
the CERs through a direct sale transactionCER Purchaser is limited to paying for CERs once they have
been delivered (Less risk Higher Price)
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
Provision of Debt Finance in Return for Provision of Debt Finance in Return for Part Payment in CERsPart Payment in CERs
Annex I project participant can be involved as financier to the underlying project
Provides a portion of project finance in the form of a loanReceives CERs as part payment of a fixed proportion of
the interest for that loan
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
Equity Investment in Return for Revenue Equity Investment in Return for Revenue Stream from CERsStream from CERs
Annex I Investor offers equity investment in a project In return for equity in the project and a share of the CERs arising from
the project Project Participants and the investor may create a separate company
to hold the CERsAnnex I investor may take equity in the form of shares in this company
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
Technology Swap in Return for CERsTechnology Swap in Return for CERs
Investor provides or licenses technology to a project Cost of technology paid for partially with CERs from
the project
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
CDM Project RisksCDM Project Risks
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
POLITICAL RISKSPOLITICAL RISKS
Political stabilityBusiness environmentLegal infrastructureInvestment culture Changes in economic and energy related policiesFailure to obtain national approval for a CDM Project
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
TECHNICAL, COMMERCIAL AND TECHNICAL, COMMERCIAL AND BUSINESS RISKSBUSINESS RISKS
Technical Risk – Underperformance of projects Business Risk – Force-Majeure Commercial Risk - CER prices fluctuation Investment culture
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
CDM PROJECT SPECIFIC RISKSCDM PROJECT SPECIFIC RISKS
Possibility of rejection of the project by the CDM Executive Board (Additionality, Baseline)
Establishing legal title to the CERs Community or NGO opposition to a CDM project Inaccurate Monitoring or Verification of Emission
Reductions
Financing Structures and CDM Project Risks Cairo, April 4th –April 5th , 2005
TIMS/EEAA Fertilizers Workshop UNEP RISOE / APEX
Negotiations Issues with InvestorsNegotiations Issues with Investors
CER PriceDuration of Contract (first crediting period or project duration)Financing StructureSplit of CERs (% for each party)Investors entry point in project cycleSale of Verified Emissions Reductions (VERs) or Certified Emissions
Reductions (CERs)