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Funding private RE and EE projects in challenging markets. EEP with Southern Africa, Workshop in Gaborone Helena Korhonen/January 19, 2009. Finnfund in brief. Finnish Fund for Industrial Cooperation Ltd. – development finance institution

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funding private re and ee projects in challenging markets

Funding private RE and EE projects in challenging markets

EEP with Southern Africa, Workshop in Gaborone

Helena Korhonen/January 19, 2009

finnfund in brief
Finnfund in brief
  • Finnish Fund for Industrial Cooperation Ltd. – development finance institution
  • Shareholders: State of Finland 84,2 %, Finnvera Plc 15,7 % (ECA), Confederation of Finnish Industries EK 0,1 %
  • Founded in 1980
  • Office in Helsinki, staff of 40 persons
  • Member of the European Development Finance Institutions (EDFI)
  • Finnfund finances companies to be established or already operating in developing and transitional countries
special features of finnfund s financing
Special features of Finnfund’s financing
  • Long-term risk-taking (5 – 10+ years)
  • Financing directly to the project company or via a holding company
  • We accept local security
  • Clients – no strict limits on sectors or sizes
    • but no potable alcohol, tobacco etc.
  • Instruments tailor-made depending on projects’ needs
  • International network to bring co-investors and co-lenders to projects
general requirements for finnfund s financing
General requirements for Finnfund’s financing
  • Economically viable projects
  • Positive environmental and social impacts
  • Private sector / privatization projects / PPP
  • Maximum share of appr. 1/3 of total project cost
  • Finnish interest involved
finnish interest
Finnish interest
  • Finnish shareholder/partner
  • Finnish carbon buyer
  • Long-term partnership (e.g. management-, licence-, purchasing agreement)
  • Technology transfer
  • Significant positive environmental impact
  • Major partners for Finnish development cooperation(Ethiopia, Kenya, Mozambique, Namibia, Zambia, Tanzania, Egypt, Nepal, Vietnam, Nicaragua and Peru) and LDC countries
financial instruments
Financial instruments
  • Equity - risk-sharing as a minority shareholder
  • Mezzanine - subordinated and convertible loans
  • Loans - medium to long-term investment loans
  • Guarantees
  • Finnfund’s investment usually 1-10 million euros
equity investments
Equity investments
  • Maximum appr. 1/3 of total equity
  • Industrial sponsor/partner required
    • max. matching its shareholding
  • Exit terms planned in advance
    • exit after 5+ years’ holding period
  • Shareholders agreement to describe the responsibilities and interests of each counterparty
  • Possibility to participate in corporate governance
  • Often an off-shore holding company
investment loans
Investment loans
  • Maturity 5-10+ years, grace period of 1-3 years
  • Market-based interests/margins
    • project/country risks
    • exemption of withholding taxation in several countries
  • Collateral e.g. assets, agreements etc. of the project company
  • Currency euros or dollars, local currencies becoming possible
  • Max 50% of the total debt portion
  • Due diligence and documentation costs paid by the project
mezzanine financing
Mezzanine financing
  • Instruments that improve capital structure
  • Unsecured subordinated loans, preferred shares, convertible bonds…
  • Built-in exit (mezzanine vs. equity investment)
renewable energy clean tech energy efficiency
Renewable energy, clean tech, energy efficiency
  • Rice husk fired power plant in Thailand, 22 MW, ~10% shareholding (common shares)
  • Hydro power project in Honduras, 13 MW, preferred shares
  • Clean Globe International, oil spill response centers and other waste management globally, equity + debt
  • Fund investment in Central America (Carec)
  • Hydro in Sri Lanka and Honduras, approved, not signed
  • Pipeline: biogas and hydro in Central America, biomass in India, wind in South Asia, infrastructure in Uganda, energy efficiency and hydro in Ukraine and rural electrification
rural energisation access to energy
Rural Energisation, Access-to-Energy
  • Our financing is geared towards projects and corporations
  • We need to find a way to finance rural energisation
  • Players needed (we think):
    • Developer, promoter or similar (might be one of the below ones)
    • NGOs to raise awareness
    • Small energy companies to design, deliver, install and maintain the solution
    • MFIs to finance the end-customers
    • FF can finance MFIs
governments role
Governments’ role
  • Support private sector activities (medium/big scale projects):
    • Allow IPPs (small and big)
    • Tariffs for grid connected RE producers
    • CDM mechanism to work (might be the sole source for cash flow for energy efficiency)
    • Energy Service COmpanies (energy efficiency)
  • For rural energisation:
    • Ask for and channel donor funds earmarked to this (not so much for technology, but other support)
  • Permiting and licensing
experience on the eep in central america
Experience on the EEP in Central America
  • Have participated since the beginning (2002)
  • Have widened our network with bankers, project developers, government officials etc.
  • Get every now and then a lot of potential project ideas
  • Our regional fund (Carec) has found many potential projects via the EEP, we co-invest with them
  • We are much better known in the region today
finnpartnership finnish business partnership programme
Finnpartnership - Finnish Business Partnership Programme
  • Finnpartnership is a business partnership programme financed by the Ministry for Foreign Affairs of Finland and operated by Finnfund.
  • Stimulates business cooperation between companies in Finland and developing countries.
  • Provides services mainly for Finnish companies’ projects in developing countries
    • Business Partnership Support Facility (grant)
    • Advisory services
    • Identification of new business partnerships (matchmaking services)

www.finnpartnership.fi

contacts
Contacts
  • www.finnfund.fi
  • firstname.lastname@finnfund.fi
  • tel. +358 9 348 434
  • Uudenmaankatu 16 BFI-00120 Helsinki, Finland