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IFC and Emerging Market Wind Energy Financing Financing Green Growth in a Time of Financial Crisis Mr. Dana R. Younger Chief Renewable Energy Specialist March 15, 2011 EWEA 2011 Brussels. Table of Contents. IFC – Who We Are, What We Do IFC and Renewable Energy

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    1. IFC and Emerging Market Wind Energy FinancingFinancing Green Growth in a Time of Financial CrisisMr. Dana R. Younger Chief Renewable Energy SpecialistMarch 15, 2011 EWEA 2011 Brussels

    2. Table of Contents • IFC – Who We Are, What We Do • IFC and Renewable Energy • Investment Experience and Deal Criteria • Other IFC Products and Services

    3. IFC – Who We Are, What We Do • Deep industry experience • Deep industry experience

    4. IFC is a Member of the World Bank Group MIGA Multilateral Investment and Guarantee Agency IBRD International Bank for Reconstruction and Development IDA International Development Association IFC International Finance Corporation Est. 1945 Est. 1960 Est. 1956 Est. 1988 Role: To promote institutional, legal and regulatory reform Governments of member countries with per capita income between $1,025 and $6,055. - Technical assistance - Loans - Policy Advice To promote institutional, legal and regulatory reform Governments of poorest countries with per capita income of less than $1,025 - Technical assistance - Interest Free Loans - Policy Advice To promote private sector development Private companies in member countries - Equity/Quasi-Equity - Long-term Loans - Risk Management - Advisory Services To reduce political investment risk Foreign investors in member countries - Political Risk Insurance Clients: Products: Shared Mission: To Promote Economic Development and Reduce Poverty

    5. Who We Are, What We Do • Founded in 1956: 12 years after the Bretton Woods Conference created the World Bank to finance post-WWII reconstruction and development by lending to governments • Owned by 182 member countries • IFC is the world’s largest multilateral institution focused on private sector development, widely seen as an essential source of job creation, growth, and poverty reduction - it is the global leader in private sector development finance • IFC invests, advises, mobilizes capital and manages assets – providing solutions for an inclusive and sustainable world • Global: Headquartered in Washington, D.C. • Local: More than 100 offices worldwide in 86 countries

    6. IFC’s Global Reach 100+ country and regional advisory services offices worldwide Moscow Almaty Washington Istanbul New Delhi Cairo Mexico City Hong Kong Dakar Port-of-Spain Bogota Nairobi Johannesburg São Paulo Buenos Aires IFC HQ/Hub Offices IFC Operational Centers IFC Country Offices

    7. IFC’s Purpose IFC’s Purpose is to create opportunity for people to escape poverty and improve their lives by • Last year our clients provided: • 2.2 million jobs • $112 billion in micro, small, and medium enterprise loans • 8 million patients with health care treatment • 35 million people with clean water • 29 million people with power connections • 1.4 million students with education services • Supporting companies and other private sector partners where there is a funding gap • Helping to generate productive jobs and deliver essential services to the underserved • Catalyzing and mobilizing other sources of finance for private enterprise development To achieve its purpose, IFC offers development impact solutions through firm-level interventions (direct investments,advisory services, and the Asset Management Company), standard-setting and business enabling environment work.

    8. IFC’s Three Main Business Lines • Loans/ Equity • Syndications • Trade finance/ Securitized finance • Client risk management services • Treasury services • Liquidity management IFC Investment Services • Access to finance • Sustainable Business • Investment Climate • Public-Private Partnerships IFC Advisory Services • Wholly owned subsidiary of IFC that invests third-party capital alongside IFC, with approximately US$4 billion under management as of June 30, 2010 IFC AssetManagementCompany

    9. Financial Products - From Equity to Debt • Corporate and JV • Typically 5-15% shareholding (not to exceed 20% of total equity) • Long-term investor, typically 6-8 year holding period • Not just financial investor, adding to shareholder value • Usually no seat on board • Infraventures (early equity investments) Equity • Subordinated loans • Income participating loans • Convertibles • Other hybrid instruments Mezzanine / Quasi Equity • Senior Debt (corporate finance, project finance) • Fixed/floating rates, US$, Euro and local currencies available • Commercial rates, repayment tailored to project/company needs • Long maturities: 8-20 years, appropriate grace periods • Range of security packages suited to project/country • Mobilization of funds from other lenders and investors, through • cofinancings, syndications, underwritings and guarantees Senior Debt & Equivalents

    10. How We Finance Projects IFC Investment Project Type • Up to 35% of project cost for IFC’s account • Up to 25% of project cost for IFC’s account • Up to 50% of project cost • Greenfield, total costless than $50 million • Greenfield, total costmore than $50 million • Expansion or rehabilitation • Umbrella for participants in IFC’s syndication program: IFC lender of record, immunity from taxation and provisioning requirements. • IFC’s total financing (for its own account) must be less than 25% of total company capitalization, and IFC does not manage or have largest stake.

    11. Commitment and Disbursement Early Review Due Diligence Disclosure • Client needs determined • Assessment of project’s impacts and development contributions • Management committee approval • Mandate letter • Assessment of business opportunities and risks • Analysis of environmental and social opportunities and risks • Appraisal • Credit committee approval • Disclosure of environmental and social information • Opportunity for public comment • Negotiation and agreement of principal terms • Board approval • Signing of legal documents • Disbursement Investing with IFC – The Process Negotiation Monitoring • Annual review of project performance We agree on a specific timeline to meet client’s needs

    12. What makes IFC unique • IFC Unique Offering Includes: • Emphasis on development impact • World Bank affiliation • Market discipline • Risk-taking and risk management • Preferred creditor status • Political risk cover • Environment and social & insurance value-addition Clients Value IFC’s Global Expertise • Knowledge of global industries and local markets • Financial sector influence • Long-term partnerships; countercyclical role • Sustainable investments • Leadership on corporate governance • Value-adding expertise along the entire value chain

    13. Fiscal Year 2010 Highlights • Investments: $18 billion in total financing: $12.7 billion for IFC’s own account in 528 new projects in 103 countries; $5.3 billion mobilized • Portfolio: $48.8 billion portfolio, representing investments in 1,656 firms Investments by Industry and Region, FY10 Commitments for IFC’s Account: $12.7 Billion

    14. IFC and Renewable Energy

    15. Why Renewables: Fueling Growth and Combating Climate Change • Developing countries have a clear need to power economic growth and to improve the quality of life of their citizens (e.g. access to lighting and communications) • Need to diversify generating sources and where possible, deploy indigenous power rather than using foreign exchange to import fuel • Climate change and environmental concerns given diminishing resources or reserves of coal, gas and even water • Solar, wind and other forms of renewable energy pose great opportunities for private investors in emerging markets – if capital can be raised and risks overcome. In 2010, IFC invested $1.6 billion in climate change business, which is a 60 percent increase from the previous year. By 2013, IFC aims to increase its climate change business to at least 20% ofits total annual commitments

    16. IFC Investments to Date in Renewables

    17. IFC View of Local Regulatory Frameworks • IFC realizes that countries offer incentives (feed-in tariffs, tax credits), establish renewable targets or create legislation (import duties, local content rules) to encourage the growth of a local renewable industry • IFC supports competition and fair market access; however, we note that in the renewables sector, governments can influence the market • As such, IFC evaluates the merit of each project on a case-by-case basis, looking each company’s inherent cost competitiveness (i.e. would the company be able to compete if incentives were not in place) • The World Bank also engages with governments to improve their energy policy and improve market access.

    18. The outlook for renewable energy generation is promising, with increased deployment expected By 2030, renewable energy is expected to account for 22% of electricity generation in emerging markets, with the biggest contributions from hydro and wind Projected Generation Costs of Renewable Energy Technologies 2007 US$ / MWh Source: International Energy Agency, World Energy Outlook 2008 Growth in renewable energy investments is expected to be driven by declining investment costs, government support and response to climate change concerns

    19. Working Across the Wind Power Value Chain • IFC finances projects across the wind value chain from upstream equipment manufacturers to downstream power projects • Deep industry experience in clean tech, manufacturing, services and power investments • In-house investment, environmental and social, legal and product expertise COMPONENT & SERVICE SUPPLIERS (e.g. suppliers of blades, towers, transformers, controller software, etc.) WIND FARMS (captive, IPPs or utilities) TURBINE MANUFACTURERS

    20. Strategy - Downstream • Work with global renewables developers and utilities expanding their asset base in emerging markets • Finance leading local renewables developers and utilities that are knowledgeable and can play an important role in furthering the adoption of renewable energy based electricity generation • Work with global and local corporates in other sectors (e.g. cement, oil & gas, mining, etc.) seeking to develop and own renewable energy projects in emerging market countries • Finance fund managers involved in clean energy, cleantech and carbon private equity funds that also finance smaller renewable energy projects and earlier stage companies

    21. Strategy - Upstream IFC’s approach is to invest in technology and scale, so as to bring down the cost of renewable energy to grid parity so that it is a widely used source of electricity generation in the emerging markets. To achieve this, IFC will invest in: • Global renewables companies expanding their manufacturing footprint in emerging markets • Leading local players that are cost competitive and can play an important role in (i) deepening the adoption of renewable power and (ii) lower the cost of renewables energy • Both global and local component suppliers (e.g. blade, gearbox, towers, bearings, generators) with a manufacturing presence in the emerging markets • Technology leaders building new, innovative solutions IFC is supporting private sector companies that are cost competitive and / or technology leaders in renewable energy, to combat pollution, environmental degradation and the negative impacts of climate change and to create or sustain employment in poor countries.

    22. IFC Investment Experience and Deal Criteria

    23. IFC Investments in Wind Power • AES GEO Energy (Bulgaria, 2008): EUR 40 million IFC “A” loan and EUR 32 million “B” loans for 156 MW St. Nikola Wind Farm near Kavarna using Vestas V90 3 MW turbines; AES is IFC’s largest utility client in wind energy and power sectors • China Windpower Group (China, 2010): US$10 million in equity along with US$45 million “A” loan and US$95 million in “B” loans to construct a US 150 million 201 MW greenfield wind farm in Gansu using Sinovel 1.5 MW turbines • EDF-EN La Ventosa/La Mata (Mexico, 2010): 310 million Mexican Pesos investment to finance the 67.5 MW greenfield wind project in Oaxaca using 2.5 MW Clipper turbines; CTF concessional loan of US$15 million • Acciona Eurus (Mexico, 2010): US$71 million in senior and mezzanine debt to finance US$560 million 250 MW wind farm using Acciona 1.5 MW turbines ; CTF concessional loan of US$30 million • Zorlu Enerji Rotor (Turkey, 2010): EUR55 million in long term debt to finance 135 MW greenfield wind project using GE 2.5 MW turbines

    24. Norvind S.A. Case Study US$30.75 million senior “A” loan and arranged US$30.75 million “B” loan package among co-lenders to fund US$140 million 46 MW project Nine months from mandate letter to first funds disbursement for Totoral wind farm in Chile SN Power is highly experienced and efficient hydro utility with some wind experience in Norway; Vestas V90 turbine technology (2 MW geared turbines, Class III wind) and 3 year services agreement; Centinela was strong local development partner Experience with Chilean power sector; Very long loan maturities (18 years); First merchant wind project with very limited recourse; Creative financial structuring of debt package with B loan fully subscribed by DnB Nor • Investment Summary: • Timing: • Why Norvind: • IFC Value Added:

    25. IFC Investments in the Equipment Supply Chain • Moser Baer Photovoltaic (India, 2007): Existing IFC client, since 1996; US$22.5 million (debt) to construct an 80 MW greenfield PV facility • ENN Solar (China, 2008): Existing IFC client – XinAo Group – in the gas distribution and clean coal sectors; US$45 million in debt and US$15 million in equity for a greenfield thin film line using AMAT equipment; IFC finance was not disbursed • Nitol Solar (Russia, 2008): US$50 million equity and US$25 million debt to finance the construction of a polysilicon facility in Russia • Suntech (China, 2009): US$50 million in convertible debt to finance the expansion of the company’s manufacturing capacity to 1 GW • SunPower Corporation (Philippines, 2010): US$75 million in debt to finance capex and working capital needs for the companies solar cell and module facilities in the Philippines • Goldwind (China, 2010): US$75 million equity investment to finance the company’s facilities in China’s frontier regions and for R&D • Gamesa (India, 2011): Euro 11 million to finance the company’s manufacturing operations in Chennai, India. Transaction in process.

    26. Goldwind Case Study US$75 million equity investment as part of the company’s Hong Kong IPO to fund capital expenditure and R&D in China Due diligence in the third week of July; documents signed and funds disbursed in September Headquartered in and strong manufacturing presence in Xinjiang in western China; largest private sector Chinese wind company with strong technology (direct drive turbines), manufacturing experience and downstream operations; strong growth potential Compliance with IFC / World Bank environmental and social guidelines • Investment Summary: • Timing: • Why Goldwind: • IFC Value Added:

    27. Gamesa Case Study Proposed Euro 11 million loan to help finance Gamesa’s new wind turbine manufacturing facility in Chennai, India Global wind turbine manufacturer with the goal of expanding its operations in the emerging markets and developing a local supply chain. Compliance with IFC / World Bank environmental and social guidelines; guidance on local financing and currency requirements; ability to work with IFC (on both manufacturing and wind farm projects) in other emerging markets. • Investment Summary: • Why Gamesa: • IFC Value Added:

    28. IFC Deal Criteria in Renewable Energy Projects

    29. Creating Effective Partnerships • Project Guidelines: • Must be in the private sector • Commercially, economically, environmentally, socially sound and cost competitive • Majority shareholder exit strategy • Sponsor should have long-term strategy and successful track record in the industry • Financial Structure • Debt/equity ratio (at least 50/50) • IFC can provide corporate finance or project finance • Sponsor needs to invest into the project (cash/in-kind contribution) • Profit oriented – IFC shares same risks with other investors • Possible security structures for long-term loans • Completion support from sponsor • Guarantee from sponsor or • Mortgage on land/equipment to be financed Allows clients to diversify funding, extend maturities, and obtain financing in currency of choice

    30. Other IFC Products and Services

    31. IFC also focuses on growth-stage opportunities across major cleantech sectors • The cleantech investment team within IFC’s Climate Business Group, will focus on growth-stage opportunities involving innovative technologies/ products/services/projects in climate change • CleanTech penetration into addressable market is small but growing rapidly; total addressable market size is close to US$ 6 trillion but current market size is under US$1 trillion – with tremendous upside in this market 2010 total addressable market (TAM)1 Revenue, $ Billions 2010 CleanTech market size Revenue, $ Billions CAGR, ‘10-’15 % Opportunities Power generation 214 470 Energy Materials Environmentally friendly nano, bio, chemical materials for various applications Energy Generation, Storage, Infrastructure, Efficiency Water 470 147 Fuels 88 1,100 Recycling & Waste Manufacturing Industrial efficiency 60 120 Recycling services Waste treatment Waste to fuel Energy efficiency Monitoring/controls Smart production Transportation 58 2,200 Waste management 34 Water Agriculture 150 Land management Natural pesticides natural fertilizers Cold chain logistics Filtration & purification Water conservation Wastewater treatment Energy use buildings 30 240 29 Energy grid infrastructure Air & Environment Transportation Remediation emission control trading and offsets Electric vehicles Fuels, batteries, capacitors Battery management 20 1,000 Materials 678 Total 5,800

    32. The CleanTech Group focuses on growth stage investments Growth Mature Incubation Early-stage Angel investors, friends/family Late stage VCs, PE, some debt investors PE, debt investors, public markets Investor profile Venture Capital Very high, Speculative Risk profile High Medium Low Deal size < US$ 5 mm US$ 1- 10 mm US$ 5-25 mm > US$ 30 mm Market & execution risks no technology risk Market, execution and exit risks, some technology risk Technology risk, very limited exits Investment risk Pricing, M&A, margins IFC investment instrument Preferred & common equity, mezz and debt Grant, Preferred equity, CT Pilot Preferred equity Common equity & debt IDA countries + frontier regions Not likely Limited, perhapsCleantech facility BRIC + MIC CleanTech focus The CleanTech Group focuses on early to growth stage cleantech investment deals

    33. Cleantech and Innovation Funds Private Equity Funds --- $150 million in nine funds $22.5 million equity investment in ~$150 million Aloe Environment 2 Fund managed by Aloe Private Equity $15 million to ~$150 million China Environment Fund III LP managed by Tsing Capital (ex-Tsinghua Venture Capital) $20 million equity investment in ~$200 million South Asia Clean Energy Fund with Global Environment Fund Clean Technology Demonstrations - e.g. Externally fired Combined Cycle using bagasse feedstock, Biomass harvesting technology Programs Supporting Technologies & Business Models – e.g. Fuel Cells for Stationary Applications; off-grid solar PV, and energy efficiency financing for small to medium sized investments with ESCOs Equity investments in clean technology start-ups - e.g. micro-turbine manufacturer, black liquor processing

    34. IFC Post-2012 Carbon Facility • €150M Facility to forward purchase carbon credits up to 2020 • Purchase Certified Emission Reductions (CERs) from projects being financed directly or indirectly by IFC • Capitalizes on IFC’s due diligence as financier to projects • Uncertainty beyond 2012 has led to a decline in climate friendly investments that could benefit from the carbon markets • Longer term high quality carbon revenue stream increases financing options • IFC will contribute up to €15M of the Facility’s capital • Balance mobilized primarily from 6-7 European power utilities & energy companies • Launched in February 2011 with 3 anchor investors including IFC • Facility to be managed by IFC • Expected to be operational in March 2011

    35. IFC’s management of Concessional Donor Funds for Climate Solutions Projects IFC, through its Financial Mechanisms for Sustainability (FinMech) unit, manages and invests concessional donor funds to catalyze climate solutions projects

    36. Donor Funds for Climate Solution ProjectsManaged by IFC Project Example: EdF La Ventosa IFC has used concessional financing from the CTF to support the development of a 67.5MW wind power plant in the State of Oaxaca (Mexico) Despite the fact that the Isthmus of Tehuantepec has a world-class wind resource, Mexico had only 88 MW of fully-commissioned and operational wind projects at the end of 2008 This project, together with additional CTF-supported wind projects, expects to have a demonstration effect and send a market signal to global wind power developers that the Mexican wind power market is viable and ready for scale-up • The Global Environment Facility • IFC has used GEF funds for concessional investments and Advisory Services for 15 years (www.gefweb.org) • The Climate Investment Funds (CIFs) which includes (www.climateinvestmentfunds.org) : • The Clean Technology Fund (CTF), to scale-up deployment clean technologies in high emitter countries • The Forestry Investment Program (FIP), to reduce emissions from deforestation and forest degradation • Pilot Program for Climate Resilience (PPCR), to support climate adaptation • The Scaling up Renewable Energy Program (SREP), to support small scale RE in low income countries • Bi-lateral Donor Funding

    37. For more information: www.ifc.orgKey Contacts for IFC Power/Renewable Energy Mr. Morgan Landy <mlandy@ifc.org> Senior Manager, Power & Renewables Mr. Dana R. Younger < dyounger@ifc.org> Chief Renewable Energy Adviser Global Manufacturing Ms. Stephanie Miller <sjmiller@ifc.org> Global Head, Climate Business Ms. Faheen Allibhoy <fallibhoy@ifc.org> Senior Investment Officer, Renewable Energy Equipment Carbon Finance Mr. Vikram Widge <vwidge@ifc.org> Program Manager