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Maximizing the impact of World Bank Financing in Energy Efficiency Projects February 23, 2012. Issam Abousleiman Head of Banking Products Banking and Debt Management. Financing Needed to Deal with Climate Change. Additional investment needed in developing countries, by 2030.

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maximizing the impact of world bank financing in energy efficiency projects february 23 2012

Maximizing the impact of World Bank Financing in Energy Efficiency ProjectsFebruary 23, 2012

IssamAbousleiman

Head of Banking Products

Banking and Debt Management

slide2

Financing Needed to Deal with Climate Change

Additional investment needed in developing countries, by 2030

Climate finance covers 10-15% of development aid and serves to..

Mitigation

$139—175 billion

2.8-3.5 trillions needed for 20 years

“Baseline”

Private &

Public

Investment

Adaptation

$75—100 billion

… to catalyze sustainable investments

..enhance capacity & policy

… leverage other sources of finance

Funding for adaptation and

mitigation $9 billion

Source: World Bank, 2010

fundamental changes in the nature of international capital flows in the new millennium
Fundamental changes in the nature of international capital flows in the new millennium
  • Paradigm shift: Need to optimize scarce public resources for development

Use scarce public resources to enable other sources of funds and/or improve development outcomes

need to mobilize finance additional finance tapped capital markets
Need to mobilize Finance Additional Finance: Tapped Capital Markets
  • Green Bonds: USD 2.4 billion through 41 transactions and 16 currencies Funds raised from the WB Green Bonds support climate change (including mitigation- EE-) projects that are selected by WB environmental and climate change specialists based on certain criteria.
  • WB Eco-3 Bonds: USD 316 million through 3 issuances. A 6-year bond issued for investors in the Netherlands, Belgium, and Luxembourg (February 2008)
  • CER Linked Bonds: USD 31.5 million: First Certified Emission Reductions-linked Bond, nicknamed “Cool Bond”, with Daiwa Securities Group (June 2008); second issue with Mitsubishi UFJ Securities (September 2008).

Summary of CO2 “Cool Bond” Terms

Amount: US$ 25 million

Settlement Date: June 26, 2008

Maturity Date: June 30, 2013

Coupon: 3% fixed annual coupon for an initial period of 15 months, and then a coupon linked to the future performance of CER prices and the actual versus estimated delivery of CERs that will be generated by a hydropower plant located in the Guizho Province in China.

Sole Lead Manager: Daiwa Securities Group SMBC Europe Ltd.

Investor Type: Japanese Retail

mckinsey curves illustrate the areas where mitigation investments can be more efficient
McKinsey Curves illustrate the areas where mitigation investments can be more efficient

Source: The McKinsey Quarterly 2007. Number 1

slide6

Residential Energy Efficiency in Mexico:

Financing Structure

IBRD Loan

GHG emissions reductions

$$$ Potential Carbon Revenues

IBRD US$ 250 million

Government of Mexico

Component 1: Light Bulb Replacement

IBRD US$ 55 million

Purchase, Distribution and Disposal

Component 2: Appliance Replacement

IBRD US$ 195 million

Consumer Rebates

Replacementand Disposal

Repayment through electricity bills

US$ 50 million

NAFIN (state bank)

CTF Loan

Consumer Loans

US$ 5 million*

GEF Grant

Guarantee Facility

GHG emissions reductions

$$$ Potential Carbon Revenues

*US$2 million of the GEF grant partially funds the technical assistance component of this project

slide7

Traditional vs. Recycling Green loan: Savings in Exposure

Savings in Exposure

Recycling Green Loan

Amount : 100 USD million

Disbursement period: 5years (sixth-month disbursements of 10 million USD)

Each disbursement: 1 year grace period, 5 years final maturity

Traditional Loan

Amount : 100 USD million

Disbursement period: 5 years (six-month disbursements of 10 million USD)

Maturity : 30 years Grace period: 5 years

traditional lending vs recycling green loans for ee cfl replacement
Traditional lending vs. Recycling Green loans for EE: CFL replacement

(1) Assuming a peak coincidence factor of 0.264% and a capacity of 53 W per replaced lamp. This decrease in demand allows for a permanent reduction in the expansion of the power generation capacity required to meet the demand of the country, compared with the base line.

main messages
Main Messages
  • Need of customization of financing to address EE
  • Thesecustomizedstructuresenable:
    • Substantialincreases in theamount of energycapacitysavings (throughthereduction of peakdemand)
    • Optimalusage of limited IBRD financingenvelope
slide10

Contacts

IssamAbousleiman, Head of Banking Products

202-458-8065

iabousleiman@worldbank.org

www.treasury.worldbank.org