Carbon Finance Presentation for DOE - DNA conference Presented by: - - PowerPoint PPT Presentation

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Carbon Finance Presentation for DOE - DNA conference Presented by: - - PowerPoint PPT Presentation

Jul 27, 2023 111 likes •262 views

Carbon Finance Presentation for DOE - DNA conference Presented by: Ziv Ben-Ami zivb@nedbankcapital.co.za +27 11 294 3021 Who is Nedbank Limited? Nedbank Ltd is one of the major 4 banks in South Africa Listed on the Johannesburg

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Carbon Finance

Presentation for DOE - DNA conference

Presented by: Ziv Ben-Ami zivb@nedbankcapital.co.za +27 11 294 3021

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Who is Nedbank Limited?

  • Nedbank Ltd is one of the major 4 banks in South Africa
  • Listed on the Johannesburg Stock Exchange (“JSE”) with a market cap of R71.8 billion (Bloomberg 11 May 2011)
  • Total assets of R R609,7 billion (Mar 2011)
  • At the forefront of African sustainability, as evidenced by its 2010 accolades1
  • 51.37% held by Old Mutual Life Assurance Company (South Africa) Ltd
  • Old Mutual Life Assurance Company (South Africa) Ltd is part of Old Mutual Plc
  • Financial highlights of Old Mutual Plc group
  • FUM of £309.3 billion (Dec 2010 preliminary results)

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  • FUM of £309.3 billion (Dec 2010 preliminary results)
  • Operating profit (IFRSAOP) of £1,481 million
  • Nedbank Capital is a division of Nedbank Ltd
  • Housing the bank’s investment banking offering comprises several divisions that manage Nedbank's structuring, lending, underwriting

and trading businesses.

  • Offering a full spectrum of investment services and products, ranging from equity research and specialised advice to debt raising and

long-term project financing

  • Clients include the who's who of southern Africa's top corporations, government bodies, financial institutions, emerging BEE

consortiums, multinational corporates and consortiums undertaking major infrastructure and mining projects in Africa

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Nedbank Capital’s Carbon Asset Offering:

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Carbon Market Overview

REGULATORY VOLUNTARY

EU ETS CDM Voluntary Carbon Standard (VCS) Voluntary Gold

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EUAs Large Scale Small Scale Programme of Activities CPA CPA CPA CERs Voluntary Gold Standard (VGS) Plan Vivo VERs

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SLIDE 5

Carbon Market Volumes 2009

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Enabling Climate Change Mitigation

INTEGRATED CARBON FINANCE SOLUTIONS

  • Aid / development funds
  • Project Finance
  • Underwriting
  • Structuring

Delivery 6

  • Structuring
  • Syndication
  • Commercial paper (bonds and

notes etc.)

  • Discounted cash flows
  • Carbon income

Delivery using

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Nedbank Capital:

  • can facilitate access to aid and development agency funding
  • is negotiating additional aid facilities specifically targeting renewable energy projects
  • can facilitate sovereign and currency risk protection

Aid and Development funding

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  • has established relationships with many African governments
  • ODA not allowed under CDM, need for additional allocation.
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Services enabling project finance include:

  • Financial modeling
  • Equity
  • Debt underwriting
  • Discounted cash-flow
  • Financial structuring
  • Loan syndication
  • Issue of commercial paper (bonds)

Project Finance

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  • Issue of commercial paper (bonds)
  • Primary market sales and distribution
  • Placement with investment funds
  • Structuring for investment funds
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Carbon Project Development

Carbon Project Development

Project Concept National approval (DNA) & Prior Notification (UNFCCC) Develop physical project plan Plan and engage with financiers Select or develop project methodology Define project benefits Document project base-line

Carbon Project

Annual Report Submitted for Verification Measure & Monitor Project Performance (Emissions Benefit)

  • Site visit and due diligence
  • DNA & UNFCCC engagement
  • PIN / notice of prior intent lodgement
  • Advice for financial planning
  • PDD development, validation & registration (Optionally

Nedbank risk against future Offset allocation)

  • Desktop project review :
  • Financial evaluation
  • Carbon project potential assessment
  • Technology introduction

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Document project base-line Evaluate project for additionality Generate PDD & submit for approval to: National sustainability & development criteria Public comment Validation (DOE) Project acceptance/registration Complete physical project implementation

Project Production Cycle

Submitted for Carbon Issuance CER's Issued & allocated in accordance with ERPA Nedbank risk against future Offset allocation)

  • Emission Reduction Purchase Agreement

(ERPA) :

  • Pre- and post 2012
  • Nedbank or third party buyer
  • Cash on delivery ( floor & market up-side

share )

  • Pre-payment
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CDM Specific Risks

  • 2012 deadline - end of first commitment period.

– no certainty for projects eligibility into EU ETS, unless a new binding agreement is signed. – The situation gives rise to CDM Specific risks:

  • Registration Risk

– Time – Host Country

  • Eligibility Risk

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– Technology – Host Country

  • Delivery Risk

– Under performance compared to PDD – Nationalization?

Risk adjusted pricing for CERs

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Putting it all together – A Carbon Finance Solution

Carbon Project Development

Project Concept National approval (DNA) & Prior Notification (UNFCCC) Develop physical project plan Plan and engage with financiers Select or develop project methodology Define project benefits Document project base-line

Carbon Project

Annual Report Submitted for Verification Measure & Monitor Project Performance (Emissions Benefit)

  • Site visit and due diligence
  • DNA & UNFCCC engagement
  • PIN / notice of prior intent lodgement
  • Advice for financial planning
  • PDD development, validation & registration (Optionally

Nedbank risk against future Offset allocation)

  • Desktop project review :
  • Financial evaluation
  • Carbon project potential assessment
  • Technology introduction

Project bankability and funding supported through innovative use of :

  • Aid, Development agency and Government

funding

  • Elimination of sovereign risks
  • Financial and performance guarantees
  • Elimination or minimisation of exchange

rate risks

  • Carbon project development and

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Document project base-line Evaluate project for additionality Generate PDD & submit for approval to: National sustainability & development criteria Public comment Validation (DOE) Project acceptance/registration Complete physical project implementation

Project Production Cycle

Submitted for Carbon Issuance CER's Issued & allocated in accordance with ERPA Nedbank risk against future Offset allocation)

  • Emission Reduction Purchase Agreement

(ERPA) :

  • Pre- and post 2012
  • Nedbank or third party buyer
  • Cash on delivery ( floor & market up-side

share )

  • Pre-payment

registration services

  • Structuring borrowing requirements and

term to match investment restrictions

  • Commercial Paper (bond etc.) issuance for

distribution into local and international investment funds

  • Contracted pre-sale of carbon credits

enabling funding through discounted carbon cash-flows

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Nedbank does not normally provide :

  • Finance for pre-feasibility / feasibility studies
  • Start-up funding
  • Technology development funding
  • Environmental impact assessment (finance or services)

Services Nedbank does not normally offer

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  • Environmental impact assessment (finance or services)

These services may be made available on a case-by-case basis

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Making Carbon Work – REDD in Kenya

  • Reduced Emissions from Deforestation and Degradation (REDD) project in SE Kenya
  • Estimated avoided emissions over 20 years - approximately 200,000 metric tonnes of CO2e (VER’s) per year

after issuance buffer

  • Partially funded through Nedbank purchase of REDD carbon finalised November 2009

– Initial purchase 2006-2009 vintage pre-CCB Accredited VER’s – Additional purchase option for VER’s annually 2010 to 2015 – High price attained due to project appeal and limited availability of African carbon offsets

  • First stage payment immediate
  • Second stage payment due upon CCB Accreditation (issued December 2009)
  • Third stage payment due upon Voluntary Carbon Standard (VCS) REDD AUFDD (Avoiding unplanned

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  • Third stage payment due upon Voluntary Carbon Standard (VCS) REDD AUFDD (Avoiding unplanned

frontier deforestation and degradation) registration (anticipated during 2010, actual Feb 2011)

  • Community support initiatives form the basis of the carbon offset leakage avoidance strategy, including:

– Ecotourism an ecotourism provider operates a camp which provides employment for local wildlife rangers and safari guides

and other service jobs, as well as a market for local produce

– Eco-factory organic clothing factory employed over 150 people from the community in the construction phase – Organic greenhouse and nursery program grow citrus trees for sale at a discount to local farmers for shade and income

generation, chillies for cash crop and human/wildlife conflict intervention

– Dryland farming scheme working with the Kenyan Agricultural Research Institute (KARI) to explore the potential of growing

jojoba as a dryland cash crop

– Participation in school construction and bursary scheme

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Thank You