International Investment Funds in Bioenergy and

Energy Efficiency

Susan Legro, Eco Ltd.

“Issues and Solutions in Bioenergy….”

December 11, 2007

Minsk

Overview

Types of Funds Investor Requirements Lessons Learned Conclusions

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Types of Funds

Private Equity Investment Funds Dedicated Renewable Energy Funds

Bioenergy Development Fund UNECE/SwissRe Fund

Fuel and power companies Shell GE Energy Financial Services

Types of Funds

Other project equity investment Foreign partner

Sawn wood companies Furniture companies

Foreign partner + investment fund Company + NEFCO

Vendor financing

Carbon equity investments Emission reduction purchase agreement Combination of project and carbon equity

Types of Funds

Debt Loan from a multilateral financial institution

(MFI) EBRD, IBRD/IFC

On-lending

Combination of Debt and Equity Common within projects Some MFIs offer both

Other Types of Intl. Support

Credit Enhancement Products Investment guarantees Political risk insurance

“Market development” support

Investor Requirements

Risk management Project risk Country risk

Risk vs. return The market--and the competition--is global

Investor Profiles

Interest in private sector Interest in small and medium

enterprises (SMEs) Interest in combined project and carbon

equity

Investor Requirements

Project investment document The more data, the better

History of site and equipment Details on owners and investors Details on consumers (residential, industrial)

What kind of document? Project documents should provide a “starting point” for

investors Individual investors have their own unique templates,

methodologies, and due diligence procedures

Lessons Learned, 1 of 2

Energy efficiency investments should be made before or concurrently with supply-side investments, not after

Heat demand may be overestimated Innovative financial mechanisms =

need for very specialized legal expertise

Lessons Learned, 2 of 2

Potential conflict of interest: private sector partners may want maximum heat consumption.

Contracts are the key means of managing risk Need to coordinate timing of funding Relatively low internal rate of return (IRR) can

make it difficult to attract investors

Conclusions

Re-visit pipeline of projects for “niche” investors

Emphasize risk management Continue to include private sector

projects Follow status of emissions market

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