Investing in renewable energy – Challenges and opportunities from an international perspective

Agenda

2

Deutsche Bank‘s experience in financing renewable energy

projects

Green Finance Products - Case studies

Presentation Global Climate Partnership Fund

Deutsche Bank‘s experience in financing renewable energy projects

Renewable energy finance

3

4

Basic facts Investment volume 2010

Drivers of

renewable energy

Climate change

Persistent high oil and gas prices

Policy inducements (taxes and other

economic incentives

Total new investment in clean energy

by region, in US$ billions

Source: Bloomberg New Energy Finance

Global Total New Investment in Clean

Energy, 2004 to 2010, in US$ billions

Overhang of energy crisis / addressing

underinvestment and dependencies

Market liquidity (Real estate, Shipping,

Aircrafts etc)

Public awareness

Due diligence check-list for wind/ photovoltaic park

Permits

Tariff/

grid connection

Construction

O&M

Watertight permits for construction / operation / grid connection

Timely achievement of permits

Confirmation of grid connection from local grid operator

Feed-in tariff regime or limited exposure to merchant risk

Tenor of tariff drive maximum tenor financing available

Use of proven technology / equipment from experienced

suppliers

EPC guarantees to cover delays and/or cost overruns

O&M contract with minimum availability guarantee

Linkage of O&M fee to revenues

Availability of appropriate insurance

Financiers should be involved in the due diligence process early on to

ensure above parameters can still be influenced

5

Energy yield

assessment/

technical expertise

Solar irradiation assessment/ wind expertise with at least 1 full

year of wind measurements at hub height

Other expertise necessary for the permitting process (e.g.

environmental impact assessment etc.)

Project milestones in a typical renewable energy project

Due Diligence

Equity investor

Debt provider

Construction phase Securing of

feed-in tariff

Equity

Debt

Grid

connection

Drawings according to construction progress

Confirmation

Debt

provision

Construction

start

End

construction

phase

Step-in of

equity

investor

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month

7

Month 8+

Operational

phase

6

Payment of

feed-in tariff

Sourcing of

components

Incorporation of SPV

Permitting

process+

grid

connection

Finalization

technical

planning

7

Risk profile from the financing bank’s perspective

Project

development Construction Regular operations

Interim

operations

Political risk

Product risk

Performance/operation risk

Construction/ completion risk

Market risk

Technology risk

Risk profile requires technical and financial know how

Green Finance Products

Case Studies - Europe

8

Transaction description Project location

The project is a 7.56 MW photovoltaic on a tracking system

The project benefits from the high irradiation in Apulia and the most favourable feed-in tariff in Italy under the Italian Conto Energia II for 20 years

Highlights DB’s role

Sanyo provided the project with the monocrystallin HIT modules, Power One supplied inverters. The tracking

system was provided by Ideematec

Alongside EST Energie & Solar Technik GmbH Deutsche Bank entered the project development at a

very early stage and brought in the necessary funds for successful completion of the permitting process

This project shows Deutsche Bank’s ability to offer all

necessary products along the entire value chain of a renewable energy project during project development and construction phase

Deutsche Bank accompanied the project from the planning stage up to commercial operation date,

including the handling of the project development, the arranging of the project’s debt and equity financing as well as the overall project management

Case Study Photovoltaic 7,5 MW solar plant in Italy

9

Mediterranean Sea

Sicily

Tyrrhenian Sea

Ligurian Sea

Adriatic Sea

Ionian Sea

Corsica

Apulia

LombardyVeneto

Trentino-altoAdige Friulivenezia

Giulia

Piedmont

Slovenia

Austria

Switzerland

France

Sardinia

Italy

Transaction description Project location

Deutsche Bank is financing the construction of a 14 MWp solar power plant in Apulia, Italy

The Photovoltaic park consists of three legally and technically separated solar parks with separate connection points to the grid and each owned by a

special purpose company

The projects benefit from the high irradiation in Apulia and the most favourable feed-in tariff in Italy under the

Italian Conto Energia II for 20 years

All solar parks are in operation since the end of 2010

Project volume EUR 80m

Highlights DB’s role

The project was developed by the German company Schüco International and its Italian subsidiary

Schüco also provides the projects with the respective components such as modules, inverters and understructure

Emicom, which is part of the Siram group, acts as a turn-key contractor

Deutsche Bank provided financing for 100% of construction costs

Deutsche Bank arranged the long term equity (EUR 24.5m) to be placed via a German closed end fund

Deutsche Bank Private Wealth Management acts as

sales agent to German private investors

Deutsche Bank arranged the long term debt financing

Case Study Photovoltaic 14MW solar plant in Italy

10

Mediterranean Sea

Sicily

Tyrrhenian Sea

Ligurian Sea

Adriatic Sea

Ionian Sea

Corsica

Apulia

LombardyVeneto

Trentino-altoAdige Friulivenezia

Giulia

Piedmont

Slovenia

Austria

Switzerland

France

Sardinia

Italy

Green Finance Products

Global Climate Partnership Fund

11

What is GCPF ?

Why GCPF ?

Objective

Introduction to the Global Climate Partnership Fund (GCPF)

12

•GCPF aims to contribute to the reduction of greenhouse gas

emissions in emerging markets across the world

•GCPF is a Fund capitalized by international investors

•It primarily offers financial institutions:

1.Commercial financing, tied to on-lending into sustainable

energy projects

2.Co-investments into sustainable energy projects

•In addition, it can provide direct financing to sustainable energy

projects

•… opens new growth markets for its partners

•… grants access to financial and technical know-how for business

development in new ecologically sustainable areas

• …is a strong and reputable partner backed by the world’s leading

financial institutions

GCPF Structure

13

Investors

Issuer

Vehicle

Luxembourg

TBD

USD funding USD, Local FX, EUR investments

Investment Committee Technical Assistance

Facility

Inve

stm

en

t M

an

ag

er

Institutional Investors, Ultra High Net Worth

Individuals (UHNWI), Socially oriented

institutions

Su

sta

ina

ble

En

erg

y P

roje

cts

Direct Equity & Debt

Senior & Sub-

Debt Loans Loans

Fin

an

cia

l In

stitu

tio

ns

Mezzanine Tranche

(B Shares)

Junior Tranche

(C Shares)

Senior Tranche

(A Shares)

Super Senior

Tranche

(Notes)

Development Finance

Institutions Investment Manager

14

Targets all emerging and

developing countries worldwide,

focus on 13 primary target

countries

Typical projects could be:

building envelope upgrades

energy efficient lighting systems

decentralized electricity generation

from renewable sources, etc.

Key data Primary target countries

Mexico

Chile

Brazil

South Africa

Ukraine Turkey

Tunisia Morocco

India Indonesia

Philippines

Vietnam

China

Overall scope of GCPF activities

GCPF for financial institutions

15

Technical Assistance

Technical assistance (TA) can be provided

to institutions with limited experience in

sustainable energy lending

It helps FIs to design, set up and

implement the new business

TA is tied to financing through GCPF

The Fund provides debt instruments to

selected partner financial institutions at

commercial rates

Financial institutions will be required to

disburse sub-loans to their clients to

finance energy efficiency and/or renewable

energy projects

Investment instruments include

senior debt

subordinated debt

guarantees

The maximum investment size per

financial institution is US$ 30m

Investments can have a maturity of up to

15 years (at the beginning 5-7 years)

Financing can be provided in US$ or local

currency (hedging could be provided by

DB)

Co-investments

For the financing of stand-alone projects,

GCPF can co-invest and provide debt or

equity during all phases of a project

Co-investments are mainly available for

institutions with little or no experience,

seeking a strong partner in the field of

energy financing

Refinancing

GCPF for sustainable energy projects

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Project Considerations

Other Considerations

Finance Considerations

Projects should ideally have a promoter

effect for the local sustainable energy

culture

The Fund will only consider commercially

proven technologies (other technologies

require approval on bankability by qualified

third party)

Renewable energy projects should ideally

be replicable on a larger scale

Energy efficiency projects should ideally be

in the sector with the highest energy use in

the country

Project is integrated into the local economy

(e.g. input of local companies and banks,

job creation)

Project complies with relevant

environmental and social standards (e.g.

IFC Performance Standards)

Investments should be in the range of US$5-

20m

Investments instruments include senior debt,

mezzanine instruments and equity

Debt investments can have a maturity of up

to 15 years, equity investments can be

adapted to the needs of various project

phases

Equity is only available to landmark projects,

not companies and is only invested

alongside a (preferably local) co-investor

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Project sourcing Project

evaluation

Project

approval &

disbursement

Monitoring

& reporting

• Sourcing from:

• Financial

Institutions

• Global / local

ESCOs

• Manufacturers

• Project

developers

• Portfolio fit

assessment

• Environmental &

developmental

evaluation

• Financial & legal

evaluation

• Technical

evaluation

• Final approval by

Investment

Committee

• Signing of

documentation

• Set up of

necessary

administration,

transaction

management

• Monitoring /

potential work out

• Combined

financial /

environmental /

social reporting

GCPF’s investment process for direct investments

Indicative term sheet for direct investments I

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Fund Initiators German government, KfW

Fund Investors IFC, Danish government, Deutsche Bank (DB), private sector investors (likely)

Fund Manager Deutsche Bank AG

Investment Purpose Projects will receive debt or equity investments for energy efficiency and renewable energy projects with the goal of reducing greenhouse gas emissions (in the case of energy efficiency projects by at least 20%)

Geographical Scope

All countries which are eligible for investments by the World Bank Group (most emerging and developing countries). Particular focus on Brazil, Chile, China, India, Indonesia, Mexico, Morocco, Philippines, South Africa, Tunisia, Turkey, Ukraine, Vietnam

Technological Scope - Only commercially proven technologies - Other technologies require approval on bankability by qualified third party

Investment Types

- Direct Investments: The Fund can (co-)invest as part of a consortium - Indirect Investments: The Fund invests in a local bank which in turn

(co-)invests into the project. - A combination of both investment types is possible

Investment Instruments - Senior debt - Subordinated debt, other mezzanine instruments - Equity

Investment Size per project

2012: Debt up to US$20m, or local currency equivalent

Equity up to US$12m (more likely US$2-5m), or local currency equivalent

2013: Debt up to US$30m, or local currency equivalent

Equity up to US$12m (more likely US$2-5m), or local currency equivalent

onwards: growing with Fund volume

Indicative term sheet for direct investments II

19

Investment Term

- Debt investments for up to max. 15 years (more likely 5-7.5 yrs. in the current market

environment).

- Equity investments can be adapted to the needs of the various phases (development,

construction, operation)

Currency US$ or local currency, hedging could be provided by DB

Restrictions

- Only one kind of instrument (debt/equity) can be offered to each project

- The Fund needs to realize commercially viable, risk-adjusted returns

- Extended manufacturer warranty or other alignment of interest over investment period

may be required, e.g. by providing technical assistance (see below)

Fund Governance /

Decision Making

- Deutsche Bank proposes all transactions (no other originator)

- Investment Committee (composed of KfW and likely other future investors) approves

Reporting requirements

- Annual performance report (standard format provided by DB) and greenhouse gas

emission savings measurements

- Quarterly reports

Technical Assistance /

Benefits

Upon request and approval by the Fund, local companies may receive technical assistance

by Deutsche Bank or third party consultants in order to establish a new business segment.

The Fund may require manufacturers, distributors, developers and other clients to provide

technical assistance to local stakeholders in addition to the Fund’s own technical assistance

Contacts

20

Michael Hölter

Michael.hoelter@db.com

+49-69-910-30843

Susanne Kern

Susanne.kern@db.com

+49-69-910-60585

© Copyright 2012. Global Climate Partnership Fund, SICAV-SIF, L-2449, Luxembourg. All rights reserved.

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The information in the Document reflects prevailing conditions and Global Climate Partnership Fund's views as of this date, all of which are

subject to change. In preparing the Document, Global Climate Partnership Fund has relied upon and assumed, without independent verification,

the accuracy and completeness of all information available from public sources or received by or on behalf of the Client.

The analyses contained in the Document are not and do not purport to be appraisals of the assets, stock, or business of the Client. The

information in the Document does not take into account the effects of a possible transaction or transactions involving an actual or potential

change of control, which may have significant valuation and other effects.