The KfW Carbon Fund37th REGULAR MEETING OF THE ALIDE GENERAL ASSEMBLY 2007 May 2007

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KfW Bankengruppe in brief

Promotional bank of the Federal Republic of Germany.

Founded in 1948.

Shareholders: Federal Republic of Germany (80%), German federal states (20%).

Headquarters: Frankfurt am Main; branch offices: Berlin and Bonn.

Foreign representations: Brussels and around 50 offices and representations worldwide

Balance-sheet total at the end of 2006: EUR 360 billion

3,580 employees at the end of 2006

Rating: AAA/Aaa/AAA.

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Brand Structure

KfW Carbon Fund

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KfW Environmental and Climate Commitments

KfW Facts and Figures

Total loan commitments for

environment- and climate protection measures in 2005: € 9.3

billion

- Thereof two thirds for climate protection

- Share of total commitments

20

%

Carbon mitigation effect of KfW climate protection programmes

Total annual reduction 1990 to 2004 in Germany

across all sectors 10.5 mill. t CO2

Annual CO2 mitigation effect of KfW programmes

(energy efficiency in the building sector and wind power)

(average 2003 to 2004) 3.9 mill. t CO2

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Carbon Market

0,799

1,6

2,4

0

0,5

1

1,5

2

2,5

3

2005 2006 2007F

Mission: to define a price/cost on carbon emissions, a value on emission reductions, and to enable trade of resulting allowances or credits

Size of International Carbon Market

Volume - Billions Tons of CO2 e

9,4

22,5 23,6

0

5

10

15

20

25

2005 2006 2007F

Transactions – EUR Billions

+100%

+50% +139%

+5%

Source: Point Carbon

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CDM Market

401

563 552

0

100

200

300

400

500

600

2005 2006 2007F

“The CDM/JI market is a success: the project market is seen as more mature, and is resulting in cost effective emission reductions.” (source: Point Carbon)

Size of CDM Market

Volume - Millions Tons of CO2 e

2,1

3,94,3

00,5

11,5

22,5

33,5

44,5

5

2005 2006 2007F

Transactions – EUR Billions

+40%

-2%

+93% +10%

Source: Point Carbon

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CDM Market - profile

China; 70%

Egypt; 2%Malaysia; 1%

Brazil; 3%

India; 12%

China completely dominated the CDM sell side, bringing the bulk of the HFC-23 and adipic acid N2O

Profile of CDM Market

Country Sellers - 2006 Project Types - 2006

Source: Point Carbon

N2O; 21%

HFC-23; 33%

Renewable Energy; 13%

Other; 10%

Fugitive Emissions;

7%LULUCF; 1%

Energy efficiency;

7%

Waste; 9%

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Purchase programme for Carbon Credits (JI/CDM) Purchase of compliance tools for the ETS (CERs, ERUs) KfW acting as a trustee for programme participants

KfW buys as a trustee for programme participants

Target group: German and European enterprises, who

- want to make use ofJI and CDM for compliance purposes and

- do not have own access to projects abroad

Forward purchase contracts with sellers of carbon credits

„Emissions Reductions Purchase Agreement (ERPA)“

The KfW Carbon Fund

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The KfW Carbon Fund

First tranche EUR 84 millionLaunched in June 2004More than 6 million tons contracted; to be closed mid 2007KfW contribution with own funds: EUR10MMGerman Government contribution: EUR4MM

Second tranche EUR 100 million Second Tranche launched in May/2007: targeting smaller Compliance Buyers and non trading companies emphasis on Renewable Energy and Energy EfficiencyPartnership with European Investment Bank

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Present Status

Programme Volume (First Tranche): EUR 83.9 Mio.

24 participating Enterprises from

Germany, Austria, France and Luxemburg

Supported by German Federal Government and KfW

6.4 million tons CO2e contracted (per 31.03.07)

Sectors: focus on renewable energy (wind, hydro, biomass), methane avoidance (landfill gas,

CMM, biogas) Countries: focus on India, China, Brazil, Egypt

All ERPAs to be concluded until mid 2007

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Fund Concept

Purchase programme (“Buyers’ Pool”) for project-based certificates Purchase of compliance tools for the ETS

(CERs, ERUs, project-based EU-Allowances) commercial orientation

KfW purchases as a trustee for participants in its own name, for the account of participants on the basis of individual Agency Contracts between KfW

and each participant

off-take contracts with suppliers of certificates (“ERPA”) payment on delivery up to 2012 with option to extend fixed or variable pricing

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Objectives of the Fund Background

Kyoto-Protocol (Clean Development Mechanism) European Emissions Trading System (ETS), Linking Directive

Provide a service instrument for German and European enterprises which want to to use project-based certificates for compliance

purposes

alternative to own measures and emissions trading no internal capacities required risk mitigation by diversification

Project development function

Promotion of projects and measures contributing to reduction of global Greenhouse Gas Emissions sustainable development in the host country

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Programme Structure - Tranche 1

Participant 1

KfW

Project Portfolio

(“KfWCarbon

Fund“)

Project n

Project 3

Project 2

Project 1

Participant 2

Participant 3

Participant x

ERPA

Ag

ency co

ntracts

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Programme Structure - Tranche 2

Buyer 1EIB-KfWCarbon Programme

KfWProgramme Manager

and Contracting Party

EIB/KfWUnderwriters

Project n

Project 3

Project 2

Project 1

Buyer 2

Buyer 3

Buyer x

Em

ission

Red

uctio

n P

urch

ase Ag

reemen

t

Pu

rchase an

d A

gen

cy Ag

reemen

t

Financing Facility

EIB Facility Manager

EIB/KfWUnderwriters

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Investment Policy

Eligible Projects

Emphasis on renewable energy and energy efficiency

Exclusions in line with Kyoto and ETS:

Nuclear, large hydro, forestry

Risk balanced portfolio

By countries, technologies, counterparties

Primary market activities

No emissions trading

Emphasis on forward contracts

Up to 2012;

Options for Post-Kyoto credits

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Portfolio Distribution

Africa21%Asia

53%

Europe1%

Latin America25%

Renewable Energy: Hydro

32%

Renewable Energy: Wind

30%

Coal Mine Gas7%

Energy Efficiency: Supply side

1%

Fossil Fuel Switch4%

Landfill Gas25%

Industrial Gases1%

Regional distribution of ER volumes Technological distribution of ER volumes

Fondsportfolio (ERPA or LoI) as per 31.03.2007

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Financing support for CDM /JI project preparation

Financing of preparatory measures:

Design of PDDs, Business Plans, Environmental Impact Assessment Reports or support of validation costs

Maximum amount of KfW financing: € 50,000.00; contribution of funds by project owner expected

Repayment by deduction from the first payment of KfW for CERs delivered due upon the first delivery of Certificates

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Financing options at KfW for project financing

Advance payments on ERPA:

up to 50% of ERPA value upon provision of investment grade securities; separate loan agreement with KfW Carbon Fund

Project financing by KfW-IPEX and DEG:

min. loan amount of 20 Mio €; term up to 10 years; min. 30% equity contribution; interest fixed or variable; security package depending on project structure

min. loan amount of 1 Mio €; term 4 to 10 years; interest fixed or variable; collateral security (e.g. fixed assets); DEG financing share up to 35% of total project costs

Concessional Financing by KfW Development Bank

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Future Plans

Continuous purchase programme for compliance certificates

Purchase target of 9 million tons CO2e per year (including Post-Kyoto

purchase)

Own underwriting capacity (“warehousing”)

EIB-KfW Carbon Programme

EUR 100 Million purchase facility for carbon credits

(second tranche of the KfW Carbon Fund)

Value Added Features

Tailormade product for SMEs (delivery guarantee)

Financing facility for projects as advance payments

Risk-sharing between EIB and KfW

The KfW Carbon Fund

For more information: www.kfw.de/carbonfund

Rose Cuten

KfW Carbon Fund

São Paulo Office

Brasil

Phone: 55 11 5187-5150

rcuten@degbrasil.com.br