Moscow presentation

What is a Buyer Looking For in a Russian Partner? - the NEFCO Perspective: 

What is a Buyer Looking For in a Russian Partner? - the NEFCO Perspective Ash Sharma Testing Ground Facility (TGF) Carbon Fund Russia and the Carbon Market Moscow, 28-29 June 2006

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Scope of Today’s Discussion ﴀ ﴀ About the Testing Ground Facility Examples of Projects Under Contracting General Comments Based on NEFCO's Experience What is NEFCO Looking For in A Russian Partner? Some Comments on Public Sector Organisations

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ﴀ ﴀ A unique, regionally focused carbon purchase fund, acquiring AAUs and ERUs on behalf of its investors Principal countries of operation : Russia and Ukraine Focus on energy related projects (but also other project types can be included) A Public Private Partnership based model, including 6 Governments and 8 private sector companies Subscribed capital currently stands at €35 million Fund management services provided by NEFCO (Experience : almost 100 transactions in Russia, > €80m) Key Features of the Testing Ground Facility

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TGF Investor Base (as of June 2006) ﴀ ﴀ

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TGF Projects Contracted as of June 2006 ﴀ ﴀ

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Objective : a long term relationship (> 7 years) based on mutual trust Use of local consultants/intermediaries is imperative e.g. NEFCO and energy efficiency centres of NW Russia offer tremendous expertise, local knowledge and contacts and are increasingly well versed in carbon finance But personal contact is equally important in Russia especially with top management, and thereafter with senior operational and financial staff Close monitoring of progress during project implementation A good, independently prepared business plan (incorporating a risk assessment) is important ﴀ ﴀ General Comments based on our Experience

What is NEFCO looking for - 1 : 

What is NEFCO looking for - 1 TGF needs acceptable risk profile for each project Carbon purchasers focus on certainty of delivery, depends on a number of factors, of which: Delivery risk is key – focus on supplier’s financial status and technical capacity to deliver project Ability to service debt / deliver credits, evidenced by i.a. financial analysis, credit checks & business plan Other risks are manageable under conventional investment procedures social & environmental, technology, market (sector viability), financial, construction etc

What is NEFCO looking for - 2 : 

What is NEFCO looking for - 2 JI window of opportunity closing, requires adequately advanced project development Project within 3-9 months of financial closure, or evidence of a financing plan Most key agreements or permits in place Ideally with NEFCO, NIB or IFI financing, but strong commercial institutions also acceptable (but rare) Appropriate security pledge on movable assets, or bank guarantee for prepayments (expensive in Russia) Transparency of ownership and business conduct, "Integrity checks" undertaken on most private companies

Public Sector Organisations: 

Public Sector Organisations Municipal owned companies MUEs & SUEs cannot obtain loans or issue guarantee, except in RUR In some cases, parent authorities can guarantee loans Long term lending requires long term budget policy, sometimes requiring special regulations However, for prioritised areas financing exists affordable credit exists: Energy Saving credits Cleaner Production loans Supported by carbon finance from TGF

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ﴀ ﴀ For Further Information Ash Sharma Programme Manager, TGF NEFCO Ash.sharma@nefco.fi For general information visit www.nefco.org/tgf Mobile + 358 400 811 327 Office + 358 9 180 01