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CTI Side Event at UNFCCC COP19 Warsaw, Poland: November 14 & 15, 2013

COP19_SideEvent_14Nov_1The CTI held two side events relating to its work on the Private Financing Advisory Network (PFAN) during the UN Climate Change Conference in Warsaw, Poland on 14th and 15th November 2013. These events brought together over 50 participants from a broad range of prominent stakeholders including national delegates, private sector, and multilateral organizations for panel discussions.

November 14, 2013  Side event at the US Pavilion

Agenda and Presentation

At the first side event held at the US Pavilion, the CTI took the audience inside the CTI PFAN approach, walking participants through the coaching process, project development, and ultimately the national level impact, while drawing upon the experiences of project developers and CTI PFAN coaches in raising financing for projects.

Mr. Elmer Holt, the Vice Chair of the CTI Executive Committee and the CTI PFAN Manager, opened the side event providing an introduction and overview of the CTI and the CTI PFAN programme as follows. The CTI’s objective is to promote more rapid development and diffusion of climate friendly and environmentally sound technologies and practices. In order to achieve the objective, the CTI works closely with various governmental and intergovernmental agencies, but the comparative advantage lies in the fact that the CTI works closely with the private sector which is the key component of the technology transfer process. During the course of conducting its activities over the years, CTI continued to receive a recurring message from developing countries in particular that the problem with technology transfer was a shortage of funds for project implementation. Another message we received was from the business and finance communities that there was a shortage of good projects in developing countries. Through the facilitation of interaction between project developers and the finance communities, a key fact emerged that it is not a shortage of funds for investment and it is not a shortage of good projects, but instead, it was a shortage of good financing proposals capable of adequately communicating the merits of the projects to the international finance community. Based upon this message, the CTI launched the CTI Private Financing Advisory Network (CTI PFAN). CTI PFAN connects clean energy projects seeking financing with investment sources seeking projects to invest. CTI PFAN is a multi-lateral Initiative under the umbrella of CTI supported by the CTI member countries as well as ICETT, REEEP and USAID.

Mr. Peter Storey, CTI PFAN Global Coordinator, presented a summary of CTI PFAN outlining its methodologies, the current activities and success stories as well as plans for the future as follows. CTI PFAN provides free coaching on project structure, development and financing to project developers identified through call for project proposals as well as unsolicited proposals. CTI PFAN selects projects based on competent management team, commercial / technical viability, GHG emission reduction potential, developmental benefits, and replication / growth potential. CTI PFAN is technology neutral, i.e., the technology employed in the projects supported by the programme may come from any source or country. The Africa activities in 2013 encompassed the expansion of East and Southern Africa network as well as the establishment of West Africa network, in particular through the organization of West Africa Forum for Clean Energy Financing (WAFCEF) in Accra as a result of which four of the participating projects are in negotiation with investors. CTI PFAN is also expanding its adaptation stream activities where 270 project proposals were submitted. CTI PFAN is working with 91 projects in Africa representing USD 1.9 billion of required investment with 4.98 million tonnes of CO2 equivalent reduction potential per annum. CTI PFAN has successfully raised USD 126 million of investment for 13 projects in Africa representing 171MW of clean capacity installed, 171MWhrs of energy savings, and 1 million tonnes of CO2 equivalent reduction per annum. The third cycle of Africa Forum for Clean Energy Financing (AFRICEF3) and WAFCEF2 will be launched in early 2014, and the Adaptation Financing Forum will be organized in late 2014. CTI PFAN is working with REEEP to develop a new financing instrument to support and assist across the whole project development value chain delivering grant funding, technical assistance, financing facilitation and investment to move projects forward.

Mr. Michael Feldner, the CTI PFAN advisor in South Africa laid out how the CTI PFAN coaching process works and introduced Bio2Watt (BBP), a 5 MW grid connected biogas project in South Africa which recently closed financing and will become operational in Q3 2014. BBP will operate for 10 years, with the opportunity to renew agreements for an additional 10 years supplying 3.3MW of electrical power to an industrial off-taker. The total project costs amount to USD 13.5 million structured as a limited recourse finance transaction with a 70%:30% debt to equity ratio. During the five-year project development process, 56 iterations were performed on the project finance model, 1,500 pages of legal documents were compiled, 18 stakeholders were involved directly in the project, and USD 600k was spent in legal fees. In order to afford the costs for the project development, grants were secured, convertible debt was structured, and the fixed costs were kept to minimum. CTI PFAN provided resources for technical assistance on top of the advisory service to the project. To navigate project developers through the complexity of project finance, CTI PFAN comes in at critical junctures of the project development process to bestow confidence in the developers, which is part of the value of the programme.

In response to a question regarding the regional variance in the amount of pre-development costs required, Mr. Feldner explained that the lawyers and technical experts for conducting due diligence need to be imported for projects in Africa, which increases the cost compared to other markets. It is necessary, especially for smaller projects, to reduce the amount of legal work that is involved and get more experiences at the banks. Mr. Storey reinforced that the predevelopment costs of USD 1.5 million in Africa in general is at the upper end, and in Asia around USD 700 thousand at the lower end. The challenge is to mobilize someone like Mr. Feldner to help 30 projects monthly, not yearly.

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