Milan COP 9 BCSEEMA Side Event Market Perspectives
Milan, COP 9 BCSE/EMA Side Event “Market Perspectives on CDM” December 2003 By: John Paul Moscarella, EVP Econergy International Corporation Clean Tech Fund
Econergy International Corporation n Energy, Environment & Finance asset management and advisory firm n Venture capital investment focus on sustainable energy future combined with environmental value added n Latin America focus • Boulder, Colorado • Washington, DC • Mexico City, Mexico • Monterrey, Mexico • São Paulo, Brazil • Panama (joint venture) Clean Tech Fund
Our Niche Energy, i. e. projects Econergy Environment, i. e. emissions reductions Finance, i. e. funds Clean Tech Fund
Group Summary n Operations q q n Funds – 10+ developed to date ($320 MM +) q q n Prototype Carbon Fund $180 MM, CAF $40 MM Clean. Tech Fund ($22. 5 MM equity, as of Dec. 2003) Projects in our portfolio (past & current) q q n 4 entities, 40 employees/staff ESCO in Mexico, consulting group, carbon trading, & fund manager 50+ developed in the past 40 in the current pipeline, ca. 10 – 12 active Carbon Trading q q Portfolio ca. 18 MM ton CO 2 (25+ contracts) CDM NM#0001 (Vale do Rosario, Brasil) Clean Tech Fund
US Venture Capital model: applied to Emerging Markets of Latin America OPTIONS Startup Friends & Family Angel or Seed Investors Institu tional Growth Consoli dation Invest ment Value Proposition: environmental assets in energy business (carbon credits) Clean Tech Fund Exit Strat egy • IPO • Merger • Strategic / Trade Sale
Example: VC proposition & carbon credits value added Carbon credits: “value added environmental asset” Case Study: Exit Strategy = 5 X EBITDA w/o carbon =7 X - 10 X EBITDA w/ carbon? Example portfolio = Ca. 2 MM ton CO 2 eq. Clean Tech Fund
Carbon Portfolio § Experience Biomass energy – USA, Brasil and Poland Landfill Gas – USA, Brasil, and Mexico Biodigestors – animal waste in USA and México Cogeneration – wood waste in Ghana, Brasil & Russia Cogeneration – sugar mills in Brasil, Nicaragua, India, Philippines Energy efficiency – ESCo cotnracts – (Various) q q q § Carbon Portfolio – Latin America Landfill gas recovery ü Biodigestors ü Cogeneration – Bagasse ü Biomass energy generation ü Wind ü Hidropower ü Reforestation TOTAL ü Clean Tech Fund 1, 1 MM ton 3, 0 MM ton 6, 7 MM ton 0, 1 MM ton 1, 0 MM ton 2, 2 MM ton 4, 5 MM ton 18, 6 MM ton CO 2 eq
CDM New Methodology Clean Tech Fund
NM 0001: Vale do Rosário (São Paulo/Brasil) Co-Generation with sugarcane bagasse q q n Installed Capacity = 65 MW Annual energy = 100 GWh Avoids thermal dispatch on the margin, per load curve 40000, 0 35000, 0 MWh/h n 30000, 0 25000, 0 20000, 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Clean Tech Fund
Clean. Tech Fund Overview n A Capital Appreciation Equity Fund n Investing in promising small and medium projects/companies in Latin America. Projects and companies with contracted longterm revenues and fixed cost investments q $500, 000 - $3, 000 investments $35 million capitalization (target) q n n Carbon Credits as a currency risk mitigation strategy Clean Tech Fund
Value Proposition Fixed Contracted Revenue Streams n Utilities/end-users: Power Purchase Agreements n End-users: Energy Services Agreements n End-users: Water Delivery Contracts n Kyoto Protocol countries: Emission Reduction Purchase Agreements Clean Tech Fund
Value Proposition Currency Risk Mitigation n Dollar Indexed contracts n Partial hedge via carbon credits sale in euros or dollars (10 -20% of revenue streams) Clean Tech Fund
Investment Strategy n Retail End-Users q q q n Energy intensive customers Higher Retail rates of energy Higher returns Distressed Asset Purchases q q Distressed markets in Latin America forcing current assets to sell at substantial discounts Contrarian plays = substantial returns Clean Tech Fund
Eólica Santa Catarina Wind Farm Clean Tech Fund
Project Summary n Located near Monterrey, Mexico n 21. 5 MW Capacity – 1. 5 MW Turbines n Site located next to existing high voltage transmission lines n Letters of Intent with eight municipalities to sell power under the self-generation framework n Current cost is 15 cents per KWh Empresas ESM and ABB New Ventures are 50% partners as the developer n Potential Carbon Credits of 33 k tons per year n Operation by 1 st Qtr. 2005 q Clean Tech Fund
Project Performance 2005 Operating Revenue Net Income After Tax Cash Flow n n 2006 2007 2008 2009 2010 2011 6, 437, 313 6, 594, 970 6, 756, 570 6, 922, 209 7, 091, 989 7, 226, 014 7, 444, 389 566, 927 739, 427 919, 594 1, 110, 880 1, 314, 224 1, 530, 657 1, 761, 304 2, 118, 015 2, 169, 030 2, 215, 564 2, 259, 853 2, 301, 502 2, 340, 068 2, 375, 062 ROE after tax: 28. 1% (CTF 15 -year return) CTF Investment: $3, 000 n Equity, 30%: 8, 297, 813 n Debt, 70%: 19, 361, 563 n Interest rate: 10% n Term: 10 years Clean Tech Fund
Emissions Reduction Credits 1 2 3 4 5 6 7 Tons CO 2 32, 750 32, 750 Value at 131, 000 131, 000 $4/TCO 2 n Total emissions reductions over 10 yrs: q q n Volume: 327, 500 t. CO 2 Value: $1. 31 million Baseline analysis complete Clean Tech Fund
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