Project Idea Note (PIN) and its Preparation

Transcription

1 Pacific Regional CDM Capacity Building Workshop Project Idea Note (PIN) and its Preparation Xianli Zhu 24-28, Jan 2011, Suva, Fiji

2 Contents What is a PIN? Its different uses PINs: the contents of a PIN The World Bank PIN template Basics of a successful PIN Some tips

3 What is a Project Idea Note? Summary information of a proposed carbon project typically 5-10 pages long The first step in the (long!) process of generating money from emission reductions Not an official document of the CDM, but virtually all funds and brokers have a PIN template Does not have an official purpose in the CDM although some countries DNAs give a letter of no objection based on PINs

4 Purpose of PIN Communication tool used by project developers and investors early on in the process Aids in the conceptualization, marketing, financing and screening/evaluation of projects Prerequisite for more serious negotiations (e.g. Letter of Intent) Road map for formal CDM application/project document DNA may require before issuing Letter of No Objection

5 Used by CER buyers for project screening Most carbon funds use PIN as a first step in identifying and screening CDM projects. Undertaken by seller and buyer to prioritize investments Cast the net widely at first, then narrow focus according to feasibility, profit, etc. Fully use the process to map out key risks, drivers, and uncertainties to identify and engage project champions and affected stakeholders. One of the most widely used PIN template is the one developed by the World Bank for its carbon funds

6 What buyers look for (1) 1. Project Financing Bankability: sooner can achieve financial closure, better the chances of selection Project costs already determined and realistic Idea of how carbon would impact implementation or address expected financing gap 2. Credible baseline and adequate volume Carbon credit volume should be sufficient to cover CDM or VER transaction costs Suggested minimum threshold: 20 ktco 2 per year or 100 ktco 2 total before 2012.

7 What buyers look for (2) 3. Commercially viable technology 4. Competent, credible counterparties clear champion and institutional arrangements sound legal arrangement -- who owns, who operates, what type of agreement between project participants 5. Viable business + operation model 6. Demonstration of sustainability, safeguards EIA and/or relevant environmental permits Compliance with social + environmental safeguards plus relevance to sustainable criteria of host country

8 PIN Key Elements Clear description of project activities and technologies employed Identify project participants and arrangement for implementation Participants roles and their technical, financial capability to undertake Status of third party involvement if appropriate (e.g., PPA in case of electricity generation project or agreement with municipality, private operator regarding ownership of waste in case of landfill project) Eligibility outline: additionality and baseline scenario Why the project should not happen on its own? Sources of GHG emission reductions and total ER volume including possible leakage Local, national, and global benefits Risks

9 Outline of a PIN (1) The PIN has three main parts: (A) Project Description-type of project, location, schedule) (B) Expected Environmental and Social Benefits (C) Finance

10 Outline of a PIN (2) (A). Project Description (type of project, location, schedule) Objective of the Project Project Description and Proposed activities Technology to be employed Project Developer/Sponsors Type of Project Location Expected Schedule Whether the Host Country has ratified the Kyoto Protocol

11 Outline of Project Idea Note (PIN) (3) (B) Expected Environmental and Social Benefits Estimate of GHG abated/co2 Sequestered Baseline Scenario Specific Global and Local Environmental Benefits Socio-Economic Aspects Environmental Strategy/Priorities of the Host Country

12 Outline of a PIN (4) (C) Finance Total Project Cost Estimate Sources of Finance to be Sought or already Identified Sources of Carbon Finance Indicative CER Price Total Emission Reduction Purchase Agreement (ERPA) Value

13 PIN Template (World Bank) Most buyers accept World Bank template, available at

14 Name of Project: Date submitted: A. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE PROJECT Describe in not more than 5 lines PROJECT DESCRIPTION AND PROPOSED ACTIVITIES About ½ page TECHNOLOGY TO BE EMPLOYED Describe in not more than 5 lines TYPE OF PROJECT Greenhouse gases targeted CO 2 /CH 4 /N 2 O/HFCs/PFCs/SF 6 (mention what is applicable) Type of activities (Abatement/CO 2 sequestration) Field of activities (mention what is applicable) See annex 1 for examples LOCATION OF THE PROJECT Country City Brief description of the location of the project No more than 3-5 lines (1)

15 PROJECT PARTICIPANT Name of the Project Participant Role of the Project Participant a. Project Operator b. Owner of the site or project c. Owner of the emission reductions d. Seller of the emission reductions e. Project advisor/consultant f. Project investor g. Other, please specify: Organizational category a. Government b. Government agency c. Municipality d. Private company e. Non Governmental Organization f. Other, please specify: Contact person Address Telephone/Fax and web address, if any Main activities Describe in not more than 5 lines Summary of the financials Summarize the financials (total assets, revenues, profit, etc.) in not more than 5 lines Summary of the relevant experience of the Project Participant Describe in not more than 5 lines Please insert information for additional Project Participants as necessary.

16 EXPECTED SCHEDULE Earliest project start date Year in which the plant/project activity will be operational Estimate of time required before becoming operational after approval of the PIN Expected first year of CER delivery Project lifetime Number of years Expected Crediting Period 7 years twice renewable or 10 years fixed Current status or phase of the project Identification and pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and indicate the documentation) Current status of acceptance of the Host Country Letter of No Objection/Endorsement is available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country with regard to the Kyoto Protocol Time required for financial commitments: months Time required for legal matters: months Time required for construction: months Has the Host Country ratified/acceded to the Kyoto Protocol? NO / YES, YEAR Has the Host Country established a CDM Designated National Authority

17 B. METHODOLOGY AND ADDITIONALITY

18 C. FINANCE TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) Development costs $ million (Feasibility studies, resource studies, etc.) Installed costs $ million (Property plant, equipment, etc.) Land $ million Other costs (please $ million (Legal, consulting, etc.) specify) Total project costs $ million

19 SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity Name of the organizations, status of financing agreements and finance (in US$ million) Debt Long-term Name of the organizations, status of financing agreements and finance (in US$ million) Debt Short term Name of the organizations, status of financing agreements and finance (in US$ million) Carbon finance advance payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON FINANCE Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER PRICE PER tco 2 e Price is subject to negotiation. Please indicate VER or CER preference if known. TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the first commitment $ / period) A period of 10 years $ / A period of 7 years $ /

20 D. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS E.g. impacts on local air, water and other pollution. GLOBAL BENEFITS Describe if other global benefits than greenhouse gas emission reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects can be attributed to the project and which would not have occurred in a comparable situation without that project? Indicate the communities and the number of people that will benefit from this project. About ¼ page What are the possible direct effects (e.g. employment creation, provision of capital required, foreign exchange effects)? About ¼ page What are the possible other effects (e.g. training/education associated with the introduction of new processes, technologies and products and/or the effects of a project on other industries)? About ¼ page ENVIRONMENTAL STRATEGY/ PRIORITIES OF THE HOST COUNTRY A brief description of the project s consistency with the environmental strategy and priorities of the Host Country About ¼ page

21 Basis for Successful PIN Competent Project participants and clear institutional arrangement Technically experienced and sound project developers with clear division of functions. 1) Early involvement of credible technical, financial, and economic specialists to establish that all project selection criteria are in place 2) Pool of in-house resources to bring to completion projects that are technically sound and sustainable Demonstration of sound legal arrangement -- for example, who owns, who operates, and what type of agreement between project participants as well as with third party (e.g. power purchase agreement, ownership agreement, water right) Viable business and operation model that help reduce transaction costs Potential for scale up Involvement of intermediaries who can invest, bundle, and implement project-related CDM services locally

22 Basis for Successful PIN Sound financing structure Sound financial health of project sponsors and cofinanciers. The sooner the project can achieve financial closure, the better the chances of selection are Environment impact and sustainability of the project In consistent with the WB s social and environmental safeguard requirements AND the host Country s overall sustainable development framework Sizable community benefits Most eligible criteria for small-scale project under the CDCF Community Benefits Questionnaires

23 Developing a PIN some tips PIN is, in part, a sales document you are trying to attract the interest of carbon buyers. Commercially viable technology Credible baseline scenario and adequate ERs volume Make the document appear professional use good English and avoid spelling mistakes Use recognised terminology and address common problems leakage, additionality, permanence, etc. Make your calculations and assumptions explicit Choose your buyer: some are interested in sustainable development impacts; others are concerned only with carbon tonnages But keep it realistic! There is no point selling a project that you cannot possibly deliver Be conservative with your carbon estimates

24 Some tips Complete the contents in the PIN Template: incomplete and slow responses delay the process Provide the information in English Find an applicable approved methodology (the UNEP Risoe Centre Methodology Selection Tool can help) Properly work on baseline establishment and emission reduction estimate, these are critical information for your CDM project Double check your PIN, avoid inconsistencies

25 How to get started Browse CD4CDM Project s CDM Project Pipeline Tracker Tool to find out whether there is an applicable approved methodology and similar registered projects similar.org Find the applicable approved PDD and approved UNFCCC CDM website: find the applicable approved methodology and download the PDDs of a few similar projects, which can offer you some clues on whether your project is feasible and how to design it

26 Dr. Xianli Zhu Website: