Overseas Private Investment Corporation: The U.S. Government s Development Finance Institution

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1 Overseas Private Investment Corporation: The U.S. Government s Development Finance Institution Renewable Resources in Emerging Markets ASIA LEDS FORUM Bangkok 20 September 2012 OPIC Snapshot Established in 1971 Green = Countries with Active Projects (107) Gray = OPIC eligible countries (150+) Provided $188 billion of financing and insurance to support highly developmental projects Operates on a self-sustaining basis at no cost to the American taxpayer. Overseas Private Investment Corp. 2 1

2 OPIC By the Numbers: Fiscal Year 2011 TOTAL PORTFOLIO, FYE COMMITTED CATALYZED COMMITMENTS IN LOW- INCOME COUNTRIES PROJECTS WITH U.S. SMALL BUSINESSES PROFIT PEREMPLOYEE $14.5 BILLION $3.2 BILLION $4.4 BILLION 61% 78% $1.3 MILLION HOST COUNTRY JOBS CREATED 19,046 U.S. JOBS SUPPORTED 1,373 Overseas Private Investment Corp. 3 OPIC Primary Products Project Finance Political Risk Insurance Loans from $1 million to $250 million Fixed interest rate Tenors up to 20 years Currency in USD Leverage up to 75% Expropriation Political Violence Currency Inconvertibility Investment Funds Leverage Provides debt to Private Equity Funds Funds can be sector and/or regionally focused Overseas Private Investment Corp. 4 2

3 Eligibility Project Finance (debt) 25% of Project Company owned by U.S. party OR significant longterm involvement of U.S. party (through licensing, royalties or leasing) Less than 50% foreign gov t ownership in Project Framework Limited recourse project finance Loan sizes from $1-250M Loan Tenors up to 20 years Fixed rate U.S. dollar financing based on U.S. Treasuries plus risk spread Long history of support to small & medium-sized enterprises Overseas Private Investment Corp. 5 Insurance Eligibility U.S. equity investors or U.S. debt providers Framework Insurance protects against Political Violence (including terrorism), Expropriation & Currency Inconvertibility Fixed premium Cancellable only by Insured Tenor up to 20 years Up to $250M per project Overseas Private Investment Corp. 6 3

4 $1.1 Billion in commitments for Renewable Energy Finance and Insurance Projects $498 million in approvals for financing to private equity funds Important priority representing 1/3 of all commitments in 2011 Overseas Private Investment Corp. 7 FY Renewables Commitments Overseas Private Investment Corp. 8 4

5 Quadruple Bottom Line Commitments Disbursements Net Income Fiscal Social/ Developmental Local jobs created Communities w/ access to energy MW Renewable Energy added Co2 avoided Environmental Economic U.S jobs supported U.S. businesses reach new markets Overseas Private Investment Corp. 9 Product Innovations for Renewables: Finance Retrofit Sub-Debt Energy Efficiency Facilities Direct financing for Renewable Energy & Efficiency improvements with repayments tailored to expected cost savings. Benefits =Working with SMEs; Ability to process small loan sizes Financing U.S. financial intermediaries to offer a financing package for Energy Efficiency improvements. Benefits = Reaches a spectrum of customers; Minimal investment required of manufacturers Leasing Carbon Credit Warehousing Lease financing through U.S. equipment vendors to reduce upfront capital costs to end users. Benefits = Extensive leasing experience; Ability to diversify risk Financing for renewable energy & clean tech solutions to end users, which will ultimately generate carbon credits as a revenue source. Benefits = Grassroots approach to implementation; Bridges local development needs with international investment markets Overseas Private Investment Corp. 10 5

6 Product Innovations for Renewables: Insurance Feed-In Tariff Cover Carbon Credit Insurance Breach of Contract Cover Political insurance protection against the risks of change to regulatory mandated feed-in tariffs. Benefits = Provides greater assurances of cash flow; Mitigates a primary concern of most RE investors Insurance protection against the risks of foreign gov t actions or inactions that can impair an investor s ability to realize carbon credits. Benefits = Ensures the commercial viability for projects dependent on carbon credits Insurance coverage to protect investors from defaults by host gov t off takers in power purchase agreements. Benefits = OPIC maintains bilateral treaties with foreign gov ts to motivate commercial behavior Overseas Private Investment Corp. 11 Contact Information Peter Ballinger Director, Business Development Peter.Ballinger@opic.gov +1 (202) Our Website opic.gov Overseas Private Investment Corp. 12 6

7 Agribusiness in Latin America & Africa $20 million to expand Root Capital s (MA-based nonprofit) current business operations in Latin America and expand to Africa. Project Description On the Ground Root Capital is demonstrating that financing sustainable agribusiness is not only possible, but also profitable. Root Capital provides a form of value chain financing to small farm owners. OPIC s financing will improve the lives of over 100,000 rural farmers by providing them with: Affordable Credit Financial Education Training Workshops Overseas Private Investment Corp. 13 $1 million insurance contract to Terra Global (CA-based) to protect against Royal Government of Cambodia (RGC)breach of contract risk and the threat of political violence. Project Description OPIC & several international partners are working together to protect forests in 13 communities in the Oddar Meanchey province. This project preserves the forest and biodiversity, while creating jobs to local community. Forestry in Cambodia On the Ground RGC provides land tenure to the local community and forest protection generates carbon credits with 50% of net income for the local community. *Red denotes 13 target forest protection sites Terra Global, LLC, a California-based technical consulting carbon management company, will be the U.S. investor. Overseas Private Investment Corp. 14 7

8 Biofuel in Liberia $90M loan to Buchanan Renewables Fuel to sustainably harvest unproductive rubber trees from Liberian plantations for use as biofuel. Project Description Highly developmental project in one of worlds poorest countries. On the Ground OPIC financing will help create: Several hundred direct and more than 1,000 indirect jobs to Liberians Training for unskilled workers on the ground. 26 U.S. jobs $7.5M in U.S. exports. Project will rejuvenate the rubber sector as an important component of the country s economic development. Supports Administration priority to rebuild Liberia after a decade of civil war. Overseas Private Investment Corp. 15 Water Access in Jordan $400M of funding to General Electric (CT-based) and Disi Water to bring water from the Rum aquifer to Amman, Jordan. Project Description Water scarcity is a major constraint to economic growth & development in Amman, Jordan. It is anticipated that this project will provide 25% of Amman s water. OPIC is financing this project in two ways: 1. $150M in Expropriation coverage to GE 2. $250M loan to Disi Water Disi Water will construct 55 wells, a 325 Km pipeline and create a new concrete reservoir and connection to an existing reservoir. Project will supports 400 U.S. jobs, $70M in U.S exports and approximately 120 jobs in Jordan. On the Ground Overseas Private Investment Corp. 16 8

9 Geothermal in Kenya $310M to OrmatTechnologies (NV-based) for Expansion of an existing geothermal plant that will double operating capacity and add clean energy to the country s electricity grid in Kenya. Project Description On the Ground Funding will enable the plant to double operating capacity and deliver at least 5% of Kenya s total power demand. The geothermal plant (pictured) operates in Hell s Gate National Park, a region abundant with hot springs, volcanoes and wildlife. A pipeline transporting pressurized steam is elevated high above the ground to make way for giraffe migration. Generates power using a proprietary technology that re-injects cooled water back into the reservoir to minimize the impact on the environment. Overseas Private Investment Corp. 17 Solar Thermal Energy in North Africa $3 M loan to International Co. for Energy Technology Industries (IETI) to help expand the use of solar thermal energy systems in Algeria, Egypt, Jordan, Lebanon, Morocco and Tunisia. Project Description On The Ground Solar thermal systems have tremendous potential to reduce demand for grid electricity and generator power that rely on fossil fuels. OPIC loan will assist IETI in expansion and in offering a lease option to its clients IETI designs and installs solar hot water heating systems, solar space heating systems, and solar cooling systems. Overseas Private Investment Corp. 18 9

10 Emerging Markets Provide Attractive Investments Factors affecting investor interest derive from political, economic, and social characteristics. Large Market Opportunity -To support economic growth and keep pace with demand, it is estimated that Sub-Saharan Africa needs to install 7GW * of new generation capacity each year. Robustness of Resource - Most countries in the region have largely untapped renewable energy potential which can be exploited by proven technologies. Market Incentives Government supported mechanisms, such as feed-in tariffs, can improve investment returns and the profitability of capital intensive renewable energy projects. First mover advantage First to market advantages offer investors insulation from competitive forces, often resulting in higher returns and brand recognition. Financing required to support power development in Sub-Saharan Africa is estimated at US$41 billion per year, indicating a critical need for countries to attract private sector investment.* * Source: Financing renewable energy in developing countries. UNEP. February Africa s Untapped Potential Geothermal Wind Solar Biomass Hydro Overseas Private Investment Corp. 19 Critical Factors for Attracting Investment Investment can only happen if debt and equity are available in a market. What are the key factors in determining capital availability? Established Renewable Energy Framework Creditworthy Off taker with Strong Power Purchase Contract Stable Regulatory, Political and Economic Environment Overseas Private Investment Corp

11 Established Renewable Energy Framework Ninety-five countries worldwide have policies to promote renewable energy generation. National Renewable Energy Targets Improves clarity for investors on the country s long term vision for renewable energy and provides comfort that renewable energy is a priority sector in the country s national energy plan. Regulatory Incentives RPS/RECs and Feed-in Tariffs reduce market volatility by providing a steady level of demand and/or long term certainty on price/revenue streams. Fiscal Incentives Tax credits, equipment sales tax exemptions, grants/rebates all reduce project costs thus increasing returns to investors. Most countries have a combination of policies in place. There is no one size fits all. Overseas Private Investment Corp. 21 Offtakers and PPAs A bankable power purchase agreement essentially provides for a long term offtake arrangement with an adequate and predictable revenue stream. Offtaker Creditworthiness strong financial statements indicating ability to meet PPA obligations, established and robust billing and payment collection systems, prices that accurately reflect cost of electricity, etc. Power Purchase Agreements some of the terms investors/lenders look to include: Foreign exchange Change in Law/Change in Tax Force Majeure Offshore Arbitration Termination/Termination Payments Assignment Transmission/Interconnection Risk Overseas Private Investment Corp

12 Stable Macro Environment In many countries, DFIs must step in to push the market when the private sector is reticent. Country and political risk expropriation, currency inconvertibility, political violence, business climate, enforceability of contracts, etc. OPIC provides risk mitigation products to investors who are not comfortable with these perceived risks. Regulatory risk discontinued or retroactively reversed renewable energy policies resulting in stranded assets and/or loss of investor trust. OPIC provides renewable specific coverage including feed-in tariff cover, carbon credit insurance, and PPA breach of contract. Overseas Private Investment Corp. 23 Other Attributes of OPIC Bankable Projects US eligibility requirement Experienced and committed management team Proven technology and creditworthy EPC contractor with a strong track record Availability of renewable resource A financial model showing strong cash flows and maintenance of minimum DSCRs Compliant with OPIC policyrequirements, including environment, labor rights and worker rights Overseas Private Investment Corp

13 Contact Information Peter Ballinger Director, Business Development +1 (202) Our Website opic.gov Overseas Private Investment Corp