KfW Experience in Financing Grid- Connected Renewable Energy

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1 KfW Experience in Financing Grid- Connected Renewable Energy International Grid-Connected Renewable Energy Policy Forum, Mexico City, February 1-3, 2006 Ulrich Schoppmeyer, KfW, Director Office for Central America and Mexico

2 KfW banking group Who we are and where we are: Promotional bank of the Federal Republic of Germany. Headquarters: Frankfurt am Main, 50 offices worldwide Balance sheet at the end of : EUR 341 billions*, new commitments in : EUR 69 billions*. Employees at the end of : 3, KfW bonds have been assigned the highest rating by Standard & Poor's, Moody's and Fitch Ratings. * interim figures

3 Structure and Fields of Activity Germany International Business Promotion of SME, start-ups Promotion of housing, protection of the environment and climate, education, infrastructure and social facilities Promotion of developing and transition countries Promotion of the private sector in developing and transition countries Export and Project Finance KfW Mittelstandsbank KfW Förderbank KfW Entwicklungsbank DEG - Deutsche Investitions- und Entwicklungsgesellschaft KfW IPEX-Bank EUR 15,5 bn. EUR 38.7 bn. EUR 1.9 bn. EUR 0.7 bn. EUR 12.1 bn. 3

4 KfW Förderbank (KfW promotional bank). Target group: enterprises, private individuals and municipalities in Germany. 4 With our interest reduced loan programs we promote: Housing construction and modernisation, energy conservation: Renovation and modernisation of residential buildings and use of renewable energies. Environmental protection: Promotion of investments by commercial enterprises to protect water, air and the soil and to use energy efficiently Financing of municipal infrastructure projects

5 KfW in Germany- Figures Promotion of Renewables Energies and Energy Efficiency: KfW SME bank / KfW promotional bank : Credit : 6,1 billion EUR Renewable Energy 3.6 billion EUR Energy Efficiency 2.5 billion EUR - Housing 2.2 billion EUR - Industry 0,2 billion EUR -Communities 0,1 billion EUR Impact of KfW programmes in housing from 1990 until end of : -CO2 -Reduction 10 million tons -Additional employment in jobs 5

6 Structure and Fields of Activity Germany International Business Promotion of SME, start-ups Promotion of housing, protection of the environment and climate, education, infrastructure and social facilities Promotion of developing and transition countries Promotion of the private sector in developing and transition countries Export and Project Finance KfW Mittelstandsbank KfW Förderbank KfW Development Bank DEG - Deutsche Investitions- und Entwicklungsgesellschaft KfW IPEX-Bank EUR 15,5 bn. EUR 38.7 bn. EUR 1.9 bn. EUR 0.7 bn. EUR 12.1 bn. 6

7 What Financing Services can KfW Group offer for Renewable Energies? 7 Concessionary financing (KfW Development Bank) - Financial cooperation (soft loans or grants from Government budget) - Development loans with interest rates below commercial rates (ODA-financing) - Study & Expert Fund for preparatory activities - Special Fund for Renewable Energy and Energy Efficiency (depends on country rating) - Cooperation with German Technical co-operation (GTZ) and bi- and multilateral financial institutions Commercial financing - Equity participation and mezzanine loans (DEG) - Export and project financing (IPEX-Bank) Innovative financing instruments - Carbon credits (KfW Carbon Fund)

8 KfW Development Bank ODA-Financing Energy Portfolio (Commitments 2001 incl. market funds) million , ,4 Total Energy Renewable Energy 416,7 322, ,8 178,5 149,2 97,3 102,6 33, Increasing Share of Renewable Energy Commitments 8

9 KfW Development Bank What and how much did we finance in the field of Renewables? Renewable Energy Sector Commitments (incl. capital market funds) Other RE Biomass Wind Solar Geothermal Hydro PS million Total Energy Commitments 2001-: Million EUR Total Renewable cl. Hydro: 773 Million EUR 9

10 KfW Development Bank - Examples Renewable Energy Portfolio Windparks in China, Egypt and Marocco (ca. EUR 170 million), further Windparks under preparation Geothermal power plant: Olkaria II+IV, Kenia (ca. EUR 21 million) Biogas power plant: Turkey (ca. EUR 15 million) Hydro power projects in various countries (ca. EUR 226 million) Solar power* in India, South Africa, China (ca. EUR 180 million) *partly off-grid, incl. hybrid systems 10

11 Special Facility for Renewable Energies and Energy Efficiency Means - EUR 500 million on behalf of German Government from to Loans with subsidized interest rates Eligibility - Projects using renewable energy sources (no restrictions) - Projects with significant efficiency improvements Generel Conditions - Term of up to 10 years and grace period of up to 3 years - Interest rate depending on type of project and country risk - Government Guarantee required - International competitive bidding for goods and services Status - Already commitments for 5 Projects (EUR 170 Mil.) - Further projects in the pipeline 11

12 DEG - Partner of the private sector in developing and reforming countries. Goals: - establishing and expanding private-sector structures in developing and reforming countries - setting the basis for sustainable economic growth - durably improving the quality of life of the people in developing countries Areas of promotion: - profitable, sustainable and effective projects in all economic sectors (agriculture, manufacturing, services, infrastructure) - investments in local financial market to provide reliable access to capital in the countries Forms of financing: long-term loans, mezzanine finance, equity participations, guarantees 12

13 DEG - Examples Renewable Energy Portfolio Miaoli Taiwan 49.8 MW Wind Power Plant EUR 7.5 million mezzanine () IHDC India 6 Hydro Power Stations ( 2-34 MW) EUR 8.6 million senior loan () QHW China 16 MW Wind Power Station EUR 7.7 million senior loan (2002) Sinersa Peru 15 MW Hydro Power Plant EUR 4.5 million senior loan (2002) Bozcaada Turkey 10 MW Wind Power Station EUR 0,5 million subord. loan EUR 10.0 million senior loan (2000) Enercon Brazil 15 MW Wind Power Plant EUR 6.3 million senior loan (1999) 13

14 KfW IPEX-Bank Services International project and corporate finance as well as trade and export finance. Financing products: Export Finance, Project Finance, Structured Finance, Acquisition Finance, Corporate Finance Trade Finance Examples ECA-covered local currency project finance for the first private wind power Project (Taiwan) Wind power project finance (GB, Italy, Spain, USA) ECA-covered export loans for biomass plants (Brazil) 14

15 KfW Carbon Fund Fund Volume and Acquisition Status Volume: - EUR 80 million Purpose: - Provide a service instrument for German and European enterprises wanting to use project-based certificates for compliance purposes under EU-Emissions Trading System. - Revenue source for renewable energy projects in Dev. Countries Project acquisition ongoing since June Present status: about 120 project proposals received - 20 projects prequalified, - offered volume 30 million tons CO 2 equivalents - First purchase agreement concluded in October ; two more in final stage - Conclusion of all purchase agreements until mid

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