Panel Discussion
Project finance and methane
capture and use projects
Project Finance Workshop
Methane to Markets Meeting
Buenos Aires,
3 November 2005
2
Project finance and methane
capture and use projects
Types of projects and potential emission
reductions
Project finance and carbon finance
Barriers to traditional project finance and
proposed solutions
Creative project finance structures and
opportunities
Impacts of carbon finance in project finance
3
Types of emission reduction
projects
1. Landfill gas (LFG)
– Produce electricity
– Process the LFG and make it available as alternative fuel
for industrial customers
– Create a pipeline quality gas or alternative vehicle fuel with
LFG
2. Natural gas and oil systems
– Technology and equipment upgrades
–
Improved management practices and operational
procedures
3. Underground coal mines
– Natural gas pipeline injection, electric power production,
district heating, mine heating, flaring, etc.
4
Types of financing
Project financing: finance investment and
construction, operation and maintenence
costs
Carbon financing:
– Revenue from sale of carbon credits
– Additional revenue – provides a “boost” to project
(becomes more attractive)
– E.g. Typical contribution CDM: 5 –15 % total
project cost
5
Barriers to traditional project
finance
What are the barriers?
How to overcome those barriers?
6
Emission reduction project -
finance structures
What are the different finance structures?
What is an Emissions Reductions
Purchase Agreement (ERPA)?
How do carbon credits affect investment in
Equity?
How do carbon credits affect investment in
Debt?
7
Impacts of carbon finance in
project finance
How do ‘carbon credits’ affect IRR of
projects?
What is the leverage effect on project
finance?
What are the risks of carbon finance?
How do you mitigate the risk?
8
Annexes
9
Types of Financiers
Carbon funds and facilities
Government programmes
Development banks and multinational
institutions
International commercial banks
10
Carbon fun