Maximizing the impact of World Bank Financing in Energy Efficiency ProjectsFebruary 23, 2012

Issam AbousleimanHead of Banking Products

Banking and Debt Management

Additional investment needed in developing countries, by 2030

Mitigation $139—175 billion

Adaptation$75—100 billion

mitigation $9 billion

Funding for adaptation and

Financing Needed to Deal with Climate Change

… to catalyze sustainable investments

..enhance capacity & policy

… leverage other sources of finance

Climate finance covers 10-15% of development aid

and serves to..

“Baseline”

Private &

Public

Investment

Source: World Bank, 2010

2.8-3.5 trillions needed for 20 years

Fundamental changes in the nature of international capital flows in the new millennium

129 29 12 4,700 8,300

35,200

80,000

-

20,000

40,000

60,000

80,000

100,000

ODA IBRD IDA SWFs FX reserves

US bond market

Global bond

market

USD

, bill

ions

Total size as of 2010

• Paradigm shift: Need to optimize scarce public resources for development

Use scarce public resources to enable other sources of funds and/or improve development outcomes

Need to mobilize Finance Additional Finance: Tapped Capital Markets

• Green Bonds: USD 2.4 billion through 41 transactions and 16 currencies Funds raised from the WB Green Bonds support climate change (including mitigation- EE-) projects that are selected by WB environmental and climate change specialists based on certain criteria.

• WB Eco-3 Bonds: USD 316 million through 3 issuances. A 6-year bond issued for investors in the Netherlands, Belgium, and Luxembourg (February 2008)

• CER Linked Bonds: USD 31.5 million: First Certified Emission Reductions-linked Bond, nicknamed “Cool Bond”, with Daiwa Securities Group (June 2008); second issue with Mitsubishi UFJ Securities (September 2008).

4

Amount: US$ 25 million

Settlement Date: June 26, 2008

Maturity Date: June 30, 2013

Coupon: 3% fixed annual coupon for an initial period of 15 months, and then a coupon linked to the future performance of CER prices and the actual versus estimated delivery of CERs that will be generated by a hydropower plant located in the Guizho Province in China.

Sole Lead Manager: Daiwa Securities Group SMBC Europe Ltd.

Investor Type: Japanese Retail

Summary of CO2 “Cool Bond” Terms

McKinsey Curves illustrate the areas where mitigation investments can be more efficient

Source: The McKinsey Quarterly 2007. Number 1

Residential Energy Efficiency in Mexico: Financing Structure

*US$2 million of the GEF grant partially funds the technical assistance component of this project

Component 1: Light Bulb Replacement

IBRD Loan

Government of Mexico

IBRD US$ 55 million

Purchase, Distribution and Disposal

$$$ Potential Carbon Revenues

CTF Loan NAFIN (state bank)

GEF Grant

IBRD US$ 195 millionComponent 2: Appliance Replacement

Consumer Rebates

US$ 50 million

Consumer Loans

Repayment through electricity bills

US$ 5 million*

Replacementand Disposal

GHG emissions reductions

Guarantee Facility

$$$ Potential Carbon Revenues

GHG emissions reductions

IBRD US$ 250 million

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 300

20

40

60

80

100

120

Outstanding Exposure Traditional Loan

Outstanding Exposure Recycling Green Loan

Cumulative Disbursement Traditional and Recycling Green Loan

Years

USD Mll

Traditional LoanAmount : 100 USD millionDisbursement period: 5 years (six-month disbursements of 10 million USD)Maturity : 30 years Grace period: 5 years

Recycling Green LoanAmount : 100 USD millionDisbursement period: 5 years (sixth-month disbursements of 10 million USD)Each disbursement: 1 year grace period, 5 years final maturity

Savings in Exposure

Traditional vs. Recycling Green loan: Savings in Exposure

Traditional lending vs. Recycling Green loans for EE: CFL replacement

Totals( USD Million) Traditional IBRD loan

New application: recycling green loan

Difference:Recycling vs. Traditional

Investment 55220 (in 55 m

Recyclable Green tranches)

4 times

Number of CFLs Installed (million) 27.5 110.0

Savings on Replacement of Old Bulbs 44.55 178.2

Energy Savings 558.59 2,234.3

CERs millions 2.9 11.5

Reduction in peak demand 1 250 (96.25 MW) 1,000 (385 MW)

(1) Assuming a peak coincidence factor of 0.264% and a capacity of 53 W per replaced lamp. This decrease in demand allows for a permanent reduction in the expansion of the power generation capacity required to meet the demand of the country, compared with the base line.

Main Messages

Need of customization of financing to address EE

These customized structures enable:

Substantial increases in the amount of energy capacity savings (through the reduction of peak demand)

Optimal usage of limited IBRD financing envelope

Issam Abousleiman, Head of Banking Products202-458-8065iabousleiman@worldbank.org

www.treasury.worldbank.org

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