TBLI NORDIC 2015

Andrew Johnstone : June 2015

Managing Change Risk for Investors

Where’s the money

Agenda

World capital sources

Climate Finance Why it interests investors

CDFF What and why

C O N F I D E N T I A L

Global assets and allocation

Infrastructure is a big number, in a bigger pool of assets

$263

trillion

$175

trillion

$75

trillion

$64

trillion

$3

trillion

67%

30%

37%

5%

3-6%

Infrastructure

Climate Finance

World’s private

assets

Investable assets

Managed assets

Global GDP

C O N F I D E N T I A L

The climate finance Market

USD331 billion financing market in 2013

C O N F I D E N T I A L

Private sector capital is flowing

Fund raising is picking up after a slowdown in 2009-2010

19

25

19

28

35 33 33

5 3 4

9

20 21

25

0

5

10

15

20

25

30

35

40

2007 2008 2009 2010 2011 2012 2013

Am

ou

nt

of

Cap

ita

l ($

bn

)

Annual Capital Invested and Distributed by Unlisted Infrastructure Funds, 2007 - 2013

Capital Invested Capital Distributed

35%

24%

30%

11%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Less than $500mn $500mn-999mn $1-5bn $5bn or More

Pro

po

rtio

n o

f In

vesto

rs

Assets under Management

Breakdown of Endowment Plans Investing in Infrastructure by Assets Under Management

33

41

59

27

49 49

59

68

36

23.2

45.5 41.1

10.5

32.0

24.4

30.5

43.9

35.0

0

10

20

30

40

50

60

70

80

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD

Year of Final Close

Annual Unlisted Infrastructure Fundraising, 2006 - 2014

No. of Funds Closed Aggregate Capital Raised ($bn)

C O N F I D E N T I A L

Impact in climate finance

Climate and social impacts

• Avoided GHG emissions and energy provision

• Energy supply critical to economic growth and job creation

• Innovative instrument for renewable projects in emerging

markets delivering more projects faster

• Limited public funds mobilise large amounts of private capital

resulting in a strong multiplier

C O N F I D E N T I A L

The need

Barriers in the market

• Lack of good bankable projects

• High development and time-related costs

• Many non-aligned financiers needed

• High Complexity

C O N F I D E N T I A L

Infrastructure funds

• Provide a hedge against inflation

• Deliver returns Commensurate with

the investment risk

• Availability-based

• Limited cyclicality

Focus Sectors

• Toll Roads

• Ports

• Power

• Renewable Energy

• Rail

• Airports

• Container Terminals

• Water

Infrastructure Funds

Opportunities to invest will arise in the development and greenfield stages of infrastructure

projects or assets, as well as during their expansion, rehabilitation or restructuring

C O N F I D E N T I A L

Defined risk parameters

0

100

200

300

400

500

600

700

2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Opex Revenue Capex

Cashflows are highly defined

Opex limited by contract

• Typically 5 years renewable

• Fixed price / fixed scope escalated at CPI

• Risk mitigated

• Operations

• Cash Collection

• Ops real prices

Rehabilitation cost scoped

• Linked to usage

• ve correlation to increase

revenues

• Flexible timing

• Benefit from tech advances

Debt costs limited by contract

• Interest

• Tenor

• Break costs

Project term limited by contract

• Typically 25 - 30 years

Cash for debt & equity

Revenues protected by contract

• Tariff set by legislation

• Escalated at CPI

• Risk mitigated

• Inflation

• Competitive pressures

C O N F I D E N T I A L

Structuring considerations

Specific risk can be mitigated through project structuring

Inflation and Forex

Realisations

• Tariff escalation designed to mitigate variations around

forecasts

• Short term equity hedging to cover acquisition cost exposure

• Longer term hedging instruments for fixed debt obligations to

link costs to revenue currency

• Development of local long term capital markets creates a pool

of potential purchasers with matching local liabilities

Political Commitment

• Central government direct agreements guaranteeing

implementing authorities obligations

Government Default and Country Risk

Quality

• Political Risk Insurance to cover government default, currency

convertibility, repatriation and contract frustration

• Strong international contractor interest and competence

Sustainability

• Local lenders and investors capacity creating long term local

vested interest

• Dependency on infrastructure makes assets critical service

providers

Corruption

• Transparent procurement process and multiple party due

diligence, plus DFI funding participation

The Climate Development and Finance Facility

C O N F I D E N T I A L

Addressing barriers in the market

Focusing on

bankability

from

day one

Resourcing

with

qualified

staff

Simpler

financing

with fewer

financiers

Realising

more

projects, quicker

Taking the role of

project

co-developer

Resourcing with

adequate

funding

Increasing influence

by higher single

asset limits

Faster

development

lead times

C O N F I D E N T I A L

Complete Lifecycle Financing for Renewable Energy

Outcome =

Bankable

project

Construction

can start directly,

no delays

Once operational,

3rd party investors

provide refinance

Development

Fund

Construction

Fund

Refinancing

Fund

0-24 months 0-36 months 0-20 years

C O N F I D E N T I A L

Complete through the cycle financing

Development

Fund

Construction

Fund

Refinancing

Fund

THE FACILITY

WIND PROJECT COMPANY

SPONSOR

Shareholder

Shareholder

REFERENCE COMMERCIAL LENDER

C O N F I D E N T I A L

Ris

k P

rofi

le

Target Return

Governments

Development

Fund

Governments

Construction

Fund

T1

Private Sector

Fixed Income

Refinancing

Facility

DFI & Private

Sector Equity

Construction

Fund T2

Private Sector

Fixed Income

Construction

Fund T3

Investment Optionality

67%

30%

37%

5%

3-6%

Infra

Climate Finance

World’s private

assets

Investable

assets

Managed

assets

Global

GDP

Thank you

Andrew Johnstone : June 2015