Transcript Profile of 3C as Carbon Credit Buyer for Russia

Kyoto protocol: Opportunities of the Carbon Market
for Russian Enterprises | Moscow | 26 April 2007
Risk Assessment and
Pricing Models for
Carbon Credits
Marcel Hanakam, Senior Project Manager
Company Background
3C Group
3C was founded in autumn 2003
 in Frankfurt am Main / Germany
by Dr. Sascha Lafeld and Markus Hüwener
 as independent spin-off
from Dresdner Bank Allianz Group
3C Holding AG
100%
3C Consulting GmbH
3C currently employs 35 specialists
 based in Frankfurt, Berlin, Santiago de Chile
and Washington, D.C.
100%
 Offices in New Dehli, Beijing and Moscow
to be set up in 2007
100%
Since 2006, 3C is structured as a holding
organization and backed by a strategic
investor
100%
Significant growth expected for 2007
© 3C Group 17.07.2015
Marcel Hanakam
3C Markets AG
3C USA LLC
3C Chile Ltda.
others to come
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Risk Assessment and Pricing Models for Carbon Credits
Company Background
3C Consulting GmbH
Development and implementation of
risk management/ trading strategies
 3C focuses on the financial impacts of
emissions trading for the affected
companies and developed new
procedures.
Development, implementation, and
marketing of JI/CDM-projects
 3C offers tailor-made services regarding
the development and implementation of
projects and the marketing of emission
reduction credits.
© 3C Group 17.07.2015
Marcel Hanakam
Development, implementation and
marketing of climate neutral
companies, events, products &
services
 3C acts as portfolio manager for climate
neutral clients with ~ 700.000t of CO2e
under management in 2006.
Carbon Investment Advisory
 3C offers advisory services for fund
managers, traders and project finance
departments.
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Risk Assessment and Pricing Models for Carbon Credits
Carbon Market
Currencies of Carbon Credits
Emission Allowances
Project-Based Certificates
AAU assigned amount unit
ERU emissions reduction unit
Kyoto Unit, relevant for governments
from projects in Annex I countries
EUA EU - Allowance
CER certifed emission reduction
allocated in the EU ETS
from projects in Non-Annex I countries
RMU removal unit
VER verified emission reduction
from sink projects/activities
for voluntary markets
Derivatives
on emission certificates
© 3C Group 17.07.2015
Marcel Hanakam
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Risk Assessment and Pricing Models for Carbon Credits
Carbon Market Driver
European Emissions Trading Scheme (EU ETS)
14.000.000
12.000.000
Volumes
EEX spot
ECX Dec 2007
ECX Dec 2008
35 €
30 €
10.000.000
25 €
8.000.000
20 €
6.000.000
15 €
4.000.000
10 €
2.000.000
5€
0
Dez. Jan. Feb. Mrz. Apr. Mai. Jun. Jul. Aug. Sep. Okt. Nov. Dez. Jan. Feb. Mrz. Apr.
05 06 06 06 06 06 06 06
06 06 06 06 06 07 07 07 07
© 3C Group 17.07.2015
Marcel Hanakam
0€
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Risk Assessment and Pricing Models for Carbon Credits
Risk Assessment
Risk Assessment for Carbon Credits – Key Factors
Management, Legal Matters
Finance

Partner evaluation – legal matters

Partner evaluation

Project evaluation – legal matters

Project evaluation

Project evaluation – management
Joint Implementation/

Project evaluation – carbon credit
management
Clean Development Mechanism

Cooperation with 3C (Track Record)

Kyoto specific risk

Additionality

Methodology

Emission reduction calculation

Stakeholder consultation

Host country approval

Validation

Public comments & request for
corrections by the JISC/CDM EB
Environment, Development

Monitoring


Benchmarks
Technology

planning - implementation and
operation

costs - implementation and operation

technology provider

quality of production factors

location
Reputation risk
© 3C Group 17.07.2015
Marcel Hanakam
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Risk Assessment and Pricing Models for Carbon Credits
Investment Fund
Climate Change Investment I S.A.
 Luxembourg based Carbon Fund
 Target Investment Volume 150 Million €
 Audited by KPMG
 „Investment Fund“ - Model
Project 1
3 C Consulting GmbH
Sponsor Investor
Project 2
Reporting
obligations
Core Investors
…
Project n
Investment
Committee
Investment
Advisory
Agreement
Investment 1
Investors
Investment
recommendation
Shareholding
© 3C Group 17.07.2015
Marcel Hanakam
Investment 2
…
Climate Change Investment I
S.A. SICAR
Executes
Investments
Investment n
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Risk Assessment and Pricing Models for Carbon Credits
Pricing
Pricing Models for Carbon Credits
Fixed Price
VER hedging possibility
 exact planning horizon
 Verified Emission Reductions (VERs) can
also be sold
 risk averse
 No registration at UNFCCC necessary
Variable Pricing
discount on EUA 2008 price related to
development of project
 single fixing at ERPA closing for a
credit stream
 individual fixing for each credit tranche
Price Combination
for example:
 PIN Level project
price per t/CO2e = EUA08 – 50%
 Floor at 7€/t CO2e
© 3C Group 17.07.2015
Marcel Hanakam
 price per t/CO2e = ~3-5 €/t CO2e
 Limited market for VERs
Additional offers
 Carbon Credit Development Facility
(CCDF) to finance carbon related
management costs
 loan provision
 equity or mezzanine financing
 support to prepare bankable
documentation for individual financing
needs
 up-front payment of ERPAs
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Risk Assessment and Pricing Models for Carbon Credits
Financing
Carbon Financing Engineering
Emission Reduction Units (ERUs) provide additional cash
flows with different risk profiles
0. case:
regular project financing without ERUs
1. case:
Reduction of interest rates or early redemption
 Additional profit margin with ERUs
Additional profit
margin
+100
8%
2007
-100
sales
ERUs
3%
2008
8%
sales
ERUs
3%
2009
8%
sales
ERUs
3%
2010
sales
ERUs
3%
8%
2011
8%
sales
ERUs
3%
2012
Carbon Financing Engineering
- provides additional margins and benefits
- has a constantly growing impact in investment decisions
- offers a communication and marketing benefit (UPS)
© 3C Group 17.07.2015
Marcel Hanakam
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Risk Assessment and Pricing Models for Carbon Credits
Summary
3C as Carbon Credit buyer can offer
To Sellers of ERUs / VERs
 professional transactions, backed by a solid Luxembourg-based investment
fund
 attractive and tailor-made pricing models including up-front payments
 equity / mezzanine / loan co-financing options
 purchase of both ERU & VER vintages (e.g. of prompt-start projects)
To Project Developers
 a network of technology partners and CDM/JI experts for pre-assessment and
support
 Carbon Credit Development Facility to take-over PDD development, validation
and registration, if desired
 take-over of complete marketing-process, where required
© 3C Group 17.07.2015
Marcel Hanakam
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Risk Assessment and Pricing Models for Carbon Credits
Contact
3C Consulting GmbH
Dipl. Ing. Marcel Hanakam
Senior Project Manager Russia, CIS and CEE
Industriestr. 10
61118 Bad Vilbel / Frankfurt, Germany
Tel. +49 (0)6101 5 56 58-41
Fax +49 (0)6101 5 56 58-77
[email protected]
www.3c-company.com
© 3C Group 17.07.2015
Marcel Hanakam
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Risk Assessment and Pricing Models for Carbon Credits