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Financing for Project in Developing Countries

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					Financing for
Clean Energy Project
in Developing Countries
      at CTI/Industry Joint Seminar
on Technology Diffusion in Asia and Small
    Island States of the Pacific Region
                5 Feb 2004
          Mizuho Corporate Bank, Ltd.
            Project Finance Division
                                            1
What is Mizuho Financial Group?




                             2
Mizuho Financial Group


In September 2000, Dai-Ichi Kangyo Bank, Fuji
Bank and The Industrial Bank of Japan were
consolidated into The Mizuho Financial Group
Ranked 2nd in the world in terms of assets
(Source: The Banker: July 2003)
Currently Ranked 6th in terms of Global
Advisory/Lead Arranger Mandates (Source: PFI)
Currently Ranked 2nd in terms of Asia Pacific
Advisory/Lead Arranger Mandates (Source: Capital
Data)


                                                   3
           Arranger League Table
           Asian Project Financings (1998 - 2003)
 Pos      Arranging Bank Name                                   No.   Amt. US$ M   % Share

  1       Citigroup Inc                                         32         3,036     24.62

  2       Mizuho Financial Group                                26         2,425     20.00

  3       Credit Agricole Indosuez                              17           955     13.08

  4       Bank of Tokyo-Mitsubishi                              16         1,111     12.31

  5       Societe Generale                                      15           816     11.54

  6       ABN AMRO                                              14         1,407     10.77

  7       BNP Paribas                                           13         1,474     10.00

  8       UFJ                                                   12         1,506      9.23

  9       Standard Chartered                                    12           959      9.23

  10      SMBC                                                  12           816      9.23


Source – Capital DATA Loanware (Ranked by Number of Projects)



                                                                                             4
Track Records of Mizuho
for Power Project in Asia




                            5
    East & Southeast Asia Coverage
                                 Beijing       Dalian
                                                                                  Branches and Subsidiaries
                                                                                  Representative Offices
                                    Tianjin
                                                           Seoul
                                                                   Tokyo
                              Nanjing
                                                                   Head Office
                                                                                 With a total of 21 branches
                           Wuhan               Shanghai                          and representative offices in
                                                                                 East and South East Asia
                     Guangzhou        Xiamen
                                                Taipei                           outside Japan
                         Shenzhen
                                               Kaoshiung
                            Hong Kong
                    Hanoi


                                    Manila
  Bangkok
                     Ho Chi
                     Minh City

                          Labuan
Kuala Lumpur      Singapore




               Jakarta


                                                                                    As of December 03


                                                                                                    6
How to Finance to Projects
 in Developing Countries?




                             7
  Project Risks
Country/Political Risk
Construction Risk
Technology Risk
Fuel Supply Risk
Offtake Risk
Operation and Maintenance Risk
Interest Rate/FX Risk
Environmental and Social Risk


                                 8
        Who Takes Project Risks

Government of Host Country      Sovereign Finance




     Private Developer          Corporate Finance




 Appropriate Risk Allocation     Project Finance
   to Project Related Parties




                                                    9
          Sovereign Finance to Project
          Project


     State Budget / Loan

Government of Host Country     “G to G” Loan    Foreign Financial Institution
(Low Credit Rating Country)


                                      Guarantee /
Project Risks
                                       Insurance
   Construction Risk
   Technology Risk
                                                         Multilateral
   Fuel Supply Risk
   Offtake Risk                                     Export Credit Agency
   Operation and Maintenance Risk
   Interest Rate/FX Risk
   Environmental and Social Risk                    Country / Political Risk

                                                                                10
        Corporate Finance to Project
 Project (Project Company)                     Country / Political Risk

in Low Credit Rating Country
                                                     Multilateral
                     Guarantee / Insurance
Equity / Loan                                   Export Credit Agency

Foreign Developer / Sponsor           Loan   Foreign Financial Institution




Project Risks
   Construction Risk
   Technology Risk
   Fuel Supply Risk
   Offtake Risk
   Operation and Maintenance Risk
   Interest Rate/FX Risk
   Environmental and Social Risk

                                                                             11
         Project Finance to Project
Engineer / Constructor         Fuel Supplier              Offtaker                 Operator

   Construction Risk         Fuel Supply Risk           Offtake Risk            Operation &
   Technology Risk                                                              Maintenance Risk

Engineering Procurement         Fuel Supply           Offtake Agreement          Operation &
Construction Agreement          Agreement                                        Maintenance
                                                                                 Agreement
                                 Project (Project Company)
                               in Low Credit Rating Country


    Equity / Loan                              Loan                       Guarantee / Insurance
                    Remaining Project Risks                               Country / Political Risk

Foreign Developer               Foreign Financial Institution                  Multilateral
     / Sponsor                                                            Export Credit Agency

                                                                                              12
Particular Risks to be Mitigated in
Project Finance to Clean Energy
Technologies in Developing Countries

 Country Risk
 Technology Risk
 + Completion Risk
 + Operation & Maintenance Risk



                                   13
   How to Mitigate Risks – Political Risk


Political Risk Guaranty / Political Risk
Insurance from
  Multilateral and/or Export Credit Agency
  Private Insurance Company with High Rating




                                             14
  How to Mitigate Risks
  – Technology Risk /Operation & Maintenance Risk
Performance Guaranty from Engineer /
Constructor and Operator
Using Proven Technology and Experienced
Operator – Verifying the Technology through
Demonstration Plants
Insurance – To mitigate the Physical Loss or
Damage to the Project, and Environmental
Risks.
                                            15
      Developing Environmental Related Financial
      Products and Advisory Services

   Advisory Services for CDM/JI* Investment
   Arranging Finance for the Renewable Energy Project
         (ex. Wind Power Project, Garbage Incineration Project,
         Bio-mass Power Project, Small Hydro Power Project, etc.)

Social Responsibility to Environmental Issues
   First Japanese Bank to adopt the Equator Principles
  for Project Finance
*CDM/JI (Clean Development Mechanisms and Joint Implementation) : The
Mechanism for the Greenhouse Gas Emission Reduction Project Adopted under the
Kyoto Protocol
                                                                            16
Thank You




            17

				
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