Renewable Energy Opportunities

Renewable Energy Investment Opportunities in Emerging Markets
GLOBAL ENVIRONMENT FUND
Synopsis
Recent years have sparked new interest in the potential return on investment from the renewable energy markets. The implementation of the Kyoto Protocol, and the rst billion dollar renewable energy IPO, combined with growing public impetus towards the use of renewable energy, has motivated much investor interest. An increasing number of private equity investment funds are focusing on the sector, and a growing base of institutional investors have set aside allocations in such funds as part of their alternative asset strategies. Clearly, renewable energy is an important component for diversication of the overall energy mix, and is now a fundamental requirement for any nations energy portfolio. The drivers for renewable energys new ascendance are long and likely to be enduring: short-term national and international policy environments are supportive; there is growing interest from consumers, politicians and the capital markets; the technology in many sectors is well developed; the world is experiencing accelerating energy demand; many governments have concerns about energy security and trade balances; and changes to long term energy prices mean that some renewable energy technologies are becoming cost-competitive with traditional energy in some markets, even without regulatory support. The same drivers exist to support high growth rates for the renewable energy sector in emerging markets. There is no question that growth in energy demand, fears of the environmental impact of traditional energy generation and growing cost pressures are set to see the governments of emerging markets, as in the developed world, commit to the development of renewable energy generation capacity. This paper reviews current renewable energy activity and investment in key emerging markets, combining consensus forecasts on renewable energy growth, the likely cost of nancing that growth, and the extent to which local governments are prepared to ensure that growth. It analyzes the potential private equity investment strategies in projects and local developers in selected developing and transition economies, identifying the most attractive by country, sector and type of investment in the short to medium term. One thing is clearthe renewable energy sector in emerging markets is not yet a homogenous or well articulated sectorthe right combination of country, technology and asset class is still required to generate signicant returns. Barriers still slow the emergence of the sector. For example, there are capacity constraints developing both for silicon in the solar PV market and for turbines in the wind market; there are legislative uncertainties as Kyoto currently has no successor; capital market interest and understanding needs to be developed; and, most importantly, grid level management and power storage needs to be improved. There are a series of milestones that need to be passed before renewable energy reaches its logical share of the energy generation capacity in most emerging markets. Capacity restraints need to be removed, a supportive regulatory environment post 2012 must be established, local legislative uncertainty must be overcome and, long-term, fully liquid secondary markets must emerge in asset and bond nance in renewable energy.
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ii Renewable Energy Investment Opportunities in Emerging Markets
foreword: a new era of investing in renewable energy in emerging markets

By Jeffrey Leonard, Chief Executive Ofcer Global Environment Fund At Global Environment Fund, we have always believed in the promise of clean and renewable energy, both as an attractive investment opportunity and as an increasingly important component of the global energy infrastructure to help improve energy security and reduce the environmental footprint. Throughout the 18 years that GEF has been investing in the sector, we have sought to identify investment opportunities in technologies that can be applied today, seeking incremental improvements immediately rather than the uncertain promise of technological breakthroughs many years later. Equally as important, we have worked hard to identify the right target companies with real cash ows and strong partners to put our investors capital to work with controlled risk. As we look at todays emerging markets landscape, it is clear that renewable energy is becoming an appreciable part of the solution to overcome signicant environmental and energy security constraints. GEF is positioned to bring its substantial experience in these countries to realize attractive long-term returns in clean energy investments.
A History of Commitment and Successful Investment

The dramatic growth of the global economy in the 1990s meant increased demand for energy. Despite a decline in energy intensity in much of the world, high economic growth in emerging markets translated into exploitation of every available cost-effective energy source, often with little thought to the environmental cost. While renewable energy received more attention than it had in the past, it was clear that the market had not yet fully embraced many of these alternative resources. Costs remained too high relative to fossil fuels, and a lack of political will stymie large-scale development of renewable power. At the same time, we could see change on the horizon. As China, India, Brazil and other major emerging markets became major industrial powers; we understood that rapid growth was straining the environment in dramatic ways. The greenhouse effect, deforestation and air pollution generated concern in developed and emerging markets alike. Moreover, the environmental damage resulting from poorly regulated, fossil fuel power generation began to act as a drag on economic growth. Some estimates put the natural resource, human health and asset degradation in China from environmental damage at between 3-10% of GDP every year, much of which is a result of power plant pollutants. Recognizing these economic fundamentals, the GEF Emerging Markets team over the past eight years sought investment opportunities in areas where improvements to the environment could be immediately realized within the commercial and regulatory environment available at that time, focusing in particular on natural gas production and hydroelectric power generation. For instance, GEF undertook a major natural gas investment in India which provided signicantly greater development of reserves and production in India providing an energy source with much lower pollutants and greenhouse gas emissions than the dominant coal alternatives.
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We are proud that the domestic natural gas sector in India stimulated in part by our investment is contributing signicantly to both the economic development and environmental quality. Hundreds of Indian industrial facilities have transitioned from naphtha and coal to cleaner burning natural gas. In Delhi, 15 million inhabitants live in a dramatically healthier and cleaner environment because compressed natural gas now fuels all buses, taxis and three wheel rickshaws. As gas markets have matured and renewable technologies have become more cost-competitive, GEF has increased its investment focus on purely renewable sources of clean energy, such as wind, small hydroelectric, solar, biomass and biogas. Furthermore, these renewable technologies also help enable a demand-side infrastructure with a lower environmental footprint. For instance, GEF is now a signicant investor in an Indian manufacturer of electric-powered automobiles, bringing the next generation of environmental improvements to the Indian market as well as to Western markets.
Favorable Market Conditions

GEF takes extraordinary care in selecting markets, industries, partners, and investment targets. In the past, we have avoided putting our investors capital to work in overbought sectors, instead focusing on market fundamentals, asset values and growth opportunities. As this paper demonstrates, we believe that the conuence of several developments in our target markets present signicant investment opportunities in the renewable energy space: The economics of renewable energy have become more competitive in light of falling capital costs and high fossil fuel prices Rapid economic growth in emerging markets has led to increased energy demand Environmental concerns are driving a regulatory environment favorable to alternative energy sources Energy security concerns have come to the forefront, spurring utilities and governments to require a larger share of power from renewable sources. The growth of energy demand in emerging markets is projected to outstrip growth in developed economies: two-thirds of demand growth will come from emerging markets. China and India have spent billions to develop energy infrastructure at home and to ensure access to resources abroad. While the vast majority of this investment has been directed at fossil fuels, these nations are increasingly coming to realize that this is not enough to meet demand. At the same time, the environmental consequences of reliance on fossil fuels have become all too apparent. History shows that increased environmental awareness and a demand for higher human health standards go hand in hand with economic development. This phenomenon is readily apparent throughout the emerging markets. While the Kyoto Protocol did not require developing countries to commit to greenhouse gas emissions reductions targets, it provided a global framework from which these nations can benet from foreign investment in renewable energy, primarily through the Clean Development Mechanism. Perhaps more importantly, this agreement marked a signicant change in the global mindset regarding the consequences of fossil fuels and the desirability for alternatives.
iv Renewable Energy Investment Opportunities in Emerging Markets
Market-Specic Approach
In addition to an exploration of the fundamentals behind these important industry developments, this paper highlights the potential for market-specic opportunities. One of the key ndings is that the types of opportunities for successful investment in renewable energy are very specic by region and country. For example, biofuels are experiencing rapid growth in Brazil due to underlying economic fundamentals specic to Brazil, while in Eastern Europe cogeneration and biomass present compelling opportunities due to the legacy of inefcient, Soviet era energy systems. Market-specic opportunities must be assessed in light of indigenous resources, government policy, infrastructure and economics. Feed-in tariffs, tax incentives and subsidies to support to construction costs are all becoming more common government approaches to stimulate investment in renewable energy, but the long-term economic fundamentals still need to be carefully assessed. GEFs top-down investment approach analyzes each market individually, in light of global trends in renewable energy. In so doing, our team identies the most attractive sectors in each market, generally characterized by high growth prospects, reasonably priced assets, favorable investment incentives and attractive returns. In short, GEF does not follow the pack. We apply our sector expertise and experience to identify the best market opportunities by region before these may be widely evident in the market itself.
Successful Investment Strategy

It is a great credit to my colleagues and fellow investment professionals that GEF over the last 18 years has rened a strategy and methodology for emerging market investing that has sought to take advantage of growth and mitigate risks in the renewable energy industry. This investment strategy is based on a few key principles: Identify the core drivers within a given country that are spurring the development of the most promising renewable energy technologies; Invest in fairly priced businesses with a strong asset base and positive cash ow poised to take advantage of these drivers to expand; Control risks as much as possible on the front end by careful structuring; Recruit the best management teams, especially with a keen understanding of latest technologies and industry dynamics from U.S. and European operations in the same sectors; Be active, sector-experienced investors, working regularly with management and the board of directors to ensure realization of the business strategy. Said another way, GEF rst tries to narrow the universe of investment opportunities to a few core countries and environmental sectors that can take advantage of the kinds of growth opportunities documented in this white paper. Through its research and relationships, the GEF team then targets companies that have a solid asset base and cash ow to realize the growth of the business. Downside risk is mitigated by negotiating fair valuations at the outset and carefully structuring ownership rights. Yet even with this rigorous process of structuring investments, emerging markets present far too many challenges and bumps in the road to allow a simple buy-and-hold strategy. By working as active investors with talented managers, GEF is able to bring value and expertise to its portfolio companies, helping position them to outperform even the high rates of sector growth that are being seen in emerging markets.
The Story Continues

As this paper makes clear, renewable energy is the fastest growing part of the energy generation mix worldwide. While each market is moving at its own pace, growth has increased substantially throughout the emerging markets. The GEF team takes particular pride in providing strong investment returns that have a positive impact on the natural environment. We expect renewable energy to continue to be a big part of this success. We are very grateful to Chris Greenwood and the rest of the staff at New Energy Finance for their work on this paper and helping us hone our thinking on renewable energy investing in emerging markets.
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table of contents
Acknowledgements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x 1. Introduction - Why Look At Renewable Energy Investment In Emerging Markets?.. . . . . . . . . . . . . . . . 1
Global Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Improving Outlook for Renewable Energy: Key Drivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Growing Energy Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Long Term Energy Price Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Falling Cost of Renewable Energy Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Growing Search for Energy Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Environmental Concerns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Potential Renewable Energy Solutions for Emerging Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2. Emerging Markets Overview.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Renewable Energy in Emerging Markets: The Improving Investment Climate. . . . . . . . . . . . . . . . . . . . . 13 Energy Needs in Emerging Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Developed World Support for Renewable Energy in Emerging Markets. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Accelerators and Support Mechanisms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Power Generation Promotion Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Domestic Policy Targets for Renewable Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Technology Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Kyoto Accord CDM/JI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Investment Opportunities in Electricity Markets and Grid Infrastructure. . . . . . . . . . . . . . . . . . . . . . . . . 19 Potential Barriers to Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3. Global Investment Activity In Renewable Energy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Public Sector Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Private Sector Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Investment Trends in the Renewable Energy sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4. Renewable Energy Opportunity In Selected Emerging Markets .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Mexico. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Poland. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Turkey. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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Table 1: Energy Growth and Projected Renewable Energy Share in Emerging Markets . . . . . . . . . . . . . . . 3 Table 2: Renewable Energy Technologies - Capital Costs and Cost Trends. . . . . . . . . . . . . . . . . . . . . . . . . 6 Table 3: Renewable Energy Policies & Measures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Table 4: Selected Emerging and Transition Economies Renewable Energy Targets. . . . . . . . . . . . . . . . . . 18 Table 5: Selected Venture Capital and Private Equity deals in 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Table 6: Selected Renewable Energy Mergers and Acquisitions in Emerging Markets. . . . . . . . . . . . . . . . 27 Table 7: Selected Emerging Markets Clean Energy IPOs and Secondary Placements . . . . . . . . . . . . . . . . 33 Table 8: Country Attractiveness for Renewable Energy Capital Investment . . . . . . . . . . . . . . . . . . . . . . . 37 Table 9: Forecast Renewable Energy Generation Capacity by Leading Sectors (2020) . . . . . . . . . . . . . . . 38 Table 10: Sector Attractiveness within Each Developing Country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Table 11: Selected Renewable Energy Projects Under Development in Brazil. . . . . . . . . . . . . . . . . . . . . . 41 Table 12: Selected Renewable Energy Projects Under Development in China . . . . . . . . . . . . . . . . . . . . . 43 Table 13: Selected Renewable Energy Projects Under Development in India . . . . . . . . . . . . . . . . . . . . . . 48 Table 14: Selected Renewable Energy Projects Under Development in Mexico. . . . . . . . . . . . . . . . . . . . . 53 Table 15: Selected Renewable Energy Projects Under Development in Poland. . . . . . . . . . . . . . . . . . . . . 55 Table 16: Selected Renewable Energy Projects Under Development in Thailand . . . . . . . . . . . . . . . . . . . 58 Table 17: Selected Renewable Energy Projects Under Development in Turkey. . . . . . . . . . . . . . . . . . . . . 60 Table 18: Renewable Energy Policies and Measures in Developing Countries. . . . . . . . . . . . . . . . . . . . . . 61 Table 19: Country Attractiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Table 20: Consensus Forecasts - Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Table 21: Consensus Forecasts - China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Table 22: Consensus Forecasts - India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table 23: Consensus Forecasts - Mexico, Poland, Thailand, Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table 24: Brazil Country Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Table 25: Brazil Energy Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Table 26: China Country Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Table 27: China Energy Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Table 28: India Country Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Table 29: India Energy Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Table 30: Mexico Country Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Table 31: Mexico Energy Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Table 32: Poland Country Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Table 33: Poland Energy Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Table 34: Thailand Country Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Table 35: Thailand Energy Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Table 36: Turkey Country Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Table 37: Turkey Energy Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
viii Renewable Energy Investment Opportunities in Emerging Markets
Figure 1: Global Investment in Renewable Energy in 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Figure 2: Range of Total Energy Cost by Source (USD cents/kWh). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figure 3: Growth in Energy Demand by Source (1Mtoe = 11.63TWh). Source = IEA. . . . . . . . . . . . . . . 14 Figure 4: Global Project Investment (Asset Financing) Activity in Renewable Energy in 2005. . . . . . . . . 26 Figure 5: Global Venture Capture / Private Equity Investment in Clean Energy Companies 2001 to 2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Figure 6: Global M&A Activity in Renewable Energy 2001 - 2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Figure 7: Global Renewable Energy IPOs and Secondary Offerings 2001-2005. . . . . . . . . . . . . . . . . . . . 32 Figure 8: Brazil Energy Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Figure 9: China Energy Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Figure 10: India Energy Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Figure 11: Mexico Energy Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Figure 12: Poland Energy Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Figure 13: Thailand Energy Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Figure 14: Turkey Energy Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Disclaimer:
The White Paper is not intended to be nancial or denitive but rather a vigorous assessment of the potential barriers and support for the development of renewable energy in a selected of developing economies. It has been understood that investing in emerging markets entails macroeconomic, currency and political risks that are in addition to any risks that may be associated with renewable energy. It is not intended to be used as a tool for basing nal investment decisions upon, and in all cases the reader must conduct sufcient additional analysis and obtain appropriate professional advice before proceeding with any investment decisions. The authors do not and cannot in any way supervise, edit or control the content of any information or data accessed through the details contained within the White Paper and shall not be held responsible in any way for content or information accessed. The authors, along with contributors and agents, are released from and indemnied against all actions, claims and demands which may be instituted against the authors arising out of this White Paper or of any other person for whose acts or omissions the user of the report is vicariously liable. The views expressed in this publication are those of the authors at the time of writing are not attributable to any other party. Every effort has been made to correctly attribute sources of information. No responsibility is taken for incorrect attributions which may have inadvertently occurred. While considerable care has been taken to ensure the accuracy of the White Paper, NEF would be pleased to hear of any errors or emissions, together with the source of any new information.
Renewable Energy Investment Opportunities in Emerging Markets ix
acknowledgements
Siddhartha Shah Nishith Desai Associates Ash Lilani Silicon Valley Bank Stephen Terry Azure International B D Viswanathan Microsol Power Amardeep Parmar Rabobank India Marcello Britos Agropalma Artur Alves SoyminaS Guilherme Prado Cosan Elin Cordero Unica Gualter Barbosa Dedini Hernique Burd CEPEL Natalhia Cepelini Cenbio Peter Richards REEEP Charlotte Moore Tersus Energy Shinichi Lioka Institute for Global Environmental Strategies Kirsty Hamilton Business Council on Sustainable Energy Jodie Roussell American Council on Renewable Energy (ACORE) Mr. Zhongying Wang Center for Renewable Energy Development Energy Research Institute (ERI) of NDRC Dr. Dai Yande Energy Research Institute (ERI) of NDRC Dr. Fuqiang Yang Energy Foundation Mr. Dajun Zhong Beijing Dajun Center for Economic Watch & Studies Ms. Xianli Zhu China Academy of Social Sciences Alexandra Amerstorfer Kommunalkredit Public Consulting Mr. Youhong Fu Beijing Oumai Investment Management Co Ltd Ian Harvey The Intellectual Property Institute Gareth Hughes Climate Change Capital Simon Littlewood London Asia Capital Charlotte Moore Tersus Energy Dr. Alex Westlake ClearWorld Energy Mr. Wei Wang Beijing Energy Investment Company Dr. Ka Keung Chan CLP Power Asia Mr. Elton Chen SGS CSTC Trade Assurance Services Lionel Kambeitz HTC Pure Energy Jerry Li Materials Magic / Hitachi Metals Mr. Robin Fu Alltronic Tech Investment Mr. Xiaoli Jia CECIC Blue-Sky Investment Consulting & Management Mr. Haoxiang Jiang DNV Mr. Yang Jiang China National Building Material Group Corporation (CNBM) Mr. Mingshan Jiao Beijing Sunpu Solar PV Technology Co Adam Pool EIP Andrew Whalley REC Mr. Olivier Kreiss Eco-Carbone Mr. Michael Lehmann DNV Ms. Xiaoyan Peng Gong Sheng Dai (GSD) China Management Consulting Co Ltd Klaus-Peter Pischke KfW Bank Ms. Christine Qian Renewable Energy International Mr. Chris Raczkowski Azure International Mr. Michael Rumberg TUV SUD Carbon Management Service Mr. Chongqi Shi Beijing Keji Consulting Service Ltd, China Mr. Qiang Wang Beijing Sunpu Solar PV Technology Co Mr. Xuanjun Wang Beacon Law Firm Ms. Yang Wang Zhejiang Windey Wind Turbine Co Mr. Zhang Xinjiang Sunoasis Co We would also like to thank: Eric Martinot Electrobras Indias Energy Resource Institute (TERI) Natsource UK CREIA China Center for Strategic & International Studies Energy Information Administration, US Geothermal Council of China Energy Society Tsinghua University DEFRA Ofce of National Climate Change Coordination Committee, NDRC
1. introduction why look at renewable energy investment in emerging markets?

Global Overview
In 2005, global annual investment in the renewable energy sector stood at just over USD 44bn1, of which USD 18.2bn was invested in the development of grid-level renewable energy generation projects. If growth continues at current rates total investment is expected to reach USD 100bn by 2010.2 Figure 1: Global Investment in Renewable Energy in 2005
$15.1bn* $59.2bn Total global investment in clean energy in 2005:
$7.0bn $25.2bn $44.1bn $18.2bn*
$44.1bn
$6.0bn $18.9bn $4.0bn $3.0bn
$4.3bn* $1.6bn*
VC/PE Public Corp markets R&D

Source: New Energy Finance
Corp P&E
Govt Tech R&D subtotal
Total Asset Distributed Capacity M&A Total finance projects subtotal investment deals
Note: Figures marked * are based on the New Energy Finance Desktop (Clean Energy Organization & Deal database); all other gures are industry estimates based on various sources. Note: Global investment in renewable energy has been broken down into venture capital and private equity investments in companies; equity placements on the worlds stock markets; corporate research and development budgets; corporate plants and equipment (on-balance sheet activity); government research and development programs; investment in grid-connected renewable energy project development; investment in distributed power generation; and mergers and acquisition activity (this is identied separately as it is not investment into the industry specically, but between industry players and may not be re-invested in renewable energy).
________________ 1,2 New Energy Finance Research on Global Investment March 2006
The IEA has predicted that the compound annual growth rate of world power generation capacity to 2030 will be around 2.6%, against an average GDP growth rate of 3.0%. According to the Commission on Sustainable Development, emerging markets are set to account for at least USD 6 trillion of the USD 17 trillion required to meet global energy development requirements in that period. The development of renewable energy generation capacity is almost certain to grow at a much faster ratefor example; solar photovoltaic installations are expected to growth at an average annual rate of 60%3 from 2000 to 2004. In the near term, New Energy Finance analysis suggests that overall investment growth in renewable energy generation will continue at an average of 18% CAGR until 2010. The worlds developing economies, which combine rapid GDP growth with accelerating energy demand, appear to offer the greatest opportunities for high levels of sustainable growth and investment.
The Improving Outlook for Renewable Energy: Key Drivers

The interaction of a number of global and country-specic drivers has radically changed the outlook for world energy markets, resulting in a more favorable investment climate for renewable energy. While market assessments vary, most commentators agree on the fundamental drivers behind the evolution of the renewable energy sector: Many emerging markets are undergoing rapid economic growth, leading to an increase in energy demand; Higher demand has contributed to an increase in fossil fuel energy costs (particularly for crude oil), which appear likely to remain at their new higher levels for the foreseeable future; At the same time, the cost of renewable energy technologies has begun to fall. In some emerging markets renewable energy sources are increasingly cost competitive on purely commercial grounds; It has become more difcult to ensure security of domestic energy supply. This is a signicant policy driver not only for emerging markets, but also for the world; Environmental concerns at the local and global level are increasing the pressure to develop non-fossil fuel renewable energy sources. Growing international concern about the impact of climate change has magnied investment interest.
________________ 3 REN21 Renewable Energy Policy Network. 2005. Renewables 2005 Global Status Report. Washington DC: Worldwatch Institute
Growing Energy Demand

Energy is central to economic development: there is a clear correlation between energy consumption and living standards. In the developing world, renewable energy is an essential component of sustainable economic growth. Use of renewable energy also reduces reliance on the purchase of expensive fossil fuels while contributing to the successful development of domestic energy industries. Renewable energy will play an important role in meeting the increased demand for energy over the next 20 years. Since 1980, total global energy demand has grown by almost 50%. The demand for electricity has grown even faster, with the most dramatic increase in developing countries. This trend is projected to continue, as GDP growth in the developing world outstrips growth in developed countries. More than half of the worlds rural population has no access to modern forms of energy; distributed energy based on renewable sources is a critical tool in providing access to electricity and other forms of energy. While already substantial, investment opportunities in renewable energy will continue to increase. Twothirds of the worlds new energy demand is expected to come from the developing world, which will account for almost half of total global energy demand by 2030. At least 15% of this increase is expected to be met by renewable sources. Major investment is required to expand the worlds total electricity generation capacity, which is expected to reach 2,500GW by 2010 and 2,850GW by 2020.4 The World Bank expects that approximately one-third of the required investment will be directed toward renewable energy assets in the developing world (see Table 1). Table 1: Energy Growth and Projected Renewable Energy Share in Emerging Markets
Country Actual Electricity Projected Electricity Projected Electricity Consumption 2005 (TWh) Consumption 2010 (TWh) Consumption 2020 (TWh) Brazil China India Mexico Poland Thailand Turkey 373.5 2,170 (2004) 418.3 (2003) 193.9 (2004) 144.8 107.3 (2003) 110.9 457 2,801 773 327.6 (2013) n/a 189.9 (2015) n/a 697 3,816 1150 n/a 293.0 (2025) n/a 240.0 Target Renewable Energy Capacity 2020 (GW) 14.5 102 16.4 4.1 5.3 3.45 4.93
Sources: Energy Information Agency (EIA); International Energy Agency (IEA); Brazilian Ministry of Mines and Energy (MME); Mexican Ministry of Energy (Secretaria de Energia, SENER); PowerGen/Turkish Ministry of Energy and Natural Resources (Enerji ve Tabii Kaynaklar Bakanligi); NEF Poland Focus Report; CIA World Fact Book.
________________ 4 OECD/IEA World Energy Outlook 2004
Long Term Energy Price Trends

There are two primary issues that will impact long-term energy pricing: an increase in the cost of fossil fuel energy and a decrease in the cost of commercial renewable energy. As global energy demand increases and the global supply of fossil fuels begins to dwindle, the pricing equation is likely shift in favor of greater reliance on renewable energy. Traditionally the cost of oil, coal and natural gas has been considerably lower than alternatives. However, the changing fundamentals of the energy market are driving a shift toward cost-competitive renewable energy sources (see Figure 2).
Fossil-Fuel Energy Costs

The changing economics of global energy markets have increased the commercial viability of renewable energy. For example: Oil prices have nearly doubled over the last couple of years; Natural gas prices are rising; Growing environmental and efciency demands have increased the capital construction costs of coalred power plants; Ageing power stations around the world need to be replaced; and Electricity grid networks need to be upgraded and modernized.
Increased Cost of Oil

Taking oil as an example, crude oil prices are now around USD 60.00 per barrel. In September 2004, the price of a barrel of standard crude oil on NYMEX was less than USD 25.00. There are a number of reasons for continued upward cost pressure, including: increased demand, diminishing reserves of easily accessible and renable oil, increasing costs of extraction, geopolitical pressure and environmental concerns. Increased demand: Oil prices have been driven higher by sharply increasing global demand. Demand drivers include higher levels of economic growth, (especially in rapidly-developing countries such as China and India), greater need for electricity and continued proliferation of automobiles. Diminishing reserves: The global supply of oil is nite; the question is how much oil may be extracted in a cost-effective manner. In 2004, 30 billion barrels of oil were consumed worldwide, while only eight billion barrels of new oil reserves were discovered.5 While many dispute the Hubbert peak theory (which holds that, at a given point, the available supply of oil will peak and then fall away), in 2004 the IEAs World Energy Outlook said that oil production is in decline in 33 of the 48 largest oil producing countries.
________________ 5 IEA
Increased costs of extraction: The costs associated with the production, renement, transport and storage of oil, continue to increase leading to higher world oil prices. While oil can still be produced from many elds, the cost of extraction increases over time (where the cost of extraction is dened as the Energy Return on Investor (EROI), which is the number of barrels of oil used in the extraction, transport and renement of oil). While this trend occurs in all oil elds, it is a much bigger issue in elds now being explored, which are signicantly more difcult to access. Canadas tar sands, for example, have been viewed as non-commercial due to a rening cost of USD 60.0 per barrel. Geopolitics: Geopolitical developments affect both the level and volatility of oil prices. Most recently, conict in oil-exporting countries, supply disruptions in the Gulf of Mexico and Nigeria, and concerns about Irans foray into uranium enrichment have sent oil futures higher. Political turbulence in the major oil producing regions of Venezuela and the Middle East, both major oil regions, have also contributed to long-term concerns over access to petroleum resources. Environmental concerns: Environmental concerns are playing an increasingly important role in determining whether oil may be accessed in a sustainable manner and cost-effective. An excellent example if the ongoing debate in the United States over the refusal to allow drilling for oil in protected nature reserves such as the Alaska National Wildlife Refuge. Opposition to exploitation of oil reserves on environmental grounds, even where oil supplies have been conrmed, is becoming increasingly common throughout the world. Taken together these supply and demand factors are ensuring continuing pressure on the price of oil, are not likely to dissipate in the short term and, in fact, some commentators believe that the era of cheap oil is effectively over.
Falling Cost of Renewable Energy Technology

Depending on the technology, renewable energy costs are either stable or moving down a steep cost curve. This is in stark contrast to the rising prices of more traditional energy resources (see Table 2). Perhaps more importantly, the most signicant costs associated with renewable energy capacity development consist of capex construction, operations and maintenance. Renewable energy fuel costs are zero and/or negligible, as opposed to those of fossil-fuel based generation plants, which are substantial.
Table 2: Renewable Energy Technologies Capital Costs and Cost Trends

Technology Mini-hydro Global Average Capital Cost (USD) 1.9m per MW Cost Trends Stable established technology Risks to Cost Curve Likely to remain stable
Wind 1.2m per MW Biomass 2.7m per MW Geothermal 1.8m per MW Solar PV 2.4m per MW Solar Thermal N/A Biofuels 0.5 per litre
Costs have halved since 1990. Turbine Issues regarding size has increased from 600kw to connection of offshore wind average 1.5MW and above. Cost farms to the grid. reductions are expected to continue due to site optimization, improved design and electronics. Offshore wind is expected over the long term to decrease following the onshore wind market.* Stable but expected to fall over time as new technologies are introduced and commercial scale generation is increased. Likely to remain stable with a downward curve as improved technology is implemented
High capital upfront costs, which Likely to remain stable, or have declined since the seventies. drop as Hot Dry Rock (HDR) Stable cost which could decrease due technology becomes to improved exploration techniques, commercial, widening cheaper drilling techniques and better geothermal resource. heat extraction. Costs have declined roughly 20% Dependent on the supply of for every doubling of installed capacity silicon. Costs can rise due (about 5% per year). Price is expected to market factors. to drop due to new materials, design, process and improved efciency.* Stable and set to fall due to increase Stable in scale and improvements in technology. Ethanol can range from 23-30 cents Affected by commodities per litre, with Biodiesel at 40-80 cents market interests, there are per litre. Technology and production ongoing issues regarding efciencies are expected to continue the use of edible feedstock. to force down the price.1 Current cost is high likely to follow a similar path to the development of offshore wind
Marine 4.2 per MW Stable and falling due to technological developments.

Source: New Energy Finance Note: 1 Further explanation below
6 Renewable Energy Investment Opportunities in Emerging Markets
Figure 2: Range of Total Energy Cost by Source (USD cents/kWh)

25.0 22.0 20.0
USD cents/kWh
15.0 12.0 10.0 10.0 8.08.0 5.0 4.5 2.5 0.0 5.5 4.0 4.04.0 2.02.0 4.0 5.0 7.0 4.0 Average Cost
Source: Various Note: Solar Minimum cost is USD 22.0 cents/kWh. Maximum cost is up to USD 84.0 cents/kWh Note: Total Cost included Capital costs, Operation & Maintenance, and Fuel (where required)
Wind: In the U.S., for example, the cost of producing electricity from utility-scale wind turbines has dropped by 80% over the last twenty years, due in part to signicant improvements in performance. Many small, expensive turbines have been replaced by larger MW-class turbines. In the early 1980s, when the rst utility-scale wind turbines were installed, wind-generated electricity cost as much as USD cents 30/kWh. Now, state-of-the-art wind power plants in the U.S. are generating electricity at less than USD cents 5/kWh. Costs are continuing to decline as more windfarms are built, which are larger in terms of both number of turbines and scale of turbine generation capacity. This is a pattern that we expect to see followed around the world. Solar: According to the retail price index of solar PV, the cost of this technology has fallen to roughly USD 5.40 per watt in the U.S. and EUR 5.80 in Europe, compared to USD 30 per watt in 1975. In fact, the recent price of electricity produced from solar PV fell as low as USD 3.00 per watt before rising due to higher demand. Nevertheless, continued progress in solar technology, from thin-lm to solar concentrators, is likely to reduce prices. The combination of improved, lower cost performance is mainly due to advances in cell materials, module packaging and manufacturing processes. Ethanol: Ethanol is used increasingly as an additive to motor vehicle fuels in several markets, and may be cost-competitive with oil at USD approximately 40-50 per barrel. Several countries, led by Brazil and the United States, have identied ethanol as an important component of a renewable energy portfolio and have made major strides in reducing production costs.
So lar Wi nd On -S ho re
Nu cle ar
Hy dro
Co al
Oil
Na tur al
Bio ma ss Ge oth erm al
Ga s
Similar advances have helped reduce the cost of renewable energy technologies, such as biomass and geothermal, in lockstep with gains in efciency and reliability of these technologies. At the same time, the costs of off-grid distributed renewable energy generation are also expected to continue to fall, primarily due to advances similar to those in on-grid technology. The long term energy price trend is upwards, and it is likely that we will see continual increases in the costs of most fossil fuel sources. Oil prices are set to continue to rise; while natural gas is far cheaper, it shares many of the same geopolitical and supply tensions as the oil market. Coal is inexpensive to mine, but the devastating environmental effects of coal-red electricity generation have led to expensive efforts to implement pollution-reduction technologies. As a result, power station construction costs have risen. Even if the price of oil begins to fall, the cost of electricity generated from the majority of renewable energy sources is expected to continue to fall (or at the very least, remain stable), thanks to technological developments, new investment and government incentives.
Growing Search for Energy Security

Energy is a fundamental driver of growth and development around the world, and the use of energy has been steadily expanding along with the global economy. Reliable access to affordable energy is a key enabler of growth. At the same time, poor access to energy and high prices have the potential to hinder growth. This is true especially for developing countries. International competition for energy resources has become more pronounced. The markets for oil, on which most of the worlds transportation depends, and natural gas, on which a growing share of the worlds electric power production depends, are increasingly characterized by intense competition. Greater competition for nite fuel supplies may lead to higher prices, which curb economic growth and disproportionately affect developing economies least able to absorb rising costs. Competition may also take the form of increased geopolitical tension between countries that own domestic oil and gas supplies and those that do not possess these assets. Energy security has grown in importance as communities, regions, and nations come to understand the necessity of a reliable fuel and electricity supply. Raw cost per MWh of energy is no longer the only indicator of competitiveness: all countries require energy to fuel economic growth and in order to secure that supply. Many countries are now looking to optimize the exploitation of their domestic resources while expanding and diversifying their international energy supply options. One way to achieve greater energy security is to develop greater fuel diversity and to reduce dependence on imported fossil fuels, which may be subject to rapid price uctuations and supply disruptions. This is a signicant issue around the world today, with many countries rushing to install natural gas-red electricity generation capacity because of its current low capital cost (compared to coal or nuclear). As world gas demand increases, the prospect of supply interruptions and uctuations will continue to grow, increasing the value of fuel diversity. Western Europe, which has long depended on imported gas from Russia, Algeria and a few smaller suppliers, is especially vulnerable. In principle, dependency on natural gas is easier to manage than dependency on oil: natural gas has rival fuels for each of its major uses. In electric power generation, countries must preserve diversityensuring, for example, that advanced coal and renewable technologies remain viable.
When valuing energy in todays markets one needs to include an element relating to Energy accessibility and reliability must be thoroughly assessed when valuing energy in todays market. Accessibility and reliability can range from access to feedstock to availability during grid disruptions, as well as the ability to ease grid requirements during periods of peak demand. This is a critical issue in emerging markets, where energy demand is increasing more rapidly than in the developed world.
Environmental Concerns
A growing global awareness of environmental issuesfocusing on the impact of pollution, resource scarcity and the implications of climate changehas led to a growing recognition renewable energy generation is an essential element in sustainable GDP. International concern about the rise in global CO2 emissions led to the implementation of the Kyoto Accord, an international treaty designed to reduce emissions of greenhouse gases. Renewable energy generation, which has a much lower environmental impact per unit of energy produced than conventional power plants, is one potential response to these environmental concerns. Environmental impact costs are becoming an increasingly important factor in resource planning decisions from national to utility level planning. The rapidly expanding economies of China and India are already showing a swift increase in CO2 emissions. China, which is already the worlds second largest polluter, has increased its emissions by 33% between 1992 and 2002, while Indias emissions have grown 57% in the same period. This trend will continue as economic activity grows. This increase in emissions has taken place despite improvements in energy efciency by China over the last decade. In 1992, a dollar of GDP was associated with the production of 4.8Kg of CO2. By 2002, every dollar of GDP was associated with 2.5kg of CO2.6 The dramatic growth of power demand in developing countries has accelerated concern about the proliferation of large coal-red power plants; at the same time, it has made solar, wind, hydrogen and biomass increasingly attractive alternatives. Biofuels are also attractive for the transportation sector, as they reduce both pollutant emissions and dependency on fossil fuels.
Potential Renewable Energy Solutions for Emerging Markets

For the purposes of this paper, we are addressing the opportunity in renewable energy, rather than the wider clean energy market. One way to improve a countrys emissions prole is to switch power plants from coal to natural gas, since the level of emissions from a natural gas red power plant are lower. Clean coal technologies are likely to be of great interest in the medium term; however, the focus of this paper is on those energy sources that can be developed domestically, requiring no international purchase of additional supply.
________________ 6 World Bank: Little Green Data Book. May 2006
Renewable Energy Investment Opportunities in Emerging Markets 9
Renewable energy projects can offer a number of signicant benets in developing nations and emerging markets, where large central power plants are typically the backbone of the national power system. Renewable projects can complement conventional thermal power projects by: Reducing emissions of greenhouse gases and other air pollutants; Providing, clean, sustainable and cost effective power in rural areas not served by the power grid; Utilizing indigenous resources in countries where fossil fuels are imported, or exported, for hard currency; and Developing diversied power sources that can sustain economic growth when fossil fuel supply decreases or becomes prohibitively expensive. The complementary nature of renewable projects has been increasingly recognized by conventional energy companies which have entered the renewable energy power project eld. The key areas in which renewable energy can make a meaningful contribution to meet the developing worlds energy needs are: Grid-connected generation demand; Distributed generation demand, Mobile generation demand; and Transportation fuels. The expansion of the developing worlds renewable energy markets are predominantly driven by high rates of GDP growth, which translates, among other things, into the need for additional supplies of electricity and fuels for transport. Therefore, this paper looks at opportunities in the most relevant sectors, including: Wind, marine, solar, geothermal, mini-hydro, biomass, biogas, and biofuels. Wind. Wind has been the most successful and widely-adopted renewable energy technology over the last twenty years. The next decade will see continued activity, particularly in developing countries and offshore. The Wind sector includes manufacturers of components and subassemblies of wind turbines, as well as turbines themselves. A large part of this sector is comprised of various developers, generators, utilities and engineering rms that are exploiting opportunities to build wind farms around the world. Marine. This category covers all technologies relating to the extraction of energy from the sea. Specic opportunities include energy generated from waves as well as tide (via tidal barrages or tidal ow generators). Note that exploitation of marine-derived biomass would be categorized as biomass, rather than marine. Solar. Solar includes all technologies that capture energy directly from the sun, either using photovoltaic (PV) material or passive technology such as a concentrator or Stirling engine. While the solar energy sector is already substantial, cost reductions achieved through new technologies or economies of scale in manufacturing should expand solars reach over the coming decades.
Geothermal. Geothermal power has long played a part in the energy portfolio of countries such as Iceland and Japan, which possess high-enthalpy geothermal resources. The highest temperature resources are generally used only for electric power generation, while low and moderate temperature resources can be divided into two categories: direct use and ground-source heat pumps. However, recent advances suggest that geothermal energy could play an increasing role worldwide. First, new drilling techniques allow users to tap into resources that have traditionally been out of reach. Second, innovative methods for extracting power from lower temperature geothermal elds now allow productive use of resources that were not economically viable in the past. Mini-hydro (<50MW). There have been important technological advances in small-scale and low-head hydroelectric power. Advances in equipment (such as the development of Gorlovs helical turbine) and design practices have enabled the utilization of low head sites,7 enabling mini-hydro to become even more economically, technically and environmentally sound. Small scale hydro power is undergoing a renaissance and will continue to be a major contributor to the global deployment of renewable energy. Biomass, Solid Waste and Biogas. This category includes production and consumption of solid and gaseous fuels derived from biomass. Solid biomass may include a number of specially-grown crops, such as elephant grass or coppiced willow, as well as crop residues, such as straw. We include in this sector processors of other waste matter for energy generation, such as sewage waste, chemical by-products and biogas produced from municipal waste, as their exploitation often involves the same technologies as grown-for-purpose biomass. Biofuels. This category refers to liquid transportation fuels, including biodiesel and bioethanol. These fuels may be derived from a range of biomass sources, including sugar cane, rape seed, soybean or cellulose. We exclude producers of base biomass but include suppliers of everything from processing technologies and equipment. We also include the logistics of distribution, manufacture of energy systems specially adapted for the use of biofuels, as well as the services on which they depend.
________________ 7 Most mini-hydro is low head. In low head (the vertical distance through which the water falls) situations, low water velocity implies the need for large ow rates and hence large machines to recover a modest amount of power. A number of different means of exploiting low head hydro, such as converting into airpressure energy, and the development of smaller and more efcient turbines are set to enable the development of a vast number of suitable low head hydro sites, and their respective untapped source of renewable energy.
2. emerging markets overview

Renewable Energy in Emerging Markets: The Improving Investment Climate
The shift in the economic perception of renewable energy has stimulated interest in the potential return on investment. In the developed world a series of landmarks, such as the implementation of the Kyoto Protocol and the rst billion dollar renewable energy IPO (the IPO of Norwegian solar wafer, cell and module manufacturer REC on the Oslo Stock Exchange in May 2006 raising USD 1.2bn), combined with a growing public impetus towards the use of renewable energy, has driven investor interest. The number of funds focusing on the sector is on the increase, and traditional limited partners such as Mitsubishi, BOC and Coca-Cola are increasing their exposure. The majority of private funds are focused on private equity opportunities in the sector and 65% of all such funds focus on investment in companies rather than projects, with over USD 2.8bn currently under management8. Growing interest in the potential of renewable energy has led to increasing interest in developments in emerging markets, as well as within the more developed economies. While it is understood that investing in emerging markets entails macroeconomic, currency and political risk, the question that needs to be answered is what are the incremental risks and/or benets of investing in renewable energy. To what extent does the political will exist at the domestic level to encourage renewable energy growth over a signicant period of time? This is vital, given the proven importance of appropriate legislation to renewable energy growth in developed markets. It is a given that efcient management of resources is linked to economic competitiveness. At the same time, renewable energy is seen in many regions as a potentially large source of job creation and economic development because it tends to harness under-utilized domestic resources. This realization has led national and local governments to seek to lure renewable energy companies and facilities to locate within their borders. Local economic development objectives can also be served by clean, affordable and resource-efcient technologies that can be deployed at the town and village levels. Biomass, solar, and small-scale hydro, for example, are among the technologies with the potential to provide new economic opportunities and improved quality of life for the two billion people in the world who still lack access to electricity. What makes the emerging markets attractive as an investment opportunity are the combination of improving fundamentals and competitive prices. The growth in renewable energy in the developed world has been rapid, and there are continuing developments in terms of scal and policy support. The main difference between emerging markets and the developing world in terms of energy trends is simply that, in emerging markets, the same drivers for the development of renewable energy generation capacity are increasingly more powerful.
________________ 8 New Energy Finance Funds Brieng March 2006
Energy Needs in Emerging Markets

It is obvious that a countrys energy needs, energy mix and energy economics are most directly relevant to an assessment of the return an investor can anticipate from nancing renewable energy generation. With the United Nations predicting world population growth from 6.0 to 7.5 billion by 2020, demand for energy will increase substantially over that period. Both population growth and increasing standards of living for many people in developing countries will cause strong growth in energy demand, expected to be 50%, between now and 2030. As noted in Section 1, two-thirds of the worlds increasing energy demand is expected to come from the developing world (reaching nearly half of total global demand by 2030). Oil and gas imports from the Middle East and North Africa are expected to rise still further, creating greater dependence for IEA countries and large importers like China and India. Energy-related CO2 emissions are expected to climbby 2030, they will be up to 52% higher than today. Electricity demand is increasing much more rapidly than overall energy use, and is projected to grow globally at 2.8% per year to 2010, and substantially more to 2020. Currently some 2 billion people have no access to electricity, and it is a high priority for governments in the developing world to address this lack, only adding to the growth in demand. Installed renewable energy generation capacity totaled 160GW in 2004 (excluding large hydro and biofuels). The emerging markets, including China, had 70GW of the total, or 44%9. Whilst, therefore, up to 85% of the worlds increased demand for energy is expected to be met by fossil-fuels, the renewable energy sector will also need to grow rapidly to help meet the various economic and environmental priorities already described (see Figure 3). For the investment community this will undoubtedly represent a signicant opportunity. Figure 3: Growth in Energy Demand by Source (1Mtoe = 11.63TWh). Source = IEA
7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 1970 1980 1990 2000 Other Renewables Hydro Power 2010 2020 2030 Natural Gas Coal Oil
Nuclear Power
________________ 9 REN21 Renewables 2005 Global Status Report
Developed World Support for Renewable Energy in Emerging Markets

For the international community, the success of any attempt to limit the worlds CO2 emissions comes down to one basic question: How does the world address the emission of India, China and Brazil? Whether or not one fully ascribes to the theory of man-made climate change, it is a fact that the climate has already absorbed the developed worlds emissions to date; increasing emissions from the developing world over the next thirty years could accelerate climate change to the point of no return. These three large, rapidly-industrializing countries have a combined population of more than 2.5 billion. If these economies produce only half of the UKs annual emissions per capita, world emissions will increase by nearly 40%. If the per capita rate of emissions reaches that of the U.S., the worlds current CO2 emissions will be double the current level. Few, if any, reputable scientists believe that the worlds climate could withstand this increase in atmospheric CO2 concentrations. What the 2.5bn people in India, China and Brazil do is, put simply, three times as important as what the 850m people do in the U.S., Europe and Japan. Recognition of this problem has led to the Kyoto Protocol being agreed and signed, which limits emissions growth and targets international emissions reductions by each developed country. However, under the current international regulatory environment, no emerging market economy has any requirement to cap emissions and it is unrealistic to expect the developing world to shoulder the main burden of mitigating future emissions growth. The Kyoto Protocol, while welcomed, may make no effective difference to the regulatory environments in emerging markets. Yet predominantly the only way to resolve infrastructural, contractual and off-take issues is following legislative action (with enforcement clauses) from the local, regional and/or national governments. Obviously the international focus on the limiting of CO2 emissions has helped create a framework wherein there is growing support for renewable energy development, but it is questionable as to what the direct impact will be. Despite a decreasing cost curve in renewable energy technologies, there is no question that at this stage of development of the renewable energy markets, sustainable high-growth in the sector requires national or local legislative and scal support. The emerging markets set to show the strongest growth will be those with legislation in place, driven by the economic priorities and objectives of the country itself.
Accelerators and Support Mechanisms

A series of accelerators and support mechanisms are already in place to drive the development of renewable energy in emerging markets. While the mechanisms in place can differ from country to country, understanding the depth of a countrys commitment to the development of renewable energy generation capacity is one of the primary indicators as to levels of potential return.
Power Generation Promotion Policies

At least 48 countries have some type of policy (aside from setting specic targets) to promote renewable energy generation, 14 of which are developing countries (see Table 3). The mechanisms which have been put in place to meet these objectives include: Feed-in tariff: A mechanism that sets a xed price at which power producers can sell renewable power into the electric power network. Some schemes provide a xed tariff, while others provide xed premiums added to market or cost related tariffs. Renewable portfolio standard: A standard requiring that a minimum percentage of generation sold or capacity installed be provided by renewable energy. Obligated utilities are required to ensure that the target is met, either through their generation, power purchase from other producers, or direct sales from third parties to utility customers. Capital subsidies, grants or rebates: One-time payments by the government or utility to cover a percentage of the capital cost of an investment, such as a solar water heating system or a biogas digester for the home. Investment, excise or other tax credits: Allow investments in renewable energy to be fully or partially deducted from tax obligations or income. Tradable renewable energy certicates: Each certicate represents the certied generation of one unit of renewable energy (usual 1 MWh). Certicates allow the trading of renewable energy obligations among generators or utilities. Energy production payments or tax credits: Annual tax credit provided to the investor in or owner of a qualifying property or project, based on the amount of electricity generated by that facility. Net metering: Allows a two-way ow of electricity between the electricity grid and customers with own generation. The customer pays for the net electricity used in each billing period (when consumption exceeds generation on site, the meter runs forward when generation exceeds consumption the meter runs backwards and power ows to the grid).
Table 3: Renewable Energy Policies & Measures

Country Feed- Renewable Capital Investment Sales Tax, Tradeable Energy Net Public Public In Tariff Portfolio Subsidies, Excise or Energy Tax Renewable Production Metering Investment, Competitive Standard Grants or Other Tax or VAT Energy of Tax Loans, or Bidding Rebates Credits Reduction Certicates Credits Financing EU-10 Czech Rep. Estonia Latvia Lithuania
Poland Slovenia
Slovak Rep.
Other Argentina Brazil China Costa Rica India Indonesia Nicaragua Sri Lanka Thailand Turkey Cambodia
* *
Guatemala
Mexico Philippines
* Some States/Provinces within the Country have State/Province-Level Policies, but no National Policies Source: Various
Domestic Policy Targets for Renewable Energy

By mid-2005 at least 43 countries had a national goal or target for renewable energy supply, including 10 developing countries. Most national targets are for shares of electricity production, ranging from 5-30%. These targets are usually expressed as a desire to achieve a certain level of renewable energy by a set future date. Some targets are legislated while others are set up by regulatory agencies or ministries, and can therefore have varying levels of enforceability between countries (see Table 4).
Table 4: Selected Emerging and Transition Economies Renewable Energy Targets

Emerging and Transition Economies Brazil Bulgaria China Czech Republic Dominican Republic Estonia Latvia India Lithuania Malaysia Mali Philippines Romania Slovak Republic Slovenia South Africa Thailand Turkey Renewable Energy Targets Additional 3300 MW from wind, small hydro, biomass by 2016; 15% of primary energy supply by 2020 11% of gross electricity consumption from renewable sources by 2010 3.3GW by 2006 from wind, biomass and mini-hydro. To reach 30GW of wind by 2020 5-6 % of TPES by 2010 8-10% of TPES by 2020 8% of electricity output by 2010 500MW wind power by 2015 5.1% of electricity output by 2010 6% of TPES (excluding large hydro) by 2010; 49.3% of electricity output by 2010 10% of additional electricity capacity by 2012 (excluding large hydro): increasing to 20% by 202 12% of TPES by 2010; 7% of electricity output by 2010 5% of electricity generation by 2005 15% of primary energy supply by 2020 4.7GW of installed generation by 2013 22% of energy production by 2010 31% of electricity output by 2010 33.6% of electricity output by 2010 9,300GWh or 0.8 Mtoe RE contribution to the nal energy consumption by 2013 8% of primary energy by 2011 (excluding rural biomass) Targeted 2% of electricity from wind by 2010
Source: IEA , EBRD, Government announcements
Technology Transfer
The Asia-Pacic Partnership on Clean Development and Climate (AP6) is an intriguing concept, set up to facilitate technology transfer. Its purpose is to help the developing economies of China and India in particular make their great industrial leap forward by using the best, most environmentally sound technologies the world can offer. Composed of six countries the U.S., China, India, Australia, South Korea and Japan the group was conceived in 2005, but only had its rst working meeting in April 2006. While it espouses a noble purpose, no concrete plans for how this might be achieved have been released. It has no emissions targets, mandates no deadlines and has no incentives planned to encourage emissions control. One selling point is the AP6 theory, based on computer modeling, which projects that if China and India were to adopt current best practice techniques for all new power plants, worldwide greenhouse gas emissions would reduce by 1.5%. However, until some concrete targets are set, it can only be considered as a positive indicator of sentiment.
Kyoto Accord CDM/JI

One of the most frequently cited forms of support is the Kyoto Protocols Clean Development Mechanism (see page 23 for details). However, in Phase I no emerging markets were given caps for their emissions and there is no suggestion that emerging market signatories will accept such caps. Given the extreme volatility of the carbon market and the fact that the CDM currently ends in 2012, the CDM is not considered a primary driver of sustainable growth in renewable energy investment in emerging markets.
Investment Opportunities in Electricity Markets and Grid Infrastructure

To understand the challenges faced by renewable energy in establishing a more meaningful role within existing systems of electricity generation and distribution, there are two distinct areas which must be addressed. The rst is the physical grid infrastructure itself. Currently these tend to be built around the model of large scale generating plants, often sited far from regions of highest demand, and linked to consumers via a waterfall of high-transmission cables and transformer substations that gradually attenuate voltage to accommodate the needs of heavy industry and commercial and domestic users. In emerging markets, this infrastructure may neither be robust nor reach the whole population10. Transmission is therefore a key constraint for many renewable energy projects. Optimum wind and geothermal power resources are frequently found inconveniently far away from existing transmission lines. For that power to be useful, a grid connection must be put in place to ensure transmission of the power from point of generation to point of use. The second issue is the business structure within a given electricity market. In China for example, there is tension between the market-oriented deregulated coal price and a highly regulated wholesale price of power. If power prices are capped, it can prove difcult to develop protable power projects.
________________ 10 The lack of a robust and extended grid infrastructure can provide support for the development of distributed generation projects.
The economics of a grid-connected renewable energy project can depend on numerous factors. These include the costs of purchasing, installing, and connecting the system to a utility, operating the system itself and the value of any net electricity production sold to the utility. The value of power sales and the interconnection and transaction costs charged to the project owner by the utility, depend on the results of negotiations with the utility. In emerging markets it can prove difcult to get power purchase agreements (PPAs) signed at a price which makes the project protable. Even if the agreement is signed, there can be problems in ensuring payment when the local utility is either state-owned or inefcient, or doesnt have sufciently strong credit to reassure project nanciers and banks. However, in a regulatory framework where the utility is required to purchase renewable energy, once the price has been agreed, it can be argued that the developers position is stronger than that of a mainstream power producer in an environment where the development of renewable generation is a matter of national policy. Globally, renewable energy technologies have been attacked as being intermittently available, and therefore difcult for any grid to manage i.e. the problems that arise when attempting to match electricity delivery to load, made far more complicated when handling intermittently generated power. In India for example, the grid is known to have required wind power producers to predict the amount of power generated and when, before authorizing a grid connection, thereby not having to authorize that connection. One way around this problem is to develop sufciently robust energy storage devices.
Opportunities in Distributed Generation

One area with high potential growth is that of small and mini-grid power generation. Combined cycle CHP plants can lead to a decrease in emissions and costs, as waste-heat recovery systems, such as Stirling engines, compressors and vaporizers, can increase the value of the project. For many users distributed generation can lower costs, improve reliability, reduce emissions and expand their energy options. Stakeholders in distributed generation can range from energy companies, equipment suppliers, energy users and nancial and supporting companies. Governments and regulators can also use distributed generation as a means of bringing power to rural populations. The combination of the use of a sustainable non-fossil fuel and local rural power generation results in social, economic and technical benets which makes distributed renewable energy projects highly desirable for emerging markets and developing countries.
Potential Barriers to Development

On the minus side of the equation, there are a number of barriers to achieving sustainable growth in renewable energy within emerging markets that need to be appraised before investing in any particular technology or market. These fall into two major categorieseither barriers for non-domestic investors to participate, or barriers to the development of renewable energy itself.
Economic and Institutional Barriers

Because of their very nature renewable energy projects face a number of nancing hurdles, including: Barriers due to higher capital costs and credit risk issues in developing countries; Competing against subsidized use of indigenous fossil fuels;
Much early backing came from international multilateral agencies, and statutory limitations in the method by which multi-lateral agencies share project nancing, and time consuming and expensive reviews of projects, which may delay and even preclude project implementation. Many renewable energy generation projects are characterized by high initial capital costs, expressed on a cost/kilowatt basis. Problems with commercial nancing can result from the higher up-front costs of renewable energy projects, as many commercial institutions view this as increasing the projects nancial risk prole. Institutional barriers may also exist with the power markets in emerging and developing countries due to national policies under which fossil fuel power is sold at subsidized prices to take account of low wages etc. In markets where there are major coal resources (such as China and Poland), there are strong economic factors pressuring governments into supporting those industries. No government particularly wants to be responsible for necessary reforms, if those reforms mean that large numbers of the population will be out of work, or that energy prices to the business and domestic user could dramatically increase. As a result the full economic cost of renewable energy can compare unfavorably with an articially low price of subsidized electricity. Those markets where growth is likely to be sustainable will be those markets where counteracting pressure will be sufciently strong to ensure that support is given to the development of renewable energy generation. For example Polands recent accession to the EU means that there are external political, regulatory and legislative pressures to reform its coal industry and support renewable energy development. In China, by comparison, although there are no such external pressures, the medium and long term economic cost of pollution generated by its coal-red power stations means that there is serious economic pressure to nd alternative generation sources ones that do not rely upon the import of energy. The enforceability of contracts, the time it takes to resolve legal issues within any given environment, levels of corruption within the country and the efciency of the electricity system, as well as the credit-worthiness of local utilities and the willingness of local banks to provide nance, will all have an impact on the risk of doing business in a given market. In many of the emerging markets, there is an increasing focus on opening markets up to and encouraging foreign investments. China, for example, has a poor record on the protection of intellectual property (IP). However, according to Ian Harvey, Chairman of the UKs Intellectual Property Institute, there has been recognition inside China of the fundamental importance of IP to economic growth. In 2004, more patent litigation cases were led in China than in any other country. More than 95% of these cases involved Chinese parties only, demonstrating just how important it has become to defend IP in the domestic arena. In the 5% of patent litigation cases brought by foreigners, over 80% found in favor of the foreign patent holder, compared with 30%40% in the U.S. This is counter to the all-to-common view that foreign patents cannot be enforced in China, said Mr Harvey. Every country within the emerging markets will have sets of conicting pressures, and the most successful markets will be those where the balance of pressure is in favor of development. These markets are likely to show long-term sustainable high growth in renewable energy development.
Kyoto and the CDM Financing Opportunity

The Kyoto Protocol was adopted at the Third Session of the Conference of the Parties (COP) to the UN Framework Convention on Climate Change (UNFCCC) in 1997 in Kyoto, Japan. It contains legally binding commitments, in addition to those included in the UNFCCC. Country signatories to the Protocol agreed to reduce their anthropogenic emissions of greenhouse gases (CO2, CH4, N2O, HFCs, PFCs, and SF6) by at least 5% below 1990 levels in the commitment period 2008 to 2012. It became law in February 2005, following ratication by Russia. The Kyoto Protocol sets binding greenhouse gas emissions targets for countries that sign and ratify the agreement. The gases covered under the Protocol include carbon dioxide, methane, nitrous oxide, hydro uorocarbons (HFCs), per uorocarbons (PFCs) and sulphur hexauoride. While developing countries do not now have specic emissions targets, they are committed under the 1992 Climate Change Convention to taking measures to limit emissions; the Protocol will open up new avenues for assisting them to do so. The Clean Development Mechanism (CDM) is one of the means by which signatory countries to the Kyoto Protocol can manage to meet and/or manage their target emissions. It was proposed as a means of enabling the nancing of renewable energy projects in developing countries. The Joint Implementation mechanism enables transition economies to benet from the transfer of emissions credits, as well as the emerging markets. The World Bank Banks Carbon Finance Unit issued analysis in May 2006 showing growth in traded volumes for European Union Allowances (EUAs) and Certied Emission Reductions (CERs) created by Clean Development Mechanism (CDM) projects located in developing countries that have ratied the Kyoto Protocol (KP). These transactions were valued at USD 10.9bn in 2005. Traded volumes of carbon dioxide equivalent (CO2e) emission reductions created by projects grew by 240%, from 110m tonnes in 2004 to 374m tonnes in 2005. Approximately 346m tonnes (or 93%) of this volume was created from CDM projects hosted by developing countries that ratied the Kyoto Protocol. The value of trade in project-based transactions in 2005 totaled USD 2.7bn. In the rst quarter of 2006, approximately 79m tonnes were traded, with a value of approximately USUSD 0.9bn. The difculty in factoring CDM and JI opportunities into the nancing of renewable energy in emerging markets is the potential volatility of the price of carbon. The main source of purchase data comes from the EU-ETS, where the price was around EUR 30 for a tonne of carbon until the end of April 2006, when it dropped to EUR 11 in three days. This followed leaks of emissions data from countries prior to the rst ofcial report on country emissions under Kyoto (15 May 2006), where it appeared that may many countries were to report emissions well within their national allocations. Naturally, this meant that demand for credits for Phase I would be low to non-existent. While many have already been purchased by the World Bank and other carbon funds, it provides major downward pressure on the tradable price of a carbon credit.
There are different ways of predicting the ongoing price of carbon credits, and a number of different factors affect the potential price. If the price of a carbon credit in Europe was costed as the replacement cost of changing from a coal-red burn to a combined-cycle gas turbine or CCGT system, then the logical cost of a tonne of carbon credits would be around EUR 70.0. A glut of credit supply in Europe could have a serious impact on the price of CDM credits. With CDM credit supply on the increase from CDM projects around the world, the demand/supply balance is likely to have a major impact on future prices. If one were to price the cost purely on a supply/demand basis, it is possible that the price of a tonne of carbon would be as low as EUR 5.0. If this were the case within the EU-ETS, the knock-on effect on the price of a CDM credit would be considerable. Another problem is that there is currently no successor in place for the Kyoto agreement, which means that nancing can only be factored in until 2012. It is quite possible that nancial instruments other than the CDM will be used for nancing climate technology transfer. Given the inherent volatility in a nascent market where the market mechanisms are not yet clear, the CDM opportunity has not been factored in as a major driver for sustainable high growth in renewable energy in emerging markets. At best it can currently be considered as a providing of minor additive or supplementary nance.
Carbon Trading in the EU

The European Union Emissions Trading Scheme (EU ETS) establishes emission reduction requirements for approximately 11,000 large industrial and electricity generating sources accounting for nearly half of Europes emissions of carbon dioxide (CO2). Phase 1 of the EU ETS started in January 2005 and runs through 2007. Phase 2 corresponds to the 2008-2012 rst commitment period of the KP. European Union allowances are EU ETS compliance instruments which are allocated by EU governments to regulated installations. They can be purchased by entities with short positions to comply with their reduction targets. The market for EUAs experienced explosive growth in 2005, increasing from approximately 9m tonnes in 2004 to over 322m tonnes in 2005a nearly 35-fold increase. Prices also increased dramatically during 2005, moving from EUR 7.0 (USD 9.0) to a high of approximately EUR 30.0 (USD 37.0). This increase was driven by factors such as: rising natural gas prices which increased the need for coal-red generation, the relative absence in the market of some sellers from Eastern Europe due to delays in bringing their emissions registries on line, delays in creating project-based supply, and other regulatory delays. In 2005, the value of EUA trades in 2005 totaled USD 8.2bn. The EU market saw continued expansion in the rst quarter of 2006, with approximately 203m tonnes traded at a value of approximately USD 6.6bn. It should be noted that China created 66% of the project-based reductions traded. Asia created 73% of the project-based reductions that were traded during 2005 and Q1 2006. China alone created 66%, up from only 5% in 2004. Indias share decreased from 43% in 2004 to only 3% in 2005 and Q1 2006. Latin America accounted for 17% of traded volumes, down from 25% in 2004. Projects located in Brazil created 10% of traded volumessecond after China.
3. global investment activity in renewable energy

Public Sector Finance
Emerging economies are still a relatively nascent market for renewable energy development, especially in comparison with the developed world. Initially one of the drivers of development of renewable energy in emerging markets was multilateral, bilateral and other public nancing, which was around USD 500m at the end of 2004. The commitment of the multilateral agencies to a project was often required to bring in private investment, as these agencies frequently have more clout when in negotiation with governments whose utilities are, for example, in default on PPAs. A signicant portion of public funding is used to support training, policy development, market facilitation, technical assistance, and other non-investment needs. The three largest sources of funds were the German Development Finance Group (KfW), the World Bank Group and the Global Environment Facility. However, in many ways its most important role is to provide added reassurance for the private investor until an industry or market becomes fully commercial. KfW approved about USD 180m for renewables in 2004, including USD 100m from public budgetary funds and USD 80m from market funds. The World Bank Group committed an average of USD 110m per year to new renewables between 2002 and 2004, while the Global Environment Facility allocated an average of USD 100m per year during the same period, to co-nance renewable energy projects implemented by the World Bank, United National Development Program (UNDP), United Nations Environment Program (UNEP) as well as other agencies. Indirect or associated private-sector nancing is often equal to or several times greater than the public nance from these agencies, as many projects are beginning to be explicitly designed to attract private investment. In addition, there has been recipient country government co-nancing.
Private Sector Finance

As the markets have developed, there has been increasing interest from the international nancial markets. With investment in the global renewable energy industry continuing to accelerate, it is logical that savvy investors would begin to look for new markets to address. In the developing world there are considerable drivers for market development, as well as specic policies and scal support in a number of countries, and private nance is expected to accelerate. Renewable energy is still supported by subsidy and policy in the developed world and by analyzing historical and current market response to the scal and policy environment, one can identify trends which might be replicated in the emerging markets.
Figure 4: Global Project Investment (Asset Financing) Activity in Renewable Energy in 2005
USD 18,220m (302) ASOC USD 5,970m (82) AMER Other Canada United States USD 9,890m (167) France Italy EMEA Others Netherlands Portugal Germany United Kingdom Spain USD 2,438m (55) ASOC Other Australia
AMER
AMER
2005
EMEA 2005
AMER 2005
ASOC 2005
Note: Brazil = USD 256m (3); Mexico USD = 127.8m (2); Japan = USD 125.8m (3); India = USD 193m (12) Numbers in brackets = (No. of deals)
The nancial community has advanced enthusiastically to exploit the opportunities presented by the buildout of renewable energy generation plants and biofuel production capacity. USD 18.3bn of new build and renancing transactions were completed in 2005 (see Figure 4). The majority (71.4%) was for development in the most established technology, wind. Biofuels, biomass and waste-to-energy nancing trailed at 18.7% while geothermal and mini-hydro and marine and solar accounted for just 5.1% and 4.8% respectively. There has been no sign of a decrease in the number of deals in 2006, although a number of very large deals in 2005 may cause a dip in total volume for full year 2006. However, an estimated USD 2bn in nancing was closed in Q1 2006. Project (asset) nance by commercial banks continues to be a popular method of both nancing construction and renancing existing projects, as it offers opportunities not only for leveraged investments by utilities and developers, but also the investment of new money by private equity investors. These sponsored an estimated USD 2.7bn across sectors in 2005 (compared to USD 7.7bn by utilities and USD 4.6bn by project developers in the same period). In 2005, developed countries, particularly the U.S. (USD 5.3bn), Spain (USD 4.0bn), and Germany (USD 1.1bn) saw the most activity, but there has been rapid growth in the Chinese wind market with an estimated USD 743m invested in 2005. This activity, sponsored by the major Chinese utilities and energy investment companies, has resulted in a build out of manufacturing capacity in the region by turbine manufacturers seeking to overcome local sourcing regulations. Elsewhere uncertainty of the PTC extensions in the U.S. and erce competition between turbine suppliers have meant that securing turbines has become an issue for even the largest
companies seeking rapid build out of their pipeline developments. However, consolidation in the manufacturing industry and continued regulatory support in key markets looks set to stabilize turbine production and facilitate rapid build out. Attention has increasingly been paid to securing development sitessuper developers with strong nancial backing have emerged and substantial portfolios have been traded and acquired. Similar depth is developing in the biofuels markets with production build out accelerating in response to high oil prices and government mandated fuel mix requirements. The price of commodities such as oil, sugar, soy beans, grain and maize will be an important factor for the sustained development of future capacity. Developing and transition countries are better positioned to take advantage of this than they are of wind where demands on transmission infrastructure are a determining factor. As such investments have been seen not only in the North America and Europe but also South America, South Africa, India, Malaysia and Indonesia amongst others. Asset nancing in the renewables sector has not been conned to investments in large scale plant and infrastructure. Captive or on-site generation for industrial purposes in developing countries has seen increased activity building on and increasing the efciency of existing models. For example in the paper and sugar industries the sources of fuel are by-products of the industrial processes, and intensive industries such as mining, cement and steel manufacturing. Countries such as India, Morocco and Peru have seen or are likely to see signicant developments in both captive wind and biomass electricity generation assets. Models pioneered in developing or transition countries are also being transferred to developed countries suffering from high energy prices, such as the UK. See country summaries (starting on page xx) for a list of selected asset nancings by emerging market. Figure 5: Global Venture Capture / Private Equity Investment in Clean Energy Companies 2001 to 2005
Asia/Oceana Europe/ME/Africa North America
2001
2002
2003
2004
2005
Numbers in brackets = (Total no. of deals)
Renewable energy equity investment continued to increase in 2005 from previous years. In 2005, the fourth quarter showed an especially high amount of investment (USD 848m), mainly due to a few large deals in power infrastructure asset or generating companies (see Figure 5). In terms of technology deals, we did not see real growth from the beginning of 2005, with quarterly investments staying within a range of USD 200300m. The number of deals also remained quite stable at around 30 deals per quarter. Private equity investments in capacity generation are mainly going into the wind, biomass and biofuels sectors, in a relatively small number of high value deals. Investments in technology companies are more numerous but remain on a smaller scale. The fuel cell and solar markets are continuing to dominate technology venture capital investment but, while these sectors remain important, investors are also gaining more interest in opportunities in Generation Efciency and Energy Storage technology. Traditionally, the U.S., and North America as a whole, has attracted a very large part of venture capital investment, followed by the UK. Within continental Europe, Germany has received the largest amount of investment. In terms of investment stage, in 2005, investment tended towards later stage deals (Series C, D) and reduced investment into early rounds (Series A, B). While the number of deals in emerging markets remained relatively small in comparison to the rest of the world, recent months have seen private equity investments in Indian, Chinese and Taiwanese companies in the solar, biofuels and wind sectors. With increasing valuations in developed markets, private equity investment in emerging markets may provide affordable access to the renewable energy markets to new investors in the sector.
Table 5: Selected Venture Capital and Private Equity Deals in 2005

Organisation Country Type of deal USD (m) Sector Investor Tersus Energy (formerly MCC Energy) Plc Status Completed Zhong Hang (Baoding) China Convertible 2 Wind Huiteng Windpower Equipment Co Ltd (HT Blade) Beijing PowerU Technology China Peak Pacic Investment China Company Ltd. Series A / First 2 institutional round Asset/capacity 5 investment
Generation Tsinghua Venture Capital Completed Efciency Management Co Ltd Generation Emerging Power Efciency Partners Ltd Shanghai Jiao Tong University Tianjin Jinneng Investment Company Completed Completed Completed
Shanghai JTU PV China See d / angel N/A Solar Technology Co Ltd Tianjin Jinneng Solar China Seed / angel N/A Solar Cell Co Ltd Shriram EPC Ltd (SEPC) India Su-Kam Power Systems Ltd. India TurboTech Precision India Engineering Private Limited Asset/capacity investment 23 Wind
Bessemer Venture Partners Completed Reliance Capital Asset Management Limited Completed Completed
Asset/capacity 10 Solar investment Other equity 0.6 investment
Generation International Finance Efciency Corporation (IFC)
Organisation
Country
Type of deal
USD (m)
Sector
Investor Industries Development Bank of India
Status Announced/ led Announced/ led
Naturol Bioenergy Ltd India Naturol Bioenergy Ltd India Suzlon Energy Ltd India Suzlon Energy Ltd India Reva Electric Car Co India
Debt/venture 18.5 Biofuels leasing
Series A / First 12.5 Biofuels APIDC Venture Capital institutional round Series B / Second 21.3 Wind institutional round Series A / First 21.3 Wind institutional round Other equity investment 15.3 Fuel Cells
ChrysCapital Investment Completed Advisors Citigroup Venture Capital Completed International (CVCI) AEV LLC Completed
Praterm Polish Heating Poland Asset/capacity 6.9 Generation Environmental Investment Completed Group investment Efciency Partners (EIP)/AIB WBK Fund Thai Biogas Energy Thailand Company Ltd. (TBEC) Other equity investment 4 Biofuels Emerging Power Partners Ltd Completed
Figure 6: Global M&A Activity in Renewable Energy 2001 - 2005
Projects Technology/Service Supplier Capacity/Infrast. Companies
$15,081m (72/168)
$7,254m (43/87) $5,929m (37/70) $3782m (15/29) $2,598m (15/24)
2001
2002
2003
2004
2005
Numbers in brackets = (Total no. of disclosed deals/Total no. of deals)
After hitting a record volume in deal value in Q4 2005 at USD 4.3bn (see Figure 6), corporate M&A activity in renewable energy experienced a record number of deals in Q1 2006, with equity in 44 renewable energy companies swapping hands. At the same time however, deal value almost halved against the previous quarter. In Q4 2005, four deals amounted to over USD 2.6bn, whereas in Q1 2006, only one acquisition (when Germany solar cell manufacturer ErSol bought U.S.-based waste silicon processor Silicon Recycling Services) was disclosed above USD 100m. The amount of Shell Solars divestment from its North American silicon operations has not yet been disclosed (it has agreed to sell the business to German PV manufacturer Solar World). Wind power companies deals have led the trend in the past few years, with 37% of the deals which took place in the renewable energy sector, but the solar and biofuels sectors seem to have taken over in the last three months, with, respectively 34% and 27% of activity. Over the past four quarters, institutional investors, large utilities and power producers have preferred acquisitions in the wind sector, but major food and the oil companies have acquired signicant stakes in the biofuels sector, and some smaller optical companies found interesting synergies in the solar sector. Most importantly, those three sectors showed an intense activity of vertical and horizontal integration, with 16 acquisitions between companies within the wind sector, 15 within the biofuels sector, and especially 28 within the solar sector during the last 4 quarters. Financial investors have gained a substantial return of USD 6.8bn, while strategic divestments generated 3.7bn, and individual founders sold stakes worth USD 2.1bn. The strength of activity in the M&A arena suggests a market where consolidation, market access and assured feedstock supply are the main drivers. Given activity in the last few months, it will prove interesting to watch how these trends are played out in emerging markets over the next three years. In the last two months French utility Velcan bought its way into the Indian market with the acquisition of Satya Maharshi Power Corporation, and in China Deli Solar USD is set to buy Beijing Four Seasons Solar while GE Energy bought a major stake in Xin Hua Control Engineering.
Table 6: Selected Renewable Energy Mergers and Acquisitions in Emerging Markets

Organisation Country Type of deal USD (m) Sector Acquirer Status Announced/ led Announced/ led Completed Announced/ led Completed ELO Sistemas e Tecnologia Brazil Service Company N/A Ltda Generation Itron Inc Efciency
Grupo Corona Brazil Capacity/Infrast. Companies N/A Biofuels Cosan SeaWest do Brasil Ltda Brazil Capacity/Infrast. Companies N/A Wind EcoInvest Deli Solar (USA) Inc GE Energy Beijing Four Seasons Solar China Capacity/Infrast. Companies N/A Solar Power Technology Co Ltd Xin Hua Control China Technology Supplier N/A Engineering Co., Ltd. Beijing Full Three China Capacity/Infrast. Companies N/A Dimension Power Engineering Co Ltd (FTD) Able New Energy Co Ltd China Capacity/Infrast. Companies N/A Generation Efciency Generation Efciency Electricity Storage
China Shoto Plc Completed
Ultralife Batteries Inc Distributed Power Inc Engelhard Corporation ND ZAP GE Energy
Completed In active planning Completed Completed Completed Completed
Hydroelectric company China Capacity/Infrast. Companies N/A Mini-hydro in BaoDing, Hebei, China Nanjing Chemical Industry China Technology Supplier N/A Biofuels Corporation (NCIC) China Xinjiang Sunoasis Co Ltd China Financial Investment N/A Solar Electricity Storage Mini-hydro
Zibo Enterprises Co Ltd China Technology Supplier N/A GE Hydro Asia Co Ltd (formerly Kvaerner Power Equipment Co., Ltd (Kvaerner Hangfa)) China Capacity/Infrast. Companies N/A
Shanghai Solar Energy China Technology Supplier N/A Solar S&T Co Ltd (SEC) Satya Maharshi Power India Capacity/Infrast. Companies N/A Biomass & Waste
Shanghai Completed Aerospace Automobile Electromechanical Co Ltd (SAAE) Velcan Energy Completed India Ltd Siemens PG Completed Wind Power Division (formerly Bonus Energy A/S) Southern Windfarms Pvt Ltd Announced/ led
LM Glasber India Capacity Asset N/A Wind NEPC India Ltd India Capacity/Infrast. Companies N/A Wind Delta PV Pvt Ltd India Capacity/Infrast. Companies N/A Solar
Webel SL Energy Postponed/ Systems Ltd cancelled Announced/ led
MVV Eternegy Polska Sp zoo Poland Capacity/Infrast. Companies N/A Wind Iberdrola SA
Figure 7: Global Renewable Energy IPOs and Secondary Offerings 2001-2005
$4,933m (61/92/20)
Asia/Oceana Europe/ME/Africa North America and Latin America
$268m (4/1/2) 2001

$268m (3/4/3) 2002
$877m (4/20/6)
$980m (14/40/5)
2003
2004
2005
Numbers in brackets = (Total no. of IPOs/Total no. of Secondary Offerings/Total no. of Convertibles & Other)
Total investment into the 10 main renewable energy sectors (solar, wind, power storage, nancial services, biofuels, generation efciency, fuel cells, geothermal, hydrogen, biomass and waste) on the worlds senior public markets in 2005 was USD 4.7bn, with Solar taking the lead (USD 2.0bn), followed by Wind (USD 1.1bn) and Power Storage (USD 0.5bn) (see Figure 7). European stock markets performed far more strongly than the North American markets, with USD 2.7bn raised in Europe, against USD 1.6bn raised in North America. While the number of deals completed was the same, market appetite for renewable energy equity has remained higher in Europe. While the number of deals completed in the Asia Pacic region remained far lower, one of the reasons for this is the increasing number of companies who are looking to access the international capital markets in Europe and the U.S. While the IPO of Indias wind turbine giant Suzlon Energy (now the fth largest wind turbine manufacturer in the world) took place on the New Delhi Stock Exchange in October 2005, when it raised nearly USD 310m, Chinas largest solar IPO, that of solar PV cell and module manufacturer, took place on the New York Stock Exchange, raising USD 396m. On the junior markets, the North American over the counter markets remained more active than those in Europe (with placements valued at USD 177m against USD 159m). And perhaps most worthy of note solar, the sector which has been driving so much public markets activity in renewable energy, was over taken by biofuels (raising USD 120m OTC in 2005), closely followed by Power Storage (USD 72m) and Wind (USD 64m).
Since beginning of 2006, approximately USD 3.4bn has been invested into renewable energy through the main markets so faralmost 71.6% of the total investment in the industry through the whole year 2005. Investment in solar in Q1 2006 was nearly USD 2bn, almost reaching the amount of money raised for the whole of 2005, thanks to Renewable Energy Corporations successful USD 1.1bn IPO on Oslo Stock Exchange on 9th May. With the increasing pressure on the silicon supply affecting the global solar market, and the seemingly ever increasing need for wind turbines, it seems likely that a growing number of emerging markets manufacturers and suppliers will be looking to access the international capital markets over the coming months.
Table 7: Selected Emerging Markets Clean Energy IPOs and Secondary Placements
Organisation Cosan Country Brazil Type of deal IPO USD (m) Sector 390 Biofuels Market So Paulo (BOVESPA) Status Completed
Tianwei Yingli New Energy China IPO N/A Solar Resources Co Ltd China Energy Savings China Technology Inc Private 50 Investment in Public Equity (PIPE)
New York Stock Exchange Announced/ (NYSE) led In active planning
Energy Efciency NASDAQ & Demand Reduction
Suntech Power Holdings China IPO 455.1 Solar Co Ltd China Shoto Plc China IPO 10.4 China Southern Power Grid China IPO 2480 Corporation Ltd China BAK Battery Inc China (formerly Medina Coffee Inc) OTC Secondary/ 43 PIPE
New York Stock Exchange Completed (NYSE) Completed In active planning Completed
Electricity Storage AIM (London) Generation Efciency Electricity Storage OTC Bulletin Board
Shanghai Electric Group China IPO 648.1 Solar Co Ltd China Energy Savings China Technology Inc China BAK Battery Inc China (formerly Medina Coffee Inc) Share N/A registration Reverse IPO 17 Generation Efciency
Hong Kong Stock Exchange Completed (HKEX) NASDAQ Completed Completed
Electricity Storage OTC Bulletin Board Generation Efciency Mini-hydro
Weichai Power Co Ltd China IPO 155 China Yangtze Power Co Ltd (CYPC) Changsha Lyrun New Material Co Ltd China China IPO IPO 1200 23.9
Hong Kong Stock Exchange Completed (HKEX) Shanghai Stock Exchange Completed
Electricity Storage Shanghai Stock Exchange Completed Services & Support Shanghai Stock Exchange Completed
CITIC Securities Co Ltd China IPO 435
BYD Company Ltd China IPO 43 Electricity Storage Hong Kong Stock Exchange Completed (HKEX)
Organisation Huaneng Power International Inc Jiangxi Lianchuang Optoelectronic Science and Technology Co Ltd Baoding Tianwei Baobian Electric Co Ltd
Country China China
Type of deal IPO IPO
USD (m) Sector 336.6 48.3 Wind Solar
Market
Status
Shanghai Stock Exchange Completed Shanghai Stock Exchange Completed
China
IPO Secondary IPO
66 28.4 20.8
Solar
Shanghai Stock Exchange Completed
Wuhan East Lake High-tech China Group Co Ltd Wuhan East Lake High-tech China Group Co Ltd
Biomass & Waste Shanghai Stock Exchange Completed Biomass & Waste Shanghai Stock Exchange Completed Generation Efciency Shanghai Stock Exchange Completed Bombay/Mumbai Stock Exchange (BSE) Announced/ led
Tebian Electric Apparatus China IPO 17.9 Stock Co Ltd (TBEA)
PRAJ Industries Ltd India Convertible 26 Biofuels Suzlon Energy Ltd India IPO 339.9 Wind Suzlon Energy Ltd India IPO 339.9 Wind Southern Online Bio India IPO 3.9 Biofuels Technologies Ltd (SBT) SREI Infrastructure Finance Ltd India IPO 35 Wind Solartron Co Ltd Thailand Secondary 3 Solar Solartron Co Ltd Thailand IPO 16.2 Solar
National Stock Exchange Completed of India (NSE) Bombay/Mumbai Stock Exchange (BSE) Bombay/Mumbai Stock Exchange (BSE) London (LSE) Stock Exchange of Thailand Stock Exchange of Thailand Completed Completed Completed In active planning Completed
Investment Trends in the Renewable Energy Sector

Recent international investment trends in the energy sector have included a broadly increased focus on the renewable energy markets, driven by the combination of the current cost of oil, fears around energy security, concerns about the potential dangers of energy related environmental damage and the need to ensure sustainable growth. Increasing concerns about environmental dangers have led to the development of international, regional and national public nancing commitments to renewable energy development (ranging from grant programs, subsidies, tax breaks etc). These programs have supported the early stage development of renewable energy infrastructure, specically to encourage development of a renewable energy marketplace.
Almost all the major energy companies now have some activity in the renewable energy markets: in 2005 BP pledged USD 8.0bn for investment in renewable energy over the next decade, while Royal Dutch Shell has one of its ve core businesses focused on renewable energy (Shell Renewables). And the impetus has moved far beyond the oil companies. General Electric said in 2005 that it would more than double its investment in energy efcient and environmental technology from USD 700m to USD 1.5bn by 2010. There has been an increasing focus on power generation assets, as access to long-term revenue via PPAs for renewable energy projects buoyed by scal support projects has increased. This has led to increasing interest from private equity investors in the project nance market. Technology investment is accelerating in venture capital as well as internal R&D, while the public markets have seen massive growth in the last eighteen months. Renewable energy companies around the world have gone from strength to strength since the window for fundraisings opened in the last few months of 2004. A total of USD 4.7bn was raised on main markets around the world in the rst few months of 200611, by pure-play renewable energy companies. With buoyant markets supporting ever larger offerings, there should be strong opportunities for venture capital and private equity investors to realize gains. A handful of substantial follow-on offerings by solar companies meant the sector still outshone all others, despite the relatively small number of IPOs that has characterized the last 12 months. The IPO pipeline shows a number of biofuels and solar companies looking to take advantage of the positive mood of the international capital markets, as well as continuing secondary placement activity in the wind markets. There is no question that the last few years have shown an acceleration of interest in the return on renewable energy investment, and trends suggest that emerging markets are set to follow strongly. New Energy Finance has identied two main investment opportunities in the renewable energy markets, with varying degrees of risk and attractiveness from country to country. The main investment opportunities identied are in: Supply side equity (private and public market) Supply side asset development The supply side equity opportunity in each market can fall into investment opportunities by sector in public or private companies: developing technology; providing operations and maintenance (O&M) services; equipment manufacturing and other service suppliers. The supply side asset development in each market also has a number of different opportunities: co-investment in projects alongside local partners (i.e. equity sponsor of a local developers projects); acquisition of projects out-right from local developers; own development of projects (i.e. no local partner required); equity investment to take minority stake in local developers; the acquisition of majority or 100% ownership of local developers.
________________ 11 New Energy Finance Desktop
While there are signicant opportunities in certain markets for investment in technology, equipment manufacture, and services, these carry a higher degree of risk than investment in asset development. Each emerging market has a different view of non-domestic investment in companies involved in renewable energy (from China, where renewable energy investment is encouraged to Mexico, where foreign investment in any part of the energy industry is forbidden). Another problem is that return on private equity investment is dependent on the individual markets nancial environment, and the ability of the investor to nd the right exit. There is no doubt that in markets supporting the development of renewable energy, there are opportunities for high return investments in private equity in technology and equipment manufacturing and services, but the identication of the best opportunities will be fraught with difculties. However, asset investment in renewable energy in the right markets (those with signicant renewable energy development targets and legislation supporting that development) will be supported legislatively and nancial by that government, suggesting that investment in renewable energy generation asset development will actually be protected by those local Governments.
4. renewable energy opportunity in selected emerging markets

New Energy Finance has reviewed the renewable energy investment opportunities in selected emerging markets, to identify those sectors and countries which offer the strongest potential for sustainable high growth. In order to identify countries likely to demonstrate the political will to drive renewable energy generation development, New Energy Finance has: Identied the different forms of renewable energy policies and support in the countries (see Supporting Data Table 17); Rated the countries in terms of their attractiveness in renewable energy development (by economic, energy and business environment) (see Supporting Data Table 18); Developed consensus forecasts on the basis of government targets and the likelihood of achieving those targets (see Supporting Data Table 19 to Table 22). The overall country attractiveness for renewable energy capital investment is based on the combination on Overall Sector Forecast, On-going Government Support, and Foreign Direct Investment Climate (see Table 7). The estimated capital investment to 2020 is also indicated. This research has identied the countries with the strongest potential to sustain high-growth return on investment in the short to medium term, as well as those sectors where this is most likely to be achieved (see Supporting Data Table 21.).
Table 8: Country Attractiveness for Renewable Energy Capital Investment

Country Brazil China India Mexico Poland Thailand Turkey
1 2 3
Overall Sector Forecast (How big) >20% CAGR 10-20% <10%
Government Support (How feasible) V Likely Likely Unlikely

1
FD Investment Climate (How sustainable) V Sustainable Sustainable Unsustainable
Estimated Capital Investment to 2020 (USD billion)
27.9 179.1 25.6 8.12 6.4 6.23 6.4
Support will change if Laws are implemented Forecast to 2013 Forecast to 2011
Consensus forecasts for each sector within each Country provide an overview of the forecast renewable energy generation capacity required by 2020 (see Table 8). Table 9: Forecast Renewable Energy Generation Capacity by Leading Sectors (2020)
Country Brazil
1
Wind (GW) 2.4 30.0 8.9
Solar (GW) 0 2.0 0.1
Mini-hydro (GW) 5.7 50.0 6.2
Biomass (GW) 6.4 20.0 1.2
Total (GW) 14.5 102.0 16.4
Biofuels (m litres) 24.0 n/a n/a 10% bioethanol mixed with petrol 5.75% biofuels mixed with petrol 3.2 n/a
China
2
India3
Mexico4 0.98 0.32 0.98 0.43 4.1 Poland5 1.3 n/a n/a 4.0 5.3 Thailand6 Turkey7
1 2 3 4 5 6 7
Nil 3.8
Neglig. 0.13
0.35 n/a
3.1 n/a
3.45 4.93
Projected GDP Based Growth in 2020 n/a = not available Government Targets in 2020 Government Targets in 2007 projected forward to 2020 Government forecast for 2013. Includes geothermal = 1.4 GW Government Estimate in 2010 Forecasts for 2011. Biomass includes Biogas (source Danish Energy Management A/S, 2005) Includes geothermal = 1.0 GW
Table 10: Sector Attractiveness within Each Developing Country

Country Sector Estimated Capital Overall Sector On-going Government FD Investment Investment to 2020 Forecast (How big?) Support (How feasible?) Climate (How sustainable?) (USDbn) >20% CAGR V Likely V Sustainable 10-20% Likely Sustainable <10% Unlikely Unsustainable Brazil Brazil Brazil Brazil China China China China India India Bioethanol Wind Biomass Mini-hydro Wind Solar PV Mini-hydro (< 100MW) Wind Mini-hydro (< 25MW) 10.8 1.8 3.2 7.6 13.7 6.6 11.9 36.4 62.4 4.8 8.2 97.9 168.1
1 1
Biomass & Waste 40.0 68.7 10.8 12.1
Country Sector Estimated Capital Overall Sector On-going Government FD Investment Investment to 2020 Forecast (How big?) Support (How feasible?) Climate (How sustainable?) (USDbn) >20% CAGR V Likely V Sustainable 10-20% Likely Sustainable <10% Unlikely Unsustainable India Mexico Mexico Mexico Mexico Mexico Poland Poland Poland Thailand Thailand Thailand Turkey Turkey
1 2 3
Biomass & Waste 2.5 (including Biogas) Wind Mini-hydro (< 10MW) Biomass Solar Geothermal Wind CHP/biomass Biofuel Biomass Mini-hydro Biofuel Geothermal Wind 1.92 1.9
2
n/a n/a n/a
1 1
0.92 0.8
2 2
1 1 1
2.6 1.6 4.8 n/a 5.7

3
0.53 n/a 1.8 4.6
Support will change if Laws are implemented Forecast to 2013 Forecast to 2011
Brazil
There are private equity / venture capital opportunities in manufacturing and support services in bioethanol and wind, while asset investment opportunities exist in bioethanol, wind and biomass: Bioethanol There are supply side asset development opportunities including: Co-investment in projects alongside local partners (equity sponsor of local developer projects); Equity investment to take minority stake in local developers; Acquisition of projects out-right from local developers. There may also be supply side equity opportunities in feedstock development and transportation/distribution. Wind There are supply side equity opportunities in equipment manufacturing and O&M. There are also supply side asset development opportunities including: Co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); Acquisition of projects out-right from local developers; Equity investment to take minority stake in local developers. Biomass There are supply side asset development opportunities including: Co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); Acquisition of projects outright from local developers; Equity investment to take minority stake in local developers; Acquisition of majority or 100% ownership of local developers.
Brazil boasts Latin Americas largest population and its largest economy. It also has its largest energy bill. Fortunate, then, that it is also the worlds largest renewable energy market, in percentage terms about 44% of total energy production comes from renewables. The rapid economic growth that the country enjoyed in the late 1960s and early 1970s was brought to an end by the oil shocks of 1973 and 1979, which forced up the countrys import bill and made its external debt unsustainable. Much of the last 25 years has seen Brazil stagger through a depressing cycle of balance of payments crisis, as the country struggled to pay off its loans. Recent years have been far more positive. Astute macro-economic management saw Brazil pay off its loans to the International Monetary Fund (IMF) at the end of 2005; economic growth has been robust, and unemployment, while still signicant, appears to be under control. Alongside investment in domestic fuel production, a massive program substituting biofuels for petrol and diesel has played a crucial in helping Brazil become oil independent in April 2006, even while aggregate energy consumption has continued to grow and at a brisk pace. While state-controlled Petrobras still dominates the upstream hydrocarbon market, power generation and distribution have been substantially deregulated over the last ten years. Independent power providers (IPPs) are now commonplace and electricity is supplied to distributors through a wholesale market system. Underlying the reform program has been a political understanding that securing the countrys energy supply is crucial to its economic development. The need to reduce energy dependence, stabilize and modernize power infrastructure, and sustain economic growth have been crucial factors in the decision of successive governments to support the development of renewable energy. Recent disagreements with Bolivia, following the nationalization of that countrys natural gas industry (including local operations of Brazilian state energy company Petrobras) and the announcement of plans to raise the prices Argentina and Brazil pay for Bolivian gas are only likely to reinforce the trend. Current Bolivian gas imports account for 8.9% of Brazils energy mix. Nevertheless, private investment in renewable energy remains small. The sector is considered high-risk and, as a result, much of the sectors growth over the last 30 years has been the result of solid government policies favoring the development of renewable energy sources (such as the PROFINA program; the PRODEEM and Luz para Todos grant programs; the Pro-Biodiesel and Pro-Alcohol programs). The government has primarily targeted onshore wind power, bioenergy and hydropower. It therefore seems likely that these sectors have the strongest development potential in Brazil, providing opportunities for investment in project developers, manufacturers and service providers. Long term power purchase agreements have been agreed under the Prona program. With such a strong emphasis on oil independence, ethanol is the most dynamic sector in Brazils renewable energy market. Currently more than 75% of Brazils new car sales are ex-fuel vehicles that is, they can run on any mixture of petrol and ethanol and the price of ethanol has been lower at the pump than gasoline for some time. Investors in other countries feeling the squeeze of high oil prices particularly in North America have been looking to the Brazilian ethanol market as a guide. Cosan, one of Brazils largest sugar cane producers (and now one of Brazils largest ethanol producers, generating 20% of its 2004 revenues from ethanol for fuel) went public in November 2005, raising USD 390m.
Table 11: Selected Renewable Energy Projects Under Development in Brazil

Project Financed Usina Bom Retiro Rio do Fogo Wind Farm Country USD (m) Sector 20 57.7 90.9 Initial Initial Brazil Brazil Type of Financing Type of Security Sponsor Balance sheet Project Finance Biofuels Biofuels Wind Petrobras Cosan Enerbrasil Grupo Bertin Brasil Ecodiesel Status Completed Completed Completed Announced Completed Candeias Biodiesel Plant Brazil
Acquisition Balance sheet
Lins Bertin Bovine Tallow Brazil 18.2 Initial ND Biofuels Biodiesel Plant Floriano Biodiesel Plant Brazil 26 Initial Balance sheet Biofuels Osorio Wind Project Brazil 230 Initial Project Finance Wind Paraiso Sugar Cane Plant Brazil Agropalma Biodiesel Plant Brazil N/A N/A Initial Initial Balance sheet Balance sheet Biofuels
Enern Enervento/ Completed Wobben Windpower Announced Completed Completed Agropalma Soyminas Biodiesel
Biomass & Waste ND
Soyminas Cassia Brazil N/A Initial Balance sheet Biofuels Biodiesel Plant
Santa Candida Bagasse Brazil N/A Initial Balance sheet Biomass & Waste Santa Candida/ Completed Cogeneration Project Econergy International Corp Companhia de Forca Brazil 103 Acquisition Balance sheet Mini-hydro e Luz Cataguazes Leopoldina (CFLCL) Brookeld Asset Completed Management (formerly Brascan Corporation) Completed
NovaGerar Landll Gas Brazil N/A Initial Balance sheet Biomass & Waste SA Paulista/ to Energy Project Econergy Brasil Ltda Millenium Wind Farm Brazil N/A Initial Lease/Vendor Financing Wind ND
Completed Completed Completed
Cruz Alta Bagasse Brazil N/A Initial Balance sheet Biomass & Waste Econergy Cogeneration Project Brasil Ltda Alta Mogiana Bagasse Brazil N/A Initial Balance sheet Biomass & Waste Econergy Cogeneration Project Brasil Ltda (AMBCP) Barralcool Bagasse Brazil N/A Initial Balance sheet Biomass & Waste Usina Cogeneration Project Barralcool SA Pesqueiro Energia Small Brazil N/A Initial Balance sheet Mini-hydro Hydroelectric Project (PESHP) Pesqueiro Energia SA
Completed Completed
Usina Itamarati Biomass Brazil N/A Initial Balance sheet Biomass & Waste Usina Itamarati SA Completed Plant Noroeste Bioenergia - Brazil 105.8 Initial Project Finance Biofuels ND Rio Grande do Sul In Active Planning
China
There are private equity / venture capital opportunities, as well as potential public market opportunities, in manufacturing and support services in solar and wind. There are also signicant technology opportunities in energy efciency and clean coal. Asset investment opportunities are strongest in wind and mini-hydro. Wind There are supply side equity opportunities in equipment manufacturing; operations and maintenance and construction. There are supply side asset development opportunities including: Equity investment to take minority stakes in local developers; Co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects) Solar There are supply side equity opportunities in feedstock manufacturing in the PV market; equipment manufacturing in the solar thermal market; operations & maintenance and construction. There will be supply side asset development opportunities as the Chinese solar market is expanded to power generation. Energy Efciency There are supply side equity opportunities in technology development, equipment manufacturing and construction. There will be supply side asset development opportunities as legislation demanding all construction increase energy efciency is implemented. Mini-hydro There are supply side asset development opportunities including: Co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); Equity investment to take minority stake in local developers Massive economic growth has increased energy demand in China exponentially; realizing the damage that traditional coal-red power plants are doing to the environment, the government has set its sights on developing renewable energy sources. Unsurprisingly, China leads the emerging markets both for its rate of growth in renewable energy, and for the likelihood of meeting its goals. Energy consumption is expected to continue growing rapidly: demand is set to double or even triple by 2020. While building coal-red plants is allowing the government to meet demand growth in the short term, in the longer term they only exacerbate the countrys environmental problems. Hence the governments efforts to develop renewable energy, which it hopes will provide 15% of total power production, or about 350GW, by 2020. If those targets are to be met, the country will require over USD 270bn of investment. The international community is supporting Chinas renewable energy plans. In February 2006, the World Bank approved a loan to fund pilot renewable energy projects in China. The loan, which came as a follow up project to Phase 1 of the China Renewable Energy Scale-Up Program (CRESP), is intended to fund the development of a large wind farm in the Inner Mongolia Autonomous Region, and rehabilitate and develop selected small hydropower projects in Zhejiang Province. The CRESP program is intended to pilot renewable energy for the Chinese market so that private energy suppliers can provide renewable energy to the grid on a commercially viable basis. Previous pilots for renewable energy sources like wind power, solar power, and biomass have previously been small-scale projects, not connected to the national grid. The hope is to increase the commercial, large-scale use of renewable energy sources like wind, small hydropower, and solar energy so that they can make a more substantial contribution to meeting fast-rising electricity demand.
There have been reported problems in resolving nancing agreements with a number of projects under development. The wind market recently received a set-back, when it was announced that wind prices under Chinas new Renewable Energy Promotion Law would be set by public tender, not relative to power prices, as had been previously announced. The public tender process was how some of the earliest wind projects were developed in China, and many of those have agreed to supply power at too low a price. However Government targets, policies and scal support mechanisms are such that it seems strongly likely that renewable energy project developers will be able to sell their power at a reasonable rate. A large proportion of the renewable energy investment opportunity in China lies with private equity investment in manufacturers and service suppliers for the solar (silicon providers, solar cell manufacturers and installers), wind (turbine and turbine blade manufacturers, as well as an O&M opportunity), while the energy efciency requirements implemented under Chinese law suggest a strong opportunity for technology and construction companies.
Table 12: Selected Renewable Energy Projects Under Development in China

Project Financed Country USD (m) Sector Type of Financing Type of Security Sponsor Yunnan Zhongda Yanjin Power Generation Co. Ltd. Status Announced White Water River China 85.2 Initial Balance sheet Mini-hydro Mini-hydro Financing Mundanjiang and Muling China N/A Initial Balance sheet Wind Wind Farms Yumen Diwopu China N/A Initial Balance sheet Wind Chifeng Wind Farm China N/A Initial Balance sheet Wind
Hong Kong Completed Construction (Holdings) Ltd (formerly known as Kumagai Gumi (Hong Kong) Limited) China Datang Corporation China Datang Corporation Completed Completed Completed
Wuxi Waste-to-Energy China 40 Initial Balance sheet Biomass & Waste China Everbright Project International Huitengxile Wind Power China 100.58 Initial Balance sheet Wind Concession Programme East Nanao Island China 53.7 Initial Balance sheet Wind Wind Farm Yancheng Dongtai China N/A Initial Balance sheet Wind Wind Farm Jurong and Suqian China N/A Initial Balance sheet Biomass & Waste Biomass project Jiangsu Rudong Wind China 104.7 Initial Project Finance Wind Farm Concession II Phase I
Longyuan Electronic Completed Power Group Co Ltd CLP Power Asia/ Completed Guangdong Electric Power Development Company Limited/China Huaneng Group China Power Investment Corporation (CPI) Completed
China Energy Completed Conservation Investment Corporation (CECIC) Jiangsu Longyuan Wind Energy Co. Completed
Project Financed
Country USD (m) Sector Type of Financing Type of Security Sponsor Jiangsu Longyuan Wind Energy Co. Guohua Energy Investment Corp Shenhua Group Corporation Limited
Status Completed
Jiangsu Rudong Wind China N/A Initial Balance sheet Wind Farm Concession II Phase II Manjing Wind Farm China N/A Initial Balance sheet Wind Phase 2 Guohua Inner Mongolia China N/A Initial Project Finance Wind Huitengliang Wind Farm
Completed Completed
Luodai Town Waste to China 64.4 Initial Balance sheet Biomass & Waste ONYX Asia/ Shanghai Announced Energy Plant Haiwan Investment Company/Shanghai Environmental Investment Co Ltd/Shanghai Environmental Group Suzhou Methane-to- China 3.4 Initial Balance sheet Biomass & Waste China Everbright Energy Project International Shuangliao Wind Farm China N/A Initial Balance sheet Wind Liaoning Zhangwu China N/A Initial Balance sheet Wind Wind Farm Liaoning Kangping China N/A Initial Balance sheet Wind Wind Farm KEPCO Gansu Wind Farm China 57.5 Initial Balance sheet Wind Xilighaote Wind Farm China 25 Initial Balance sheet Wind Chongming Island and China N/A Initial Balance sheet Wind Nanhui Wind Facilities Huitengxile Wind Farm China 25.7 Initial Balance sheet Wind CDM Project Datang Jilin Power Generation Co Ltd/ Roaring 40s Renewable Energy Pty Ltd Liaoning Zhangwu Jinshan Wind Power Co Ltd Liaoning Kangping Jinshan Wind Power Co Ltd Korea Electric Power Corp (KEPCO)/ China Datang Corporation Completed Completed
Completed
Completed
Completed
Yongsheng National Completed Energy Wind Power Co Longyuan Electronic Completed Power Group Co Ltd Longyuan Electronic Completed Power Group Co Ltd Completed Completed
Yixing City waste-to- China 28.8 Initial Balance sheet Biomass & Waste China Everbright energy project International Zhoushan pilot Kobold China N/A Initial Balance sheet Marine (Marine) Turbine Plant Tuoli Township Wind Farm China 108.4 Initial Balance sheet Wind Guangzhou Institute of Energy Conversion/ Ponte di Archimede China State Development and Investment Company
Completed
Project Financed
Country USD (m) Sector Type of Financing Type of Security Sponsor Guohua Energy Investment Corp
Status Completed
Manjing Wind Farm China N/A Initial Balance sheet Wind Phase 1 Yangjiang Hailing Island China 98.66 Initial Balance sheet Wind Project Shiwenzi Wind Power China 30.1 Initial Balance sheet Wind Station ECP Jiangsu Rudong China 100 Initial Project Finance Wind Wind Power Project Datang Zhangzhou Liuao China 37 Initial Balance sheet Wind Wind Farm (Phase I) Heilongjiang (CR Alcohol) China Bioethanol Plant 17 Initial Balance sheet Biofuels
Hong Kong Zhonghua Completed Electric Power Company HeiLongjiang Huafu Electric Power Investment Co Ltd Europe China Power BV (ECP) Datang Zhangzhou Wind Power Co Ltd ND Completed
Announced Completed Completed
Jilin Tongyu I Wind Project China 121.9 Initial Balance sheet Wind
Huaneng New Energy Completed & Environment Protection (Holding) Co Ltd (aka Huaneng New Energy Industrial) Completed Completed Announced Announced Completed Completed
Suzhou City Waste-to- China 60 Initial Balance sheet Biomass & Waste China Everbright Energy Plant International Ningxia Helanshan China N/A Initial Balance sheet Wind Wind Park Qinghai Province China 1.6 Initial Balance sheet Solar Mini Grid Qinghai province China 1.6 Initial Balance sheet Solar Mini Grid Shi Bei Shan Wind Farm China N/A Initial Balance sheet Wind Concession Changdiao Power Station China N/A Initial Balance sheet Mini-hydro Henan 2002 Bioethanol China 152 Initial Project Finance Biofuels Plant Yunnan xinjiang Mini China N/A Initial Balance sheet Solar Grid Project Ningxia Tianjing Wind Power Co Ltd Chinese Ministry of Finance (MOF) KfW Banking Group Guangdong Yuedian Group CLP Power Asia/ Huaiji County Huilian Hydroelectric (Group) Company Limited
Henan Tianguan Completed Enterprises Group Co Ltd/ Henan Provincial Investment Company/China National Petroleum & Chemical Corporation (SINOPEC) Chinese Ministry of Finance (MOF)/KfW Banking Group Announced
Project Financed
Country USD (m) Sector Type of Financing Type of Security Sponsor HeiLongjiang Huafu Electric Power Investment Co Ltd/ Huarui Group HeiLongjiang Huafu Electric Power Investment Co Ltd/ Huarui Group CLP Power Asia ND
Status Completed
Shiwenzi Wind Power China N/A Initial Balance sheet Wind Station Stage 2 Shiwenzi Wind Power China N/A Initial Balance sheet Wind Station Stage 2 Gaotang Power Station China N/A 581.9 China Initial Initial 17.5 Balance sheet Bond Initial Mini-hydro Solar Township Electrication China Project Qingdao Huawei Financing Completed
Completed
Completed Announced Nordex AG Completed
Project Finance Wind Henan Tianguan Enterprises Group Co Ltd
Henan 2001 (Nanyang) China N/A Initial Balance sheet Biofuels Bioethanol Plant Jilin Tianhe Bioethanol China N/A Initial Balance sheet Biofuels Plant Dabancheng/Fujin/ China 98 Initial Project Finance Wind Xiwaizi Wind Farms Beijing Kangxi Wind Farm China N/A Initial Balance sheet Wind Anhui Bioethanol Plant China 96 Initial Balance sheet Biofuels Yutiao Power Station China 33.4 Xinwan Power Station China N/A Portfolio Project Finance Mini-hydro Bundling Initial Balance sheet Mini-hydro
China Resources Completed (Jilin) Bio-chemical Co Liaoning Electric Power Company Ltd/Xinjiang Electric Power Company Ltd Completed
Europe China Power Completed BV (ECP) Anhui BBCA Biochemical Co Ltd CLP Power Asia CLP Power Asia Completed Completed Announced
India
There is a signicant corporate opportunity for wind and solar equipment and manufacturing, as well as strong technology potential in the fuel cells and energy efciency markets. Wind There are supply side equity opportunities in equipment manufacturing, O&M and other services. There are also supply side asset development opportunities including: Co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); Acquisition of projects outright from local developers; Equity investment to take minority stake in local developers; Acquisition of majority or 100% ownership of local developers. Mini-hydro There are supply side asset development opportunities including: Co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); Acquisition of projects out-right from local developers; Equity investment to take minority stake in local developers; Acquisition of majority or 100% ownership of local developers.
Fuel Cell There are supply side equity opportunities in technology development and, as the global market expands, potentially in manufacturing. Energy Efciency There are supply side equity opportunities in technology development, equipment manufacturing and possibly in construction. Biofuels There are supply side equity opportunities in technology development, and the development of feedstock and distribution. There will also be supply side asset development opportunities as the market matures. With one-fth of the worlds population, India ranks sixth in terms of energy demand, accounting for 3.61% of the global energy demand, and together with China is the fastest-growing user of fossil fuels. In 2004, the country displaced Mexico to become the third most attractive FDI destination worldwide, and it is increasingly perceived as a R&D hub for a wide range of industries. Indias highly-educated workforce, management talent, rule of law, transparency, cultural afnity, and regulatory environment has earned the country the reputation of the easiest of the emerging markets in which to do business. The countrys service-oriented development path has so far allowed it to bypass certain obstacles, notably its weak infrastructure. The pressure of keeping up with the pace of economic growth is changing this, however. India currently imports 1.9m barrels of oil per day, about 70% of its consumption. The International Energy Agency predicts that by 2030 it will be consuming 5.6m barrels per day, of which 94% will be imported. It has been projected that India must, in order to sustain estimated GDP growth of 8% a year, add around 500 MW of power generation on a weekly basis for the next 25 years. Given the parlous state of Indias grid and electricity market, alternatives to large scale power plants must be found. While energy efciency measures can offset at least a part of this future demand, one of the most explosive areas of development has been within distributed generation for industry. The country has suffered a series of problems with transmission and distribution on the grid, electricity shortages and power theft. The implementation of a depreciation allowance led a large number of industrial groups to develop their own on-site generation facilities (using wind, solar or their own waste), ensuring security and reliability of supply, as well as depreciating the capital cost by 80% in the rst year. While India has no renewable energy legislation per se, it provides tax breaks for joint ventures, gives a depreciation allowances, loans and planning exemptions. There is a Model Renewable Energy Law currently under discussion, but no time frame for implementation has been given. The growing interest in the renewables market has been particularly strong in the wind sector, as evinced by the success of turbine manufacturer Suzlon and it seems likely that the largest opportunities within India lie in equipment manufacturing and service supply for the global renewables market, and in project development for distributed generation.
Table 13: Selected Renewable Energy Projects Under Development in India

Project Financed Country USD (m) Sector Type of Financing Type of Security Sponsor Biomass ND & Waste Biomass & Waste Solar Seshasayee Paper and Boards ND Government of India Gujarat NRE Coke Ltd (GNCL) Simbhaoli Sugar Mills Limited Status In Active Planning In Active Planning Completed Completed Completed Completed Energreen Tamil Nadu India N/A Initial Project Finance Biomass Plants Pallipalayam Biomass India 8.1 Initial Project Finance Plant Pune MSCP4 Solar Thermal Project India N/A Initial Balance sheet
Rashtrapati Bhavan India 21.9 Initial Balance sheet Solar Solar Project Financing GNCL Kutch Wind Farm India 26 Initial Balance sheet Wind Chilwaria Bioethanol India N/A Initial Balance sheet Biofuels Plant Kakinda Biodiesel Plant India 31.7 Initial Project Finance Biofuels Karnataka Biomass India 8.5 Initial Project Finance Biomass Plant & Waste Rithwik Biomass India N/A Initial Balance sheet Power Project Biomass & Waste
Naturol Bioenergy Completed Ltd/UTI Securities/ Sidbi Venture Capital Ltd/APIDC Venture Capital Velcan Energy (formerly Saint Merri Bioenergy) Completed
Rithwik Energy System Completed Limited (RESL) Southern Online Bio Announced Technologies Ltd (SBT) Vishal Exports Overseas Ltd Completed
Andhra Pradesh India N/A Initial Balance sheet Biofuels Biodiesel Project Tamil Nadu Andhiyur India 7.8 Initial Project Finance Wind Wind Farm Kalpataru Ganganar India 6.9 Initial Balance sheet Biomass Plant Biomass & Waste
Kalpataru Power Completed Transmission Limited Pioneer Asia Wind Turbines Completed
Pioneer Asia Tamil India N/A Initial Balance sheet Wind Nadu II Wind Farm Enercon Kappaguda Wind Farm India N/A Initial Project Finance Wind Biomass & Waste Wind
Enercon India Limited Completed Kalpataru Power Completed Transmission Limited MSPL Limited Completed
Kalpataru Tonk India N/A Initial Balance sheet Biomass Project Sogi, Joigmatti and India Jajikalgudda Wind Farm Phase 1 N/A Initial Balance sheet
Ajbapur Sugar Complex India N/A Initial Balance sheet Cogeneration Project
Biomass & Waste
DCM Shriram Completed Consolidated Limited Bhoruka Power Corporation Ltd Bhoruka Power Corporation Ltd Completed Completed
Chaya Devi Hydro India N/A Initial Balance sheet Mini-hydro Power Scheme Neria Mini-hydro Scheme India N/A Initial Balance sheet Mini-hydro
Project Financed
Country USD (m) Sector Type of Financing Type of Security Sponsor Biomass & Waste Biomass & Waste Wind Oswal Woolen Mills Ltd. Nahar Spinning Mills Limited. MSPL Limited Orissa Power Consortium Ltd. Orissa Power Consortium Ltd. Meenakshi Power Limited (MPL) Meenakshi Power Limited (MPL) Perpetual Energy Systems Limited Chambal Power Limited
Status Completed Completed Completed Completed Completed Completed Completed Completed Completed
Oswal Woolen Mills Project India N/A Initial Balance sheet Nahar Spinning India N/A Initial Balance sheet Mills Project MSPL Karnataka Wind Farm India 28.3 Initial Project Finance
Samal Hydroelectric India N/A Initial Balance sheet Mini-hydro Project Jalaput Hydroelectric India N/A Initial Project Finance Mini-hydro Project Middle Kolab Small India N/A Initial Balance sheet Mini-hydro Hydroelectric Project Lower Kolab Small India N/A Initial Balance sheet Mini-hydro Hydroelectric Project Perpetual Biomass India N/A Initial Balance sheet Power Project Chambal Biomass Project India N/A Initial Balance sheet Sri Chamundeswari India N/A Initial Balance sheet Sugars Bagasse Project Ugar Sugar Works India 5.8 Initial Balance sheet Ugarkhurd Cogen Plant Triveni Bagasse Plant India N/A Initial Balance sheet RSCL Mundiampakkam India N/A Initial Balance sheet Biomass Project Biomass & Waste Biomass & Waste Biomass & Waste Biomass & Waste Biomass & Waste Biomass & Waste
Sri Chamundeswari Completed Sugars Limited (SCSL) Ugar Sugar Works Ltd Completed Triveni Engineering & Industries Ltd. Rajshree Sugars & Chemicals Limited Woman for sustainable development Deepak Spinners Ltd DSL Enercon Wind Farms (Jaisalmer) Pvt Ltd Completed Completed Completed
Coimbatore, Bangalore, India N/A Initial Balance sheet Biomass Coorg Biomass Plants & Waste Deepak Spinners Pagara India N/A Initial Balance sheet Biomass Project Biomass & Waste
Completed Completed
Enercon Jaisalmer India N/A Initial Balance sheet Wind Bundled Wind Power Project Haidergarh Bagasse India N/A Initial Balance sheet Based Co-generation Power Project The Dhampur Sugar India N/A Initial Balance sheet Mills Limited Biomass Project Ropar Biomass Project India N/A Initial Balance sheet Biomass & Waste Biomass & Waste Biomass & Waste
Balrampur Chini Completed Mills Ltd Dhampur Sugar Mills Ltd Gujarat Ambuja Cements Limited Narayanpur Power Company Ltd. Completed
Completed Completed
Somanamaradi Hydro India N/A Initial Balance sheet Mini-hydro Electric Project
Project Financed
Country USD (m) Sector Type of Financing Type of Security Sponsor Biomass & Waste Biomass & Waste Biomass & Waste Biomass & Waste Biomass & Waste Biomass & Waste Indur Green Power Balrampur Chini Mills Ltd
Status Completed Completed
Indur Biomass India N/A Initial Balance sheet Power Project Balrampur Bagasse India N/A Initial Balance sheet Based Co-generation Power Project Raja Bhaskar Biomass India N/A Initial Balance sheet Power Project Satya Maharshi India N/A Initial Balance sheet Biomass Project Renuka Sugars India N/A Initial Balance sheet Cogeneration Expansion Project Bannari Amman Sugars India N/A Initial Balance sheet Karnataka Biomass Project
Raja Bhaskar Power Completed Pvt. Limited Satya Maharshi Completed Power Corporation Ltd Shree Renuka Sugars Completed Ltd (SRSL) Bannari Amman Sugars Ltd Bhoruka Power Corporation Ltd Completed
Mandagere Mini India N/A Initial Balance sheet Mini-hydro Hydro Scheme Raghu Rama Renewable India N/A Initial Balance sheet Energy Limited Biomass & Waste
Completed
Ind-Bharat Energies Completed Limited Enercon Wind Farms Completed (Jaisalmer) Pvt Ltd Sai Spurthi Power Ltd. Completed Shree Renuka Sugars Completed Ltd (SRSL) ENERCON GmbH Dharmshala Hydro Power Ltd. Completed Completed
Jaisalmer Wind India 27.5 Initial Balance sheet Wind Energy Project Chunchi Doddi Hydroelectric Project India 9.5 Initial Balance sheet Mini-hydro Biomass & Waste Wind
SRS Bagasse India N/A Initial Balance sheet Cogeneration Project Enercon Chitradurga Wind Farm India 23.4 Initial Bond
Maujhi Small India N/A Initial Balance sheet Mini-hydro Hydro Project Matrix Power India N/A Initial ND Biomass Project Malavalli Power India N/A Initial Balance sheet Plant Project Lucknow Asia Bio-Energy India N/A Initial Balance sheet India Municipal Solid Waste Project Ganapati Sugar India N/A Initial ND Industries Biomass plant Sri Rama Devara Katte India Mini-hydro Scheme N/A Initial Balance sheet Biomass & Waste Biomass & Waste Biomass & Waste Biomass & Waste Mini-hydro Biomass & Waste
Matrix Power Pvt Ltd. Completed Malavalli Power Plant Completed Pvt Limited Asia Bioenergy India Completed Limited (ABIL) ND ND Bannari Amman Sugars Ltd Completed Completed Completed
Bannari Amman Sugars India N/A Initial Balance sheet Tamil Nadu Biomass Project
Project Financed
Country USD (m) Sector Type of Financing Type of Security Sponsor Biomass & Waste Vandana Vidhyut Limited Aban Loyd Chiles Offshore Ltd Wescare (India) Limited Mohan Breweries & Distilleries Encon Services Limited (ESL)
Status Completed Completed Completed Completed Completed
Vandana Vidhyut India N/A Initial Balance sheet Biomass Project
Cape Comorim India N/A Initial Balance sheet Wind Puthlur RCI India N/A Initial ND Wind Chennai Mohan India N/A Initial Balance sheet Wind Encon Wind Power Project India N/A Initial Balance sheet Wind Enercon Chitradurga India N/A Initial Balance sheet Wind Bundled Wind Power Project Devarkulam and India 18.4 Initial Balance sheet Wind Perungudi wind farm Vankusawade Wind Park India Kavdya Dongar Wind Park India Malana power project India N/A N/A 9.8 Initial Initial Initial Project Finance ND ND Wind Wind Mini-hydro
Enercon (India) Power Completed Development Pvt Ltd Tamil Nadu Newsprint Completed and Papers Ltd (TNPL) Suzlon Energy Ltd Suzlon Energy Ltd ND Vishal Exports Overseas Ltd Vishal Exports Overseas Ltd Vishal Exports Overseas Ltd Completed Completed Completed Completed Completed Completed
Vishal Tamil Nadu India N/A Initial Balance sheet Wind Wind Farm Vishal Rajasthan India N/A Initial Balance sheet Wind Wind Farm Vishal Himachal India N/A Initial Balance sheet Mini-hydro Pradesh Hydro Plant
Mexico
Mexico is a potentially large market, with opportunities in wind and biofuels. However, until its renewable energy legislation is passed, there is likely to be little opportunity for foreign investors to get involved in the power market. Wind There are supply side asset development opportunities including: equity investment to take minority stake in local developers; co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects). There are also signicant potential supply side equity opportunities in equipment manufacturing, O&M and service supply. Biomass There are supply side asset development opportunities including: equity investment to take minority stake in local developers; co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects) Mini-hydro There are supply side asset development opportunities including: equity investment to take minority stake in local developers; co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects)
After maintaining fairly high levels of investor condence in the late 1990s, Mexico has suffered for the last few years, as unfullled reforms in key areas such as telecom, infrastructure, and energy, and the pull of other emerging markets have led a number of global investors to rethink Mexico. From the end of 2000 to April 2004, roughly one in four maquila enterprises left Mexico, cutting nearly a quarter of a million jobs. Among these rms about one in three reportedly relocated to China. While Mexico led major emerging markets in meeting investors expected prot targets in 2003, in 2004 China, Brazil, India and Poland surpassed Mexico. The major issues which are seen as problematic are the need to liberalize the labor laws, an improvement in the tax collection process, as well as the need to allow private capital into the energy sector. The Mexican market does seem to be rebounding, in large part due to an ongoing consolidation of its democratic processes, combining with a willingness to open its energy markets to investment. In 2006, Mexicos stock markets have been on an upward swing, up 19% in the early months of 2006. There is strongly positive investor sentiment across Latin America, thanks in large part to soaring commodity prices, while most governments so far are avoiding uncontrolled spending. And it reects an economy that is nally picking up steam and boosting corporate protability, thanks to robust growth in the United States, the destination for more than 90% of Mexicos exports. Changes in investment laws have also aided the Bolsas (Mexican Stock Exchange) rise. In 2005, Mexicos private pension funds, known as Afores, were permitted to put a portion of workers individual retirement accounts into equities. The cash contributions amount to about USD 350m so far and are generating growing demand for private equity opportunities. It has been reported that Mexicos GDP expanded at an annual rate of 5% in the rst quarter of 2006. If his forecast is accurate, it will be the fastest pace since the third quarter of 2000. At this level of growth, external debt is manageable, foreign reserves remain strong and the balance of trade remains positive thanks to world demand for oils and metals. Mexico has beneted from rising oil prices and growing export revenues, but there has been increasing pressure on the economy from increases in the cost of natural gas and rened oil products, and this has meant increasing pressure on its electricity costs. Over 60% of Mexicos oil comes from one oil eld, which is currently in decline, creating an enormous challenge for Mexicos energy industry. As Mexicos domestic fuel supplies diminish, these price pressures will increase, and the country becomes increasingly dependent on imports, unless it focuses on growth of its renewable energy generation capacity. Recent moves in Venezuela, Bolivia and Ecuador have strongly highlighted such issues in Latin America and Mexicos economic development will be directly affected by its future net energy trade balance. Mexico has effectively committed, by ratifying the Kyoto protocol, to use more renewable energy as a source of electricity. The Mexican House of Representatives passed a Law for the Use of Renewable Energy Sources in December 2005 and the measure has now been sent to the Mexican Senate for its review and approval. Many believe that the law will be enacted this year (2006) and there is no question that its implementation would transform Mexico as a potential market for renewable energy investment. Yet private sector investment in Mexicos state owned energy industry has been discouraged to date. With the growing importance of energy and the oil balance in Mexicos market coming to the fore of political debate in the run-up to the July 2006 elections, it is possible that signicant changes could be seen fairly soon. Mexican installed capacity from renewables is insignicant to date (less than 5MW), which leaves enormous room for growth. The Mexican Ministry of Energy estimates that there is potential to generate approximately 5GW from wind power, 1GW from biomass and 150MW from biogas drawn from landlls. The
measure the House passed in December would favor wind, solar, hydro, marine, and biomass and biofuels. Mexico already provides certain forms scal support for renewable energy technologies, and has created interconnect agreements for wind, hydro and solar and could well provide opportunities for project developers in these sectors, as well as offering a service and supply opportunity. Mini-hydro is likely to prove the biggest opportunity, as there is a large potential market dominated by the state owned energy companies however, private developers are being welcomed to look at projects below 30MW. However, the long term development of the market will require not only the implementation of the countrys renewable energy legislation, but clarication of how the scal support mechanisms will be structured and implemented.
Table 14: Selected Renewable Energy Projects Under Development in Mexico

Project Financed Country USD (m) Sector Type of Financing Type of Security Sponsor Status Eoloelectrica Las Mexico 111.4 Initial Balance sheet Wind Ventas II Mexican Federal Completed Electricity Commission (CFE) Completed
Encinada Waste to Mexico N/A Initial Project Finance Biomass & Waste International Power Energy Plant Group Ltd Comexhidro Hydroelectric Mexico 14 Initial Balance sheet Mini-hydro Plants San Rafael Dam Mexico N/A Initial Balance sheet Mini-hydro Hydroelectric Plant La Primavera Mexico N/A Initial Balance sheet Geothermal Geothermal Resource
Mexican Hydroelectric Completed Corporation SA de CV (COMEXHIDRO) EDF Energies Nouvelles Completed (former SIIF Energies) Mexican Federal Announced Electricity Commission (CFE)
El Higo Biomass Plant Mexico N/A Initial Balance sheet Biomass & Waste El Higo Sugar Cane Completed Plantation SA Trigomil Hydroelectric Mexico N/A Initial Balance sheet Mini-hydro Plant Mexicana de Electrogeneracion SA de CV Completed
Dulces Nombres Mexico 7 Initial Balance sheet Biomass & Waste Water and Drainage Completed Biogas Plant Services of Monterrey Hermosillo Solar Mexico N/A Initial Balance sheet Solar Cogeneration Plant Planta Hidroelectrica Mexico N/A Initial Balance sheet Mini-hydro de Atexcaco Mexican Federal Completed Electricity Commission (CFE)/World Bank (Global Environment Facility) Mexican Energy Company SA de CV Completed
Project Financed
Country USD (m) Sector Type of Financing Type of Security Sponsor
Status
San Rafael de Pucte Mexico N/A Initial Balance sheet Biomass & Waste San Rafael de Pucte Completed Biomass energy plant Sugar Cane Plantation SA Huixtla Sugar Renery Mexico N/A Initial Balance sheet Biomass & Waste Huixtla Sugar Renery Completed Biomass Energy Plant SA de CV Plan de San Luis Mexico N/A Initial Balance sheet Biomass & Waste Plan de San Luis In Active Sugar Renery Biomass Sugar Cane Renery Planning Energy Plant SA Tamazula Sugar Renery Mexico N/A Initial Balance sheet Biomass & Waste Tamazula Sugar Biomass Energy Plant Renery SA de CV In Active Planning
Puga Biomass Energy Mexico N/A Initial Balance sheet Biomass & Waste Sugar Cane Renery In Active Plant of Puga Planning
Poland
Poland has high targets for the development of renewable energy generation in a fairly short time frame, driven by its accession to the EU. At the same time, it is looking to improve the efciency of its coal-red generation and diversify its energy mix, providing large opportunities in energy efciency and clean coal. Wind There are supply side asset development opportunities including: co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); acquisition of projects out-right from local developers; own development of projects (i.e. no local partner required); equity investment to take minority stake in local developers; acquisition of majority or 100% ownership of local developers CHP/biomass There are supply side asset development opportunities including: co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); acquisition of projects out-right from local developers; own development of projects (i.e. no local partner required); equity investment to take minority stake in local developers; acquisition of majority or 100% ownership of local developers Biofuel There are supply side asset development opportunities including: co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); acquisition of projects out-right from local developers; own development of projects (i.e. no local partner required); equity investment to take minority stake in local developers; acquisition of majority or 100% ownership of local developers Poland is the eighth largest consumer of power in Europe, with a power market dominated by coal. However, its potential for wind energy is rated the highest in Central and Eastern Europe, and it is also an agricultural powerhouse, producing large quantities of straw, wood-chipping and animal waste, suggesting strong potential for biomass and biofuels development. It is Polands 2004 accession to the EU which provides the strongest driver for the development of renewable energy. The country must conform to EU standards and it currently has targets of developing renewable energy generation to constitute 7% of primary energy supply by 2010. The country exhibits GDP of roughly 5% and both energy demand and GDP are expected to grow.
Poland has attracted signicant foreign investment n the last decade, including some sizeable activity in the energy sector. It has an active private equity industry, although the stock markets have not been as active the majority of deal activity remains below the public markets. There has been relatively little investment in the renewable energy sector in Poland to date, due to its relatively immaturity and issues surrounding the enforcement of renewable energy legislation on the utilities. As a transition economy, Poland suffers from perceived threats to its competitiveness in the global markets, from concerns about poor infrastructure, corruption and the erosion of low-cost advantage. Poland relies primarily on coal for electric power generation and while the Government is attempting to reform the coal industry, the economic impact on the country means that the process must be handled very carefully. Poland is still in the process of attempting to liberalize its electricity markets and while there have been moves in this direction, accelerated by the requirements of EU accession, there are a number of issues which still need to be overcome, including a series of long term power purchase agreements already in place within the power sector. Polands Government has adopted new legislation that favors renewable energy but it still needs to be bedded in and enforced. Electricity suppliers must purchase and present green certicates to ensure that they are supporting renewable energy. At present, an estimated 80MW of wind capacity is up and running in Poland. There are however a number of wind farms under development which are expected to come on-stream in the next year or two and the Government is plan that 800MW could be installed by 2010. There are solid developer opportunities in wind, the minihydro sector, biomass power (specically in relation to co-ring with coal and CHP on a distributed basis). The story in Poland is one of growing interest and potential, rather than large ows of money. The targets set by the Government are high, but lack of clarity and opposition to alternative power generation mean that development is likely to be slow in the short term. However, it is expected that within ve years, the market for renewable energy generation could be signicant. The potential for biofuels is also strong, but roll-out on a large scale remains dependent on EU legislation and support.
Table 15: Selected Renewable Energy Projects Under Development in Poland

Project Financed Country USD (m) Sector Type of Financing Type of Security Sponsor Polish Energy Partners (PEP S.A.) Environmental Investment Partners (EIP) Projekt GmbH Status Completed Completed Puck Wind Farm Poland 33.6 Initial Project Finance Wind Financing Puck Gemina Wind Poland N/A Acquisition Balance sheet Wind Farm Acquisition Radziejow Wind Farm Financing Radziejow Wind Farm Financing Phase I Tymien Wind Farm Poland Poland Poland 120 120 57 Initial Initial Initial Project Finance Project Finance Project Finance Solar Solar Wind
Abandoned
Wysak Petroleum Inc Abandoned EEZ Completed
Zagorze Wind Farm Poland N/A Initial Balance sheet Wind (Wiatrowa)
Wolin North Spolska Completed z.o.o
Project Financed Cisowo Wind Farm
Country USD (m) Sector Poland N/A N/A N/A Initial Initial Initial
Type of Financing Type of Security Sponsor Project Finance Balance sheet Balance sheet Wind Wind Wind Energia Eco EPA Sp. z o.o. Nuon
Status Completed Completed Completed
Skrobotowo Wind Farm Poland Skrobotowo Wind Farm Poland
Thailand
The Thai Government has high targets for the development of renewable sources and the country has a broad range of natural resources to be exploited, although it should be noted that the current political environment is volatile. Biomass There are supply side asset development opportunities including: co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); acquisition of projects out-right from local developers; own development of projects (i.e. no local partner required); equity investment to take minority stake in local developers; acquisition of majority or 100% ownership of local developers. Biofuels most specically in ethanol. There are supply side asset development opportunities including: co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); acquisition of projects out-right from local developers; own development of projects (i.e. no local partner required); equity investment to take minority stake in local developers; acquisition of majority or 100% ownership of local developers. Mini-hydro Although the market has been slow to develop and there is little domestic infrastructural or service support, there are supply side asset development opportunities including: co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); acquisition of projects out-right from local developers; own development of projects (i.e. no local partner required); equity investment to take minority stake in local developers; acquisition of majority or 100% ownership of local developers. With a well-developed infrastructure, a free-enterprise economy, and pro-investment policies, Thailand appears to have fully recovered from the 1997-98 Asian Financial Crisis. The country was one of East Asias best performers in 2002-04. Thailands economy slowed substantially following the impact of the tsunami in December 2004, with real GDP growth falling to 4.5% for 2005, down from 6.1% in 2004. The impact of high oil prices, weaker demand from Western markets, severe drought in rural regions and lower consumer condence have all contributed to the slowing of economic growth. The development of alternative sources is critical to energy sustainability as Thailand relies substantially on crude oil imports totaling approximately U.S. 10.7bn in 2004, representing 6.5% of GDP. Renewable sources accounted for only 1% of electricity generated in 2004.
Thailands energy sector is undergoing a period of restructuring and privatization. The Thai electric utility and petroleum industries, which historically have been state-controlled monopolies, are currently being restructured. With the exception of agriculture and animal husbandry, foreign investors may own up to 100% of projects and project developers. It is projected that Thailand will need an additional 20GW of electricity during the next 10 years. Compared with the existing generating capacity of about 26GW, generating capacity has to increase by roughly 77% in order to meet future demand. Regarding the transmission system, the South and the North-Eastern grids are already faced with insufcient generation to meet increasing demand. The Thai Government has been developing mini-hydro projects for some time, in order to increase rural electrication and it has now set a target of 8% of renewable energy generation by 2011. The main areas of potential renewable energy investor interest in Thailand are in mini-hydro, biomass and biofuels. To achieve the 8% goal, the government is encouraging the power generating sector, consisting of Independent Power Producers (IPPs) and Small Power Producers (SPPs) to produce 1.9WW of power from renewable energy sources. IPPs are rms which build, own and operate large power plants that generate and sell electricity to the grid, to ease the states power production burden. IPPs are now required to adhere to the Renewable Portfolio Standard (RPS). Under the RPS, power companies that wish to bid to supply power to the Electricity Generating Authority of Thailand (EGAT) must produce 5% of their installed energy generating capacity from renewable sources. As one of only ve net food exporters on the world market, Thailand is also one of the largest producers of waste products from agriculture and agro-industrial processing. Given existing programs of scal support for small and very small power producers, its possible that biomass could provide an interesting opportunity. In the biofuels industry, market potential in Asia is high, with 90% of Thailands current ethanol exports going to Japan, the worlds largest importer of ethanol and second largest consumer of gasoline. The Thai biofuels industry hopes that it can follow Brazil, the worlds leading ethanol producer, and move its agro-industry further up the value chain, although much of its development is currently at the experimental stage. The two nations signed a memorandum of understanding (MOU) to exchange biofuels information and expertise. There are obstacles to be overcome. While mini-hydro is supported by the government, implementation has been slow and there are no domestic equipment suppliers. The recent political events in Thailand, while not expected to have a major long-term impact, may have affect the countrys ability to attract foreign investment.
Table 16: Selected Renewable Energy Projects Under Development in Thailand

Project Financed Country USD (m) Sector Initial Type of Financing Type of Security Sponsor Balance sheet Biofuels Senoko Power Ltd. Status Completed Completed Udon Thani Biofame Thailand 250 Ethanol Plant
Chachoegsao Biofame Thailand N/A Initial Balance sheet Biomass & Waste Malakoff Berhad/ Biomass Plant Plasma Renewable Energy Sdn Bhd APT Petchabun Thailand 13 Initial Project Finance Biomass & Waste ND Biomass Plant APT Waste-to- Energy Plant Thailand N/A Initial Initial Initial Project Finance Project Finance Balance sheet Biomass & Waste ND Biomass & Waste ND
In Active Planning Announced Announced
WasteKleen Phuket Thailand 22 Waste-to-Energy Plant Nakhon Sawan Biomass Plant Thailand N/A
Biomass & Waste AT Biopower Co. Ltd. Completed
Kitroongruang Thailand 2 Initial Balance sheet Biomass & Waste Thai Biogas Energy Completed Biomass Plant Company Ltd. (TBEC) Jiratpattanna Thailand 3.4 Initial Balance sheet Biomass & Waste Thai Biogas Energy Completed Biomass Plant Company Ltd. (TBEC) Chao Khun Agro Thailand 3.4 Initial Balance sheet Biomass & Waste Thai Biogas Energy Completed Biomass Plant Company Ltd. (TBEC) Thai Agro Ethanol Thailand N/A Initial Project Finance Biofuels Plant Khon Kaen Fuel Thailand N/A Initial Project Finance Biofuels Ethanol Pichit Biomass Plant Thailand 36 Initial Balance sheet Thai Agro Energy Co. Ltd Khon Kaen Sugar Company, Ltd. Completed Announced
Biomass & Waste AT Biopower Co. Ltd. Completed Completed Completed
Thai Agro Energy Thailand 3.5 Initial Project Finance Biomass & Waste Thai Agro Energy Biogas Plant Co. Ltd Ratchasima Small Thailand N/A Power Producer (SPP) Expansion Project Initial Balance sheet Biomass & Waste ND
Korat Waste to Thailand 10 Initial Balance sheet Biomass & Waste Korat Waste to Energy Completed Energy Project Company (KWTE) Charoen Pokphand RaiSam Farm Biogas Plant Thailand 1 Initial Project Finance Biomass & Waste ND Completed
Turkey
Turkey has signicant renewable energy resources, growing energy demand and renewable energy legislation; however the current framework does not yet provide sufcient scal support to encourage major investment. Geothermal There are supply side asset development opportunities including: Co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects) Wind There are supply side asset development opportunities including: Co-investment in projects alongside local partners (i.e. equity sponsor of local developer projects); Acquisition of projects outright from local developers; Equity investment to take minority stake in local developers; Acquisition of majority or 100% ownership of local developers Turkey has experienced a strong recovery from the nancial and currency crisis of 2001. Real GDP growth has exceeded 6% in many years, but this strong expansion was interrupted by sharp declines in output in 1994, 1999, and 2001. It is now on the brink of attaining economic stability, sustainable growth and disination through the implementation of economic reforms. In 2005 real GDP growth reached 5.1% and Ination fell to 7.7% a 30-year low. Despite strong economic gains in 2002-05, largely due to renewed investor interest in emerging markets, IMF backing, and tighter scal policy, the economy is still burdened by a high current account decit and high debt. The reforms mandated by the IMF stabilization package and Turkeys EU accession bid have removed several of the obstacles that were standing in the way of foreign direct investment into the country. Privatizations surged in 2005 and there have been several recent high prole purchases of Turkish assets in several industries, including energy for example Austrias energy giant OMV bought a 34% stake in Petrol Osi, Turkeys leading retail oil distributor. Currently 31% of energy generation in Turkey depends on hydroelectric power (mini and large scale) and the remaining 69% on thermal power (natural gas, lignite, coal and fuel oil). According to the Turkish Energy Market Regulation Board (EPDK) Turkeys lignite potential is 11GW, coal potential 12GW, while its geothermal potential is 2GW. Turkey has strong potential for renewable energy development in hydro and geothermal specically and due to supply constraints, the Government is exploring a range of alternative forms of supply, from renewable energy generation to nuclear. Prior to Turkeys severe economic difculties in 2001, the countrys energy consumption and net imports had been growing rapidly. Assuming that the Turkish economy and energy demand return to rapid growth, the government anticipates the need for a signicant increase in power generation capacity that will possibly reach 54GW by 2020 and require billions of dollars in foreign investment. In 2001, Turkey ratied the Energy Charter Treaty, the international legal framework for energy investment. Also, in early 2001, the Turkish parliament passed an energy liberalization law aimed at ending the governments monopoly in the energy sector, and also geared towards attracting foreign energy investment. In December 2003, parliament passed legislation liberalizing the countrys energy sector.
In April 2005, the International Energy Agency (IEA) issued a report on Turkey which said that Turkey has taken steps to implement energy market reforms which have resulted in clear and signicant benets. Now, continued action is needed to see the process through to a successful conclusion. The IEA elaborated that Turkey needs to restructure the state-owned enterprises...create independent electricity and gas operators and to remove cross-subsidies from electricity and gas prices. Turkey has ratied the Kyoto Protocol and passed a renewable energy law in May 2005. This states that retailers (utilities) have to purchase electricity from renewable sources at a rate not less than 8% of their total electricity generated in the previous year and that distribution companies have to purchase energy from renewable resources by the average electricity whole-selling price in Turkey which is currently estimated at EUR cents 5/kWh. This law may not be sufcient to encourage large scale investment as the feed-in tariff is below the average remuneration in the leading European wind markets. Turkey has substantial renewable energy resources and, as it looks towards possible European Union membership, it will need to increase its use of cleaner energy as a means of achieving sustainable economic development. Turkey also has a great potential for energy efciency improvements, both in industry and in power generation. However, until the privatization of Turkeys energy industry is completed and the current system of feed-in tariffs is redesigned, it is unlikely that there will be a rush of investment into renewable energy in Turkey.
Table 17: Selected Renewable Energy Projects under development in Turkey

Project Financed Country USD (m) Sector N/A Initial Type of Financing Type of Security Sponsor Balance sheet Wind Bilgin Group Status Completed Bares II Wind Project Turkey
Supporting Data
Table 18: Renewable Energy Policies and Measures in Developing Countries
Country Policy Name Policy Type o Guaranteed Prices / Feed-In o Obligations o Tradeable Certicates o 3rd Party Finance Technology o Onshore Wind o Bioenergy o Hydropower o All Technologies Simultaneously Brazil The PROINFA Programme
National Programme for Energy o Rural electrication Development of States and Municipalities (PRODEEM) National Rural Electrication o Rural electrication Programme
o All Technologies Simultaneously o On-shore wind o Solar Photovoltaics o All Technologies Simultaneously
China Brightness Programme o Capital Grants The Peoples Republic of China Renewable Energy Law Reduced VAT and Income Tax o General Energy Policy o Guaranteed Prices / Feed-In o Obligations o RD&D o Regulatory and Administrative Rules o Excise Tax Exemptions o Sales Tax Rebates o Tax Credits
o Onshore Wind
Wind Power Concessions Programme o Bidding Systems o Guaranteed Prices/Feed-In India Policy and Economic Incentives for Investment in Renewable Energy Sources (Model Renewable Energy Law not yet implemented) Incentives for Investment in Wind Power Generation Incentives for Investment in Small Hydro Power Generation o FDI & Joint Ventures o Depreciation Allowance o Income Tax Holiday o Excise & Customs Incentives o Planning Exemptions o Loans o Concessional Import Duties o Accelerated Depreciation o Sales Tax & Excise Duty Relief o Soft Loans o Income Tax Holiday o Wheeling Charges o Buy-Back Facility o 5% Annual Tariff Escalation o Financial Incentives for Demonstration Projects
o Onshore Wind o All Technologies Simultaneously
o Wind
o Survey & Investigation Subsidies o Small Hydro Power o Project Development Subsidies o Renovation, Modernisation & Capacity Upgrade nancial support o Term loans
Country Mexico
Policy Name
Policy Type
Technology o All Technologies Simultaneously
Accelerated Depreciation for o Investment Tax Credits Environmental Investment o Tax Credits (Renewable Energy Law in Congress not yet implemented)
Grid Interconnection Contract for o Regulatory & Administrative Renewable Energy Affairs Poland Project of Bill to Promote Renewable o General Energy Policy Energy Project of Ecological Norm for Wind Farms Project of Electricity Reform in Connection with Renewable Energy Public Electricity Services Law Methodology to Establish Service Charges for Transmission of Renewable Energy o Regulatory & Administrative Affairs o Regulatory & Administrative Affairs o General Energy Policy o Regulatory & Administrative Affairs
o Hydropower o Offshore Wind o Onshore Wind o Solar Photovoltaics o Solar Concentrating Power o All Technologies Simultaneously o Onshore Wind o All Technologies Simultaneously o All Technologies Simultaneously o All Technologies Simultaneously
Wheeling Service Agreement for o Regulatory & Administrative Electricity from Renewable Energy Affairs Sources General RES Voluntary Target o Obligations
o All Technologies Simultaneously
o All Technologies Simultaneously o Bioenergy o Geothermal Heat o Hydropower o Offshore Wind o Onshore Wind o Solar Concentrating Power o Solar Photovoltaics o Solar Thermal o Solar o Wind o Biomass o Biogas o Hyrdo o Biofuels o Geothermal o Fuel Cells o Energy Efciency o All Technologies Simultaneously o All Technologies Simultaneously
Development Strategy of Renewable o General Energy Policy Energy Sector Thailand Strategic Plan for Renewable o General Energy Policy Energy Development o Machinery Import Duty Exemptions o Corporate Income Tax Exemption Turkey Electricity Market Licensing o Capital Grants Regulation Law on Utilisation of Renewable o General Energy Policy Energy Resources for the Purpose of Generating Electrical Energy No. 5346
Source: IEA, New Energy Finance, MNES, MMDT
Table 19: Country Attractiveness

Area Economic Energy Country Sustainability of Economic Growth US H UK H L Y Brazil H M Y China 9.0% H H Y India 8.1% H H N Mexico 3.2% M M N Poland 3.8% M M N Thailand 5.4% M M N Turkey 5.0% M H Y Projected GDP Growth1 3.2% 2.8% 2.5%
Projected Energy L Demand Growth Renewable Energy Legislation (at May 2006) Enforceability of the Legislation Grid Reliability Fuel Infrastructure Robustness of Electricity Market Y
H H H H 9.0 9.0
H H H H 8.5 9.0 8.6 AAA 9 8.0 H
M M L L 4.5 5.0 3.7 BB- 119 5.3 H
M L L L 3.5 4.0 3.2 A- 91 4.3 M
L L L L 5.0 6.0 2.9 BB+ 116 6.0 H
L M M L 4.0 3.0 3.5 BBB 73 3.7 H
L L M L 4.5 5.0 3.4 BBB+ 54 6.3 H
L L L L 2.5 1.5 3.8 BBB+ 20 6.0 H
M L M L 4.5 3.75 3.5 BB93 5.0 M
Investment/ Business Business Environment2

1 2
Maturity of Capital Markets3
Corruption Perception 7.6 Index4 Emerging Markets Risk5 Ease of Doing Business6 Protection of Investors7 Ease of Prot Repatriation
Source: IMFC
AAA 3 8.3 H
Source: New Energy Finance Research on robustness of capital market, level of global integration, retail growth, GDP growth, political stability, rate of ination, population growth, contractual environment, independence of regulation, technological infrastructure, ranging from 10 (highest) to 1 (lowest) Source: New Energy Finance Research on extent of regulation, investment protection, capital market activity, private equity volume, centralized/decentralized economy, robustness of legal infrastructure
4 Source: Transparency International Corruption Perceptions Index Score (http://www.transparency.org/policy_research/surveys_indices/cpi/2005) relates to perceptions of the degree of corruption as seen by business people and country analysts and ranges between 10 (highly clean) and 0 (highly corrupt) 5 6 Source: S&P Sovereign Debt Rating from IMF Global Financial Stability Report April 2006 (http://www.imf.org/External/Pubs/FT/ GFSR/2006/01/pdf/chp3.pdf ) Source: The World Bank Group Economy Rankings Ease of Doing Business Index (http://www.doingbusiness.org/EconomyRankings/) ranks economies from 1 (highest) to 155 (lowest). The index is calculated as the ranking on the simple average of the country percentile rankings on each of 10 topics covered in Doing Business in 2006 Source: The World Bank Group Economy Rankings Investor Protection Index (http://www.doingbusiness.org/ExploreTopics/ProtectingInvestors/) measures the strength of minority shareholders protections against misuse of corporate assets by directors for their personal gain, between 10 (high protection) and 0 (no protection)
Table 20: Consensus Forecasts Brazil

Sector Wind Mini-hydro Biomass & Waste Solar PV Geothermal Marine Tidal Marine Wave Biodiesel (mlitres) Bioethanol (mlitres) Total Forecast capacity (GW) Government Projected GDP Targets in Based Growth 2007/20101 in 20202 1.5 3.4 3.8 0.0 0.0 0.0 0.0 2.0 22.0 32.7 2.4 5.7 6.4 0.0 0.0 0.0 0.0 2.0 22.0 38.5 CAGR (%) Government Projected GDP Targets in Based Growth 2007/20101,4 in 20203 607.1% 24.1% 10.4% n/a n/a n/a n/a 22.0% 7.4% n/a 35.0% 7.0% 5.4% n/a n/a n/a n/a 22.0% 7.4% n/a Capital Investment Required (USDbn) Government Projected GDP Targets in Based Growth 2007/20101,4 in 2020 1.8 6.6 7.6 0.0 0.0 0.0 0.0 1.0 10.8 27.9 2.9 11.1 12.8 0.0 0.0 0.0 0.0 1.0 10.8 38.7
Notes 1 Government targets are for 2007 (Wind, Mini-hydro and Biomass & Waste) and 2010 (Biodiesel and Bioethanol) 2 Projected GDP based growth forecasts based on predicted 2007 generation portfolio mix. 3 Projected GDP growth stable at 2.5% (IMFC, 2006/7 gures May 2006) 4 Biofuel CAGR and investment are for 2010
Table 21: Consensus Forecasts China

Sector Wind Mini-hydro (under 100MW) Biomass & Waste Solar PV Geothermal Marine Tidal Marine Wave Total
Notes 1 2 Projected GDP based growth forecasts rely on expected generation portfolio mix 2020 (Merril Lynch Asia Pacic utilities predictions 2005/Government targets) Projected GDP growth stable at 9.0% (IMFC, 2006/7 gures May 2006)
Forecast capacity (GW) Government Projected GDP Targets in Based Growth 2020 in 20201,2 30.0 50.0 20.0 2.0 0.0 0.0 0.0 102.0 45.7 76.2 30.5 3.0 0.0 0.0 0.0 155.5
CAGR (%) Government Projected GDP Targets in Based Growth 2020 in 20202 23.5% 10.8% 12.5% 16.6% n/a n/a n/a n/a 29.3% 17.4% 20.5% 31.7% n/a n/a n/a n/a
Capital Investment Required (USDbn) Government Projected GDP Targets in Based Growth 2020 in 20202 36.4 97.9 40.0 4.8 0.0 0.0 0.0 179.1 62.4 168.1 68.7 8.2 0.0 0.0 0.0 307.5
Table 22: Consensus Forecasts India

Sector Wind Biomass & Waste (including biogas)5 Solar PV Geothermal Marine Tidal Marine Wave Total Forecast capacity (GW) Government Projected GDP Targets in Based Growth 20204 in 20202,4,6 8.9 1.2 0.1 0.0 0.0 0.0 16.5 9.6 6.7 1.3 0.1 0.0 0.0 0.0 17.7 CAGR (%) Government Projected GDP Targets in Based Growth 20201,3 in 20202,3,6 4.8% 9.0% 6.4% 0.3% n/a n/a n/a n/a 5.3% 9.6% 7.0% 0.3% n/a n/a n/a n/a Capital Investment Required (USDbn) Government Projected GDP Targets in Based Growth 2020 in 20202,6 10.8 12.1 2.5 0.2 0.0 0.0 0.0 25.6 10.8 12.1 2.5 0.2 0.0 0.0 0.0 25.6
Mini-hydro (under 25MW) 6.2
Notes 1 Government targets scenario projects growth needed to meet 2007 renewable targets to 2020 2 Projected GDP based growth scenario based on generation portfolio mix estimates for 2020 (IEA 2005) 3 Linear growth to meet targets 2007, 2012, 2020 4 Capacity build rate to meet the targets is projected forward to 2020. 5 No targets for biomass. Estimate year on year addition 50MW 6 Projected GDP growth stable at 8.1% (IMFC, 2006/7 gures, April 2006)
Table 23: Consensus Forecasts Mexico, Poland, Thailand, Turkey

Country/Sector CAGR (%) Forecast Capacity (GW) Mexico - Wind1 Mexico - Solar PV1 Mexico - Mini-hydro
1
Capital Investment Required (USDbn) 1.2 0.8 1.9 0.9 2.6 1.6 8.0 0.5 5.7 4.6 1.8 29.5
Government Targets in 20201,2,3 Government Targets in 20201,2,3 Government Targets in 20201,2,3 n/a 47.9% 39.8% 24.6% 4.8% 20.4%
2
0.98 0.32 0.98 0.43 1.40 1.30 4.0 0.27 2.83 3.80 1.00 17.3
Mexico - Biomass
1
Mexico - Geothermal1 Poland - Wind2 Poland - CHP/Biomass Thailand - Mini-hydro

3
22.5% 35.9% 24.8% 31.8% 29.8% n/a
Thailand - Biomass3 Turkey - Wind Turkey - Geothermal Total
Notes 1 Mexico Government Targets in 2013 2 Poland Government Estimate in 2010, projected to 2020 3 Thailand Forecast for 2011
Table 24: Brazil Country Overview

Economy
1
10th largest globally
Population
188m 2% (largest in Americas after the US) Estimated 30% 5.0%
FDI (2004) USD 18.2bn Total Energy Consumption Energy Growth2 3.6% per annum Economic Growth Avg 2.2% per annum (2001-2003) % of Population Living Below Poverty Line Estimated Economic Growth (Q1 2006)
Estimated GDP Growth 3.7% (2006)3

1 2 3 In decline from the late nineties. A recent report from Standard & Poors suggests that the wider decline in Latin American FDI is among the main reasons why the region is growing more slowly than other emerging markets. International Energy Outlook of 2004 Brazilian National Confederation of Industry (CNI) in April 2006.
Figure 8: Brazil Energy Overview
Nuclear: 3.7% Gas: 3.6% Oil: 3.0% Coal: 2.4%
Renewables 87.4% Hydro: 83.8%
Biomass and Renewable Wastes: 3.5%
Reproduced from IEA data
Table 25: Brazil Energy Overview

Net Energy Imports 10% of total energy Net Energy Exports (2002) 16.3% of TPES 83.3% of Renewable Energy Self-sufcient in 2006 30% from Bolivia Renewable Energy % of Total 44% Hydroelectric Energy Production Oil & Oil Derivatives Natural Gas 40% of total energy 8.9% of total energy Petroleum Natural Gas Imports
Electricity Demand (2003) 374TWh per annum Generating (2003) Capacity 82.5GW Renewable Energy Potential (2007 Target)1 Ethanol Production Wind 170 GW (1.451 GW) 15.4 billion litres per annum
Forecast Electricity Demand 697TWh per annum (2020) Forecast Generating Capacity 134GW (2015) SHP 13.2 GW (3.391 GW) Ethanol Exports (2005) Biomass 11.7GW (3.819 GW) 2.56 billion litres per annum
Estimated Ethanol Demand 22.0 billion litres (2010)
Mandated Bioethanol Mix (2006) 20%
Biodiesel Production 740 million litres per annum Mandated Biodiesel Mix (2008) 2% (800 million litres) increasing to 5% (2013) Forecast Biodiesel Production 2.4 billion litres per annum (2013) Forecast Biodiesel Production 12.4 billion litres per annum (2020) USD 20m (Petrobas in 59.5 million litre biodiesel plant) 106 units under construction
National Programme USD 3.2bn (Proinfa)2 Other Investments Investments USD 350m (Biofuels) USD 2.8bn (Hydropower)
1 2 MME 2005
Proinfa programme, established in 2002, set out incentives for the production of electricity through alternative sources. The programme envisages wind, biomass and SHP accounting for 10% of Brazils total electricity production in the next 20 years. Its main objective is to diversify the energy matrix and search for regional solutions by increasing the participation of alternative sources in the electricity supply. The programme guarantees power sale contracts to Electrobras for projects which use this technology in the next 20 years, giving security for investors and project developers. It also establishes that 60% of the equipment used in these projects needs to be produced in the local market. All incentives and accelerators for the renewable energy sector are directly or indirectly related to the Proinfa programme (excepting ethanol and biodiesel).
Table 26: China Country Overview

Economy (GDP PPP) USD 8.182 trillion Population 1.3 billion 1390 million tonnes of oil equivalent FDI (2004)1 USD 60.63 billion Total Energy Consumption Energy Growth2 4.0% per year until 2030 Economic Growth (2001-2003) 8.0% 2002: 9.1% 2003: 8.6% 2004
% of Population Living Below 10% (estimated in 2001) Poverty Line Estimated Economic Growth (Q1 2006) 10.2%
Estimated GDP Growth 9.0% (2006)3
Figure 9: China Energy Overview
Oil: 3.0% Gas: 0.3% Nuclear: 2.3%
Coal 79.4%
Renewables 15%
Hydro: 14.9%
Table 27: China Energy Overview

Net Energy Imports (2002) 1.4% Hydroelectric 7% (2005) 3.226m bbl/day 0 cubic metres (2004) 723 753GW Renewable Energy % of Total 10% (2005) including large hydro Oil Imports Energy Production Oil Production (2004) 3.504m bbl/day Natural Gas Imports Forecast Electricity Demand (2010) Natural Gas 35.02 billion cubic metres (2003) Electricity Demand (2004) 2190 TWh Generating (2003) Capacity 356.09GW Renewable Energy Potential 30.0GW in wind (2020 Target) Ethanol Production Biodiesel Production (2004) 71.4m litres
Forecast Generating Capacity 800 900GW (2030) Forecast Biodiesel Production 14-28bn litres per annum (2020) (all biofuels) 50.0GW in Mini-hydro 20.0MW in Biomass
Mandated Bioethanol Mix (2020) 10% Forecast Biodiesel Production 14-28bn litres per annum (2020) (all biofuels)
Table 28: India Country Overview

Economy (GDP PPP) FDI (2004) USD 3.678 trillion USD 12.7bn Population Total Energy Consumption 1.1bn 418TWh
Energy Growth (2005) 8.1% Economic Growth 7 8% (2001-2003)
% of Population Living Below 25% (estimated in 2002) Poverty Line Estimated Economic Growth (Q1 2006) 8.0%
Estimated GDP Growth (2006) 8.1%
Figure 10: India Energy Overview

Oil: 4.6% Gas: 11.5% Nuclear: 2.8%
Renewables 12.8% Coal 68.3%
Hydro: 11.9%
Wind: 0.6% Biomass and Renewable Wastes: 0.1%

Table 29: India Energy Overview

Net Energy Imports (2002) 17.8% of total energy consumption Hydroelectric Renewable Energy % of 24% (including large hydro) Oil Imports Total Energy Production (2003) Oil Reserves (2004) 5.9bn barrels (0.5% of global reserves) Natural Gas Consumption (2001) Forecast Electricity Demand (2020) 21.5% of total installed capacity 95m tonnes of oil per year (70% of its requirement) 22.75bn cubic metres 1,150TWh
Natural Gas Production (2005) 27.1bn cubic metres Electricity Demand (2004) 418.33TWh
Forecast Generating Capacity 400GW (2030) 1.2GW in biomass and waste
Generating (2003) Capacity 126.34GW Renewable Energy 8.9GW in wind 6.2GW in Mini-hydro Potential (2020 Target)
Table 30: Mexico Country Overview

Economy (GDP PPP) FDI (2004) USD 1.7 trillion USD 3.05 billion Population Total Energy Consumption % of Population Living Below Poverty Line Economic Growth (2006) 106,202,903 2119TWh 40% 3.5%
Energy Growth 69% by 2013 (Base Year 2004) Economic Growth (2001-2003) 1.86% average for the last 5 years
Estimated GDP Growth (2006) 4.5 7%
Figure 11: Mexico Energy Overview
Gas 35.4%
Nuclear: 4.8%
Renewables 13.1% Oil 32.4% Coal 14.3%
Hydro: 9.1% Geothermal: 2.9% Biomass and Renewable Wastes: 1.1%
Table 31: Mexico Energy Overview

Net Energy Imports 45.0% in 2002 (US DOE) Hydroelectric (2003) 9.4% 33.31billion bbl Renewable Energy % of Total 13.1% Proven Oil Reserves (2005) Energy Production Oil Consumption (2004) 1.752m bbl/day Natural Gas Reserves (2005) 424.3bn cubic metres Electricity Consumption 193.9TWh (2004) Forecast Electricity Demand (2013)
Natural Gas Consumption (2004) 55.1bn cubic metres 327.6TWh
Forecast Generating Capacity 65.4GW (2013)
Generating (2003) Capacity 45.8GW Mandated Bioethanol Mix (2010) 10% subject to approval of law Renewable Energy 980MW in wind Targets (2013) 1.4GW in Geothermal 980 in mini-hydro
Ethanol Production Mandated Bioethanol Mix (2010) 10% if the Law to promote and develop biofuels is approved 70 Renewable Energy Investment Opportunities in Emerging Markets
Table 32: Poland Country Overview

Economy (GDP PPP) FDI (2004) USD 489.8bn USD 8.82bn Population Total Energy Consumption % of Population Living Below Poverty Line Economic Growth (2005) 38.54m 59m TOE 17% (estimated 2003) 5.0%
Energy Growth 293TWh by 2025 Economic Growth (2001-2003) 5.3% 2004
Figure 12: Poland Energy Overview
Oil: 1.6% Gas: 1.6% Renewables: 1.7% Coal 95.1% Hydro: 1.1% Wind: 0.1% Biomass and Renewable Wastes: 0.2% Non Renewable Wastes: 0.3%
Table 33: Poland Energy Overview

Net Energy Imports 11.6% of TPES Hydroelectric (2003) 1.2% (US DOE) 24,530 BPD Imports 62% of its gas requirements 293TWh Renewable Energy % of Total 3% Oil Reserves Energy Production Oil Consumption (2004) 476,200 BPD Natural Gas Imports Natural gas 12% of TPES Electricity Demand (2004) 154.1TWh Renewable Energy Potential 6.0GW wind Forecast Electricity Demand (2025)
Forecast Generating Capacity N/A (2030) 4.0GW biomass
Total Generating Capacity 35.3GW Mandated Bioethanol Mix (2010) 5.75% of fuels must be (2003) blended with biofuels Estimated Biofuel Demand 700,000 tonnes per year Mandated Biodiesel Mix (2010) (2010) 5.75% must be blended with biofuels
Table 34: Thailand Country Overview

Economy (GDP PPP) FDI (2004) 545.8bn USD 3.85bn Population Total Energy Consumption 64.6m 107.3 TWh
Energy Growth N/A GDP Growth (2005) Food Exporter 4.5% per annum
% of Population Living Below 10% (estimated in 2004) Poverty Line GDP Growth (2004) 6.1% per annum
Estimated GDP Growth (2006) 4.9% per annum 5th largest globally
1 Energy Information Administration (EIA)
Figure 13: Thailand Energy Overview
Gas 73.0%
Renewables 8.5% Coal 15.8%
Hydro: 6.2%
Oil: 2.7%
Table 35: Thailand Energy Overview

Crude Oil Imports (2004) USD 10.7bn (6.5% of GDP) Natural Gas (2004) 76% 0.75GW 0.5GW 3.043GW (6%) 189.9TWh Renewable Energy % of Total 1% Biomass Energy Production (2004) Oil Reserves Natural Gas Reserves (2003) 583m bbl 377.7bn cubic metres Wind Hydropower Forecast Electricity Demand (2015)
Projected Energy Demand N/A CAGR Generating Capacity (2003) 26.0GW
Forecast Generating Capacity 46.0GW (2015)1
Renewable Energy Potential 1.9GW (8% of total energy) (2011 Target) Ethanol Production 73.0 million litres per annum Ethanol Exports (2005) 90% (mostly Japan) Estimated Ethanol Demand N/A Mandated Bioethanol Mix (2006) N/A (2010) Biodiesel Production2 3.65 million litres per annum Mandated Biodiesel Mix (2008) Forecast Biodiesel Production N/A (2013) 8.5m litres per day (10% of diesel consumption)
Forecast Biodiesel Production N/A (2020) USD 300m over 10 yrs
National Programme USD 34m for biodiesel production Biogas Investment Potential3 Investments Renewable Energy Obligation 5% through Renewable Portfolio (2005) Standard
1
In 2005, Thailand announced a international $ 6bn tender to build 12GW of electricity capacity and the country has a history of awarding lucrative long-term power purchase agreements (PPAs) which is very attractive for project developers. Luke Eginton, Managing Director of Waste Kleen, who develops biogas projects in Thailand (headquartered in Singapore, Waste Kleens projects in Thailand are just at the proposal stage, but it has several operating in Europe), expects a minimum Internal Rate of Investment (IRR) of 16%. Including the possible purchase of CERs the IRR could increase to about 20% or even more. 24 ethanol factories being permitted by the national Ethanol Board, to produce ethanol for fuel use, with total capacity of 4,210,000 l/d (1.5bn litres/a). Thai engineering group CleanTHAI believes it has a head-start in terms of signing contracts with cassava producers for the generation of biogas and biofuel. The engineering company is also the developer of the Korat Waste-to-Energy plant, which will have the greatest digester in South-East-Asia. Currently producing 3.1MW, the plant is expected to generate 40MWth and 5MWe. Half a dozen other companies (CST Environment, Jiamphatana, several contractors for Biogas Advisory Unit of Chiang Mai University, and the Energy for Environment Foundation) are actively involved in project development. Given the lucrative returns, competition is expected, but expertise in the eld is limited, and it is currently uncertain whether expansion of the industry can take place in ways that maintain the high returns that early entrants have achieved.
2 3
Table 36: Turkey Country Overview

Economy (GDP PPP) FDI (2004) USD 552.8bn USD 2.94bn Population (est 2006) Total Energy Consumption % of Population Living Below Poverty Line Ination (2005) 70.4m 60 MTOE 20% (estimated 2002) 7.7% (30-year low)
Energy Growth N/A GDP Growth (2005) 5.1% per annum
Figure 14: Turkey Energy Overview
Gas 45.2% Renewables 25.3% Oil 6.5% Hydro: 25.1%
Coal 22.9%
Geothermal: 0.1% Biomass and Renewable Wastes: 0.1%
Table 37: Turkey Energy Overview

Net Energy Imports 57% (90% of all its oil) Thermal Power 69% 31% 240.0TWh Renewable Energy % of Total 32% Hydroelectric Energy Production (2004) Projected Energy Demand 8-10% CAGR Generating Capacity 37.5GW Renewable Energy Obligation 8% of electricity consumption (2005)
1
Forecast Electricity Demand (2015)
Forecast Generating Capacity 54.0GW (2020)1 Feed-in Tariff Est. EUR 0.05/kWh
A major dilemma for Turkey had been how to invest in new electric power capacity while at the same time adhering to foreign debt ceilings mandated under lending rules set by the IMF. Conventional nancing of major infrastructure projects would only increase the amount of foreign credit, so Turkeys Energy Ministry has conceived other options for nancing projects. One option used until now has been the so-called Build, Operate and Transfer (BOT) model, under which private investors build and operate private sector generation facilities for a set number of years, at which point they transfer ownership to the state. First introduced in 1984 (under Law 3096) by then Prime Minister Turgut Ozal, BOT projects have been plagued by legal problems, which has slowed their implementation (although 23 BOT projects, plus ve build-operate plants, have been commissioned since 1993). Another problem with BOT projects is that they obligate the government to commit to long-term power contracts at predeterminedand often highprices (in exchange for lower capital costs initially).
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Renewable Energy Investment Opportunities in Emerging Markets

GLOBAL ENVIRONMENT FUND

Renewable Energy Investment Opportunities in Emerging Markets i

ii Renewable Energy Investment Opportunities in Emerging Markets

foreword: a new era of investing in renewable energy in emerging markets

A History of Commitment and Successful Investment

Renewable Energy Investment Opportunities in Emerging Markets iii

Favorable Market Conditions

iv Renewable Energy Investment Opportunities in Emerging Markets

Successful Investment Strategy

Renewable Energy Investment Opportunities in Emerging Markets 

The Story Continues

vi Renewable Energy Investment Opportunities in Emerging Markets

2. Emerging Markets Overview.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3. Global Investment Activity In Renewable Energy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

4. Renewable Energy Opportunity In Selected Emerging Markets .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

viii Renewable Energy Investment Opportunities in Emerging Markets

Renewable Energy Investment Opportunities in Emerging Markets ix

 Renewable Energy Investment Opportunities in Emerging Markets

1. introduction why look at renewable energy investment in emerging markets?

$7.0bn $25.2bn $44.1bn $18.2bn*

$6.0bn $18.9bn $4.0bn $3.0bn

VC/PE Public Corp markets R&D

Govt Tech R&D subtotal

Renewable Energy Investment Opportunities in Emerging Markets 

The Improving Outlook for Renewable Energy: Key Drivers

 Renewable Energy Investment Opportunities in Emerging Markets

Growing Energy Demand

________________ 4 OECD/IEA World Energy Outlook 2004

Renewable Energy Investment Opportunities in Emerging Markets 

Long Term Energy Price Trends

Fossil-Fuel Energy Costs

Increased Cost of Oil

 Renewable Energy Investment Opportunities in Emerging Markets

Falling Cost of Renewable Energy Technology

Renewable Energy Investment Opportunities in Emerging Markets 

Table 2: Renewable Energy Technologies Capital Costs and Cost Trends

Marine 4.2 per MW Stable and falling due to technological developments.

6 Renewable Energy Investment Opportunities in Emerging Markets

Figure 2: Range of Total Energy Cost by Source (USD cents/kWh)

Bio ma ss Ge oth erm al

Growing Search for Energy Security

8 Renewable Energy Investment Opportunities in Emerging Markets

Potential Renewable Energy Solutions for Emerging Markets

________________ 6 World Bank: Little Green Data Book. May 2006

Renewable Energy Investment Opportunities in Emerging Markets 9

10 Renewable Energy Investment Opportunities in Emerging Markets

Renewable Energy Investment Opportunities in Emerging Markets 11

12 Renewable Energy Investment Opportunities in Emerging Markets

2. emerging markets overview

Renewable Energy Investment Opportunities in Emerging Markets 13

Energy Needs in Emerging Markets

________________ 9 REN21 Renewables 2005 Global Status Report

14 Renewable Energy Investment Opportunities in Emerging Markets

Developed World Support for Renewable Energy in Emerging Markets

Accelerators and Support Mechanisms

Renewable Energy Investment Opportunities in Emerging Markets 15

Power Generation Promotion Policies

16 Renewable Energy Investment Opportunities in Emerging Markets

Table 3: Renewable Energy Policies & Measures

Renewable Energy Investment Opportunities in Emerging Markets 17

Domestic Policy Targets for Renewable Energy

Table 4: Selected Emerging and Transition Economies Renewable Energy Targets

Source: IEA , EBRD, Government announcements

Renewable Energy Investment Opportunities in Emerging Markets

Renewable Energy Investment Opportunities in Emerging Markets

Renewable Energy Investment Opportunities in Emerging Markets

Renewable Energy Investment Opportunities in Emerging Markets

Renewable Energy Investment Opportunities in Emerging Markets

Renewable Energy Investment Opportunities in Emerging Markets

Renewable Energy Investment Opportunities in Emerging Markets