AFRICAN BIOFUELS & RENEWABLE ENERGY FUND

To become in long term a leader Fund in Clean Energy

Development focused on African region

Dakar, 4 September 2008

Energy Security: Energy poses a major problem in sub-Saharan Africa, more so than anywhere else in the world.

The electrification rate < 25% The primary energy consumption = 5% of the world total consumption An increase in oil price $10/barrel = 1.5% drop in GDP & up to 3% for very poor countries

Climate change: The poorest countries that will suffer the climate change earliest and most Hunger, water shortages and coastal flooding The increase of production and exports of oil and gas cannot be an end in itself

Carbon market: an additional revenue stream Kyoto protocol and its local application : European Trading Scheme, CCX (USA),NSW (Australia)… Carbon finance could raise $4 billion by 2012 and up to $14 billion thereafter (10 times greater than what is available than Official Development Assistance)

Energy Context

I. BackgroundI. Background

I. BackgroundI. Background

CDM Opportunities and Biofuels

Africa currently accounts for less than 2% of the Clean Development Mechanism (CDM) projects. Yet, the continent is rich in natural resources and the potential for investments in biofuels and renewable energy is considerable. The water and forest resources of the African continent are vast. For example, Africa has:

17 major rivers with catchment areas of greater than 100,000 km2;

total forest cover of 650 million hectares (69.8 million haectares in West Africa) accounting for approximately 17% of the world’s total forest cover;

Many natural resources remain unexploited due to either lack of capital or human resource skills available.

Average sunshine potential in West Africa represents 5 to 6 kWh/m² per day

I. BackgroundI. Background

In November 2006, the ECOWAS Bank for Investment and Development (EBID) and the United Nations Conference on Trade and Development (UNCTAD) organized a regional conference in Accra, Ghana, on the financing of bio-fuels and Jetropha cultivation in Africa, and on the development of the carbon market.

During the conference the initiative was launched to establish an African Fund for the development of bio fuels.

The President of the Republic of Ghana, his excellency John KUFUOR kindly agreed to be the patron of the Fund.

The Fund Creation

II. Objectives of the Fund II. Objectives of the Fund

The Fund will :

Contribute to the development of the biofuels and renewable energy industry in the African regions, with a particular focus on West African countries

Provide investors with superior returns through investments in biofuels and renewable energy projects which generate Certified Emission Reductions (CERs).

III. Structure & Mode of Operation III. Structure & Mode of Operation of the Fundof the Fund

Structure

Africa Biofuels & Renewable Energy

Fund (ABREF)

Equity Investment CERs Purchase

Africa Clean EnergyTechnical Assistance

Facility (ACE TAF)

Feasibility studies Energy audit for potential energy

efficiency projects Project Design Documentation &

Validation Projects preparation costs Capacity building

Africa Biofuels & Renewable Energy Company (ABREC)

Project identification Support for Management of

the TAF Liaison & Coordination Support to the Fund Manager

International Fund Manager)

Revew & carry out due diligence on projects &recommandation to the Board of Trustees

Monitor the project post funding & report backto the Board of Trustees

Prepare an annual budget for its activities

III. Structure & Mode of Operation III. Structure & Mode of Operation of the Fundof the Fund

Board of Trustees

Investment Committee

Management of the Fund

Two options

Joint Venture between ABREC and the International Fund Manager (IFM)

One International Fund Manager (SICAV : a “limited liability company with a variable share capital”)

Mode of Operation

IV. Fund Size, Category of Shares IV. Fund Size, Category of Shares & Investment Parameters& Investment Parameters

ABREF Equity investments : € 200 million

€ 150 million (75%) of the Fund’s capital for equity investments in specific projects € 50 million (25%) to purchase CERs

Debt facility : US $ 1 billion

ACE TAF : € 10 million

Contributions from governments Voluntary contributions from private sector

Fund Size

IV. Fund Size, Category of Shares IV. Fund Size, Category of Shares & Investment Parameters& Investment Parameters

Two options :

Option I

Private Investors , Share A

Governments, Share B

Option II

ABREC (African investors), Share A

Governments (Non African), Share B

Non African Institutions, Share C

Category of Shares

IV. Fund Size, Category of Shares IV. Fund Size, Category of Shares & Investment Parameters& Investment Parameters

A minimum contribution from any one investor of € 5 million euro;

The investment from African Investors will be represented by ABREC with an minimum investment by ABREC of €5 million euro with a minimum of €1 million euro by any one investor;

A maximum contribution from any one investor of € 40 million euro;

A minimum of Euro 50 million for the fund to close, in the event that it proves extremely difficult to raise the € 200 million target

A minimum of 5 investors of which at least two must be Government investors and at least two must be private sector investors

Investment parameters

V. Eligible sectorsV. Eligible sectors

Energy-Efficiency (Household & Industrial);

Renewable Energy (e.g – small hydro);

Biomass (new generation facilities using biomass);

Fuel-Switching (e.g – coal or gas or oil to biomass);

Methane Capture (e.g – landfill gas);

Biofuels (e.g. – Jatropha plantations).

N.B : All the projects will be financed on the base of their financial profitability

VI. Eligible countriesVI. Eligible countries

First Phase

Second Phase

ALL AFRICA

VII. Types and Parameters of VII. Types and Parameters of investmentinvestment

Category

Carbon (CER

Generation)Description of Type of Investment

1 No Equity Investments

2 Yes Equity Investments with CERs

3 Yes Intermediation of Debt in Return for CERs

Types of Investment

VII. Types and Parameters of VII. Types and Parameters of investmentinvestment

Parameters of Investment

At least 75% of the Fund’s capital should be invested in the preferred categories of projects (energy-efficiency, small hydro, biomass (new cogeneration) and biomass (fuel switching);

A minimum investment in any one project of €1 million euro;

A maximum investment in any one project of 10% of the Fund or €20 million euro, whichever is lower.

VIII. ABREF Business Plan VIII. ABREF Business Plan

The business model of ABREF will be to :

Identify

Originate and

Execute investments in renewable energy projects from the ABREC’s pipeline of projects wich generate an additional return from the sale of CERs

IX. ABREF Pipeline of IX. ABREF Pipeline of Projects Projects

SECTORS NUMBER

Agriculture 4

Biofuel 19

Biomass Energy 10

Energy Distribution 7

Energy Efficiency industry 2

Energy Efficiency households 9

Energy Efficiency own generation 5

Fossil fuel switch 5

Hydro 22

Afforestation / Reforestation 4

Solide Waste management 17

Solar 3

Wind 1

TOTAL 108

X. Target rate of returnX. Target rate of return

With the additional return from CERs :

The Fund expects a minimum of 15% Internal Rate of Return (IRR) based on this following assumption:

Governments : 5%

Private investors : 25%

Assuming that the Fund is composed of 50% government funding and 50% private funding

XI. CER Contracting and XI. CER Contracting and Sales StrategySales Strategy

The CER contracting structures include :

Fixed price with 30-50% of CER contract valued at financial closure and the rest on delivery of the CERs

Low fixed price with the project sponsor and the Fund sharing returns above the fixed price

Partial Sale of CERs at a low fixed price of which 100% is payable up front. The remaining CERs can then be sold later once the project is more developed either on the spot market or through a forward contract.

XII. The Voluntary Carbon XII. The Voluntary Carbon MarketMarket

The Fund will also focus on the Voluntary Carbon Market for the projects which are not able to generate CERs

The VER market is expanding with a future increased demand

In the absence of regulation, there is an increasing number of companies around the world who are wanting to go ‘carbon neutral’ in order to prove their green credentials. VERs can be generated for projects where there is not an approved CDM methodology yet in place or in countries where it is not yet possible to undertake CDM projects.

XIII. Risk ManagementXIII. Risk Management

Country risk Can be mitigated through close working with the governments of the respective countries who badly

need the services to be provided by the projects Market risk

Can be mitigated through the use of appropriate partners in each country and through the commissioning of thorough feasibility studies

Economic risk The benefit of carbon credits earned under the CDM mechanism will assist the economic returns on

the project Management Risk

This risk is mitigated by conducting a tender to select the best possible international fund manager and by ensuring that ABREC works closely with the International Fund Manager in a cooperation and support role

Carbon CER Delivery Risk Can be mitigated in three manners :

o by not forward selling CERs from the project until the project is well advanced under development o by conservatively selling the volume of CERs expected to be generated by the project and o by taking out CER delivery guarantee insurance with an insurance company

The risk of there not being any CERs, post 2012 can be mitigated by not selling any post 2012 CERs until the international climate regime, post-2012 becomes clearer.

XIV. Exit StrategyXIV. Exit Strategy

Two obvious exit routes :

An Initial Public Offering (IPO) of the Funds equity stake, including in its project CER portfolio

A tender and private sale to private investors and/or CER purchasers.

XV. Tax RegimeXV. Tax Regime

ABREC will be the International Financial Institution. The tax regime depends on the location and the form of the management of the Fund. If :

• Joint Venture between ABREC and the International Fund Manager (IFM) …… 45%

• One International Fund Manager (SICAV) ……………………………………………. 0%

The Fund is tax exempt

XVI. Road MapXVI. Road Map

THANKS TOOUR SPONSORS

Ecowas Bank for Ecowas Bank for Investment & Investment &

DevelopmentDevelopment

United NationsUnited Nations Conference On Trade & Conference On Trade &

DevelopmentDevelopment

World BankWorld Bank Carbon Finance Carbon Finance

AssistAssist

Economic Economic CommunitCommunit

yy Of West African Of West African

StatesStates

ECOBANK GroupECOBANK GroupInternational International

Energy Insurance Energy Insurance (Nigeria)(Nigeria)

Fonds Africain de Fonds Africain de Garantie et Garantie et

de Coopération de Coopération EconomiqueEconomiqueOUR PARTNER

ECOSURECOSUREnergy.EnvironEnergy.Environ

ment.ment.InnovationInnovation

Alien EnergyAlien Energy Empresa Empresa Brasileira Brasileira

dedePesquisa Pesquisa

AgropecuAgropecuàriaària

FIRST FIRST CLIMATCLIMAT

EE

Agence Nationale Agence Nationale d’Appui d’Appui

Au Développement Au Développement RuralRural

Communauté Communauté Electrique du BéninElectrique du Bénin

DENTON WILDE DENTON WILDE SPATESPATE

Union Economique Union Economique et et

Monétaire Ouest Monétaire Ouest AfricaineAfricaine

Head of Project

Mr. Thierno Bocar TALL

Tel : (+228) 221 68 64Fax : (+228) 221 86 84

(+228) 222 81 51

E-mail : infos@faber-abref.org

www.faber-abref.org

THANK YOU FOR YOUR KIND ATTENTION

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