Carbon as a New Commodity Class –
Africa in the Emerging Global Carbon
Markets
by
Dr. Christiane Abou-Lehaf
Senior Principal Associate
Planning & Business Development
Presented at the “West Africa Carbon Finance Investment Forum for
Financial Institutions” during February 12 - 14, 2008, in Dakar, Senegal
Contents
1. About Afreximbank
(www.afreximbank.com)
2. Afreximbank’s Programmes and Facilities
3. Why Carbon Financing Programme?
4. Afreximbank Carbon Financing
Programme (CFP) – Product Outline
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1. About Afreximbank
1.1 Background:
 Established
in 1993 as a multilateral financial
institution.
 Shareholders include African governments and/or
their Central Banks; African Multilaterals (Class A
Shareholders); African private investors (Class B
Shareholders); and non-African investors (Class C).
 Authorized capital = US$750 million.
 Mandated to finance and promote intra- and extraAfrican trade.
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1. About Afreximbank (cont’d)
 Headquartered
in Egypt with Branch offices in
Abuja, Nigeria; Harare, Zimbabwe; and Tunis,
Tunisia.
 Cumulative credit approvals since 1994/95
amounted to USD11.6 billion (end of 2007).
 Profitable with Return On Equity in excess of 7%
in recent years
 Been paying dividends to Shareholders since 1998.
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1.2 Vision, Mission and Mandate
1.2.1 Vision
To be the Trade Finance Bank for Africa
1.2.2 Mission
To stimulate a consistent expansion, diversification
and development of African trade while operating as a
first class, profit-oriented, socially responsible
financial institution and a centre of excellence in
African trade matters.
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1.2.3 Mandate
Some of the Principal Objects of the Bank are:
 To extend short-term credit and medium-term loans to
African exporters and importers;
 To finance imports needed for export development such as
imports of equipment, spare parts and raw materials;
 To promote and provide insurance and guarantee services
covering commercial and non-commercial risks associated
with African exports;
 To develop a market for banker acceptances in Africa; and
 To promote and finance South-South trade between African
and other countries, among others.
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2. Afreximbank Programmes and Facilities
Afreximbank offers a number of Programmes
and Facilities aimed at promoting intra- and
extra-African trade, namely
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
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
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Afreximbank Line of Credit Programme;
Afreximbank Direct Financing Programme;
Afreximbank Syndications Programme;
Afreximbank Project Related Financing Programme;
Afreximbank Special Risks Programme, including
Country Risk and Investment Guarantees Facilities;
Investment Banking and Advisory Services Programme;
Afreximbank Export Development Finance Programme;
Afreximbank Infrastructure and Services Financing
Programme;
Afreximbank Future Flow Financing Programme; and
Afreximbank Trade Information Programme, among
others.
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• In its 3rd Strategic Plan to cover the period 20072011, Afreximbank proposes to introduce a
Carbon Financing Programme
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3. Why Afreximbank Carbon Financing
Programme?
 It will help the development of environmentally-friendly
projects in Africa.
 Access to finance will encourage entrepreneurs to think of
using environmentally-friendly technologies that may be
more expensive than traditional technologies.
 Such a Programme will help attract to Africa the huge
funds devoted to buying carbon credits under the CDM.
Currently most of these funds go to Asia and Latin
America.
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3. Why Afreximbank Carbon Finance
Programme? (cont’d)
 Enhanced cashflow for projects.
 To improve the negotiating power of African
sellers of Carbon Credit by mitigation of delivery
and project completion risks.
 Maintaining social responsibility.
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3. Why Afreximbank Carbon Finance
Programme? (cont’d)
 Even though there are risks in carbon finance such as project
completion risk, performance/delivery risk, payment risk,
regulatory risk, price risk, etc., the potential benefits to Africa
and financiers, such as the Bank could be very high. The flow
of new and additional resources for environmentally sound
projects in African countries can augment Official
Development Assistance (ODA) and serve as a conduit for new
technologies. This would meet the need of African countries to
increase their energy efficiency and mitigate environmental
pollution.
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3. Why Afreximbank Carbon Finance
Programme? (cont’d)
 Opportunity for spin-off business - It can
complement the Bank’s engagement in energy
and infrastructure projects, where carbon
finance can improve the viability of these
investments and create other revenue
opportunities.
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3. Why Afreximbank Carbon Finance
Programme? (cont’d)
 Carbon finance can also play a role in increasing
investment in efficient fossil fuel plants, supporting
renewable energy (including biofuels), dealing with
poorly managed landfills and other waste streams that
pose serious public health risks to large populations,
building sustainable forest management, improving land
use practices in agriculture, and increasing efficiency in
transportation – all while setting up a cost-effective
mechanism to deal with climate change.
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4.
Afreximbank Carbon Financing
Programme (CFP) –Product Outline
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Purpose
Objectives
Beneficiaries
Eligible Transactions
Implementing Modality
Financing Instruments
Pricing
Tenor
Partnerships
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4.1 Purpose
To support environmentally-friendly projects in
Africa by promoting project-based trading of
certified emission reductions (Carbon Credits)
under the Kyoto Protocol’s Clean Development
Mechanism (CDM) as well as pre-financing
receivables from carbon credits earned and
traded by African businesses and governments
thereby contributing to reductions in carbon
emissions and abating consequential climate
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change.
4.2 Objectives
The Bank’s CFP has the general objective of
supporting
African
private
and
public
environmentally-friendly projects, some of which
would otherwise not be bankable, by leveraging the
credit of off-takers of carbon credits earned by those
projects to complement other revenue flows
supporting such deals.
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The specific objectives are:
1. to stimulate investment in environmentallyfriendly projects under the CDM
2. To leverage additional carbon finance and
supporting investments into Africa through
partnering with developed country governments
and private corporations wanting to buy carbon
credits in African markets;
3. strengthening the capacity of African countries
to benefit from the emerging market for carbon
credits;
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4. to play a major role in building, sustaining, and
expanding a market-based approach for carbon
emission reductions by piloting the development
in Africa, of new techniques for achieving carbon
emission reductions while attracting finance for
new types of projects (e.g., clean coal, urban
infrastructure,
sustainable
agriculture,
aforestation, etc.).
5. to promote awareness about the dangers of GHG
emissions and to encourage entrepreneurs to
pursue projects that recognize these dangers.
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4.3 Beneficiaries
4.3.1 African
corporates
and
governments
implementing projects that have earned or are
likely to earn carbon credits;
4.3.2 African banks and financial institutions
financing trade in carbon credits and/or projects
that have earned or can earn carbon credits; and
4.3.3 NGOs and environmental groups seeking
finance to promote projects that have earned or
can earn carbon credits.
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4.4 Eligible Transactions
4.4.1 African Projects under the CDM; and
4.4.2 Carbon traders that have accumulated carbon
credits earned by environmentally friendly
projects in Africa and who have sold those
credits to acceptable parties.
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4.5 Implementing Modality
 Advances to projects against assignment of
binding and enforceable carbon credits sales
contracts entered into with parties acceptable
to Afreximbank;
 Country Risk Guarantees to mitigate policy
risks for prospective investors in African
CDM projects;
 Letters of Credit, etc. in support of Eligible
Transactions, against carbon credits sales
proceeds assignment;
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 Performance guarantee covering delivery risk
for projects that have sold their CER’s on long
term basis;
 completion risk guarantees for CDM projects
if needed by a prospective purchaser of carbon
credits; and
 Brokerage/ Advisory Services for CER
certification process and trading of carbon
credits.
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4.6 Financing Instruments
4.6.1 Direct Advance;
4.6.2 Guarantees; and
4.6.3 Advisory/Brokerage services to assist eligible
projects earn carbon credit and trade same in
the international markets.
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4.7 Pricing
4.7.1 Funded transactions attract:
(i) interest rate, and
(ii) fees
The above are linked to the LIBOR and related to
country and transaction risks and market conditions.
4.7.2 The Non-funded transactions attract fees only
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4.8 Tenor
Maximum tenor is 4 years, subject to no deal
exceeding 2012 unless the Kyoto Protocol is
extended.
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4.9 Partnerships
1.
2.
3.
4.
5.
6.
The Bank implements its CFP using a
partnership approach. Such partners include:
African, non-African Multilateral Development
Institutions.
African and non-African EXIM Banks.
African and non-African banks and Carbon
Funds.
African and non-African governments.
African and non-African corporates, including
brokerage firms.
NGOs and environmental groups.
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Prospective applicants can access the programme
by sending their application to the President of the
Afreximbank. The application must contain
detailed
information
on
the
following:
 Organization;
 Ownership;
 History;
 Management’s experience in the line of
business;
 3 year financial statements;
 Detailed information on the
transaction/project, PDD (if available);
 The country of operation, among others.
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Contacts
Headquarters:
The President
1191 Corniche El-Nil, Cairo, 11221, Egypt
P.O. Box 404 Gezira
Cairo, 11568, Egypt
Tel: 202 25780282
Fax: 202 25780276
Email: mail@afreximbank.com
Website: www.afreximbank.com
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Thank you
for
Listening
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