Asian development bank creates clean energy funds



The Asian Development Bank (ADB) has named five clean energy private equity funds to which it is providing up to $100 million in seed financing. The funds hope to raise a total of $1.2 billion to invest in clean energy projects in Asia.

'ADB believes the success of these funds will help demonstrate the credibility of private equity in the emerging clean energy sector in developing Asia, and mobilize capital to support other private equity funds,' said Mu-Shin Kim, Investment Specialist in ADB’s Private Sector Operations Department. ADB is playing a catalytic role by identifying and supporting fund managers willing to establish clean energy-focused private equity funds.

ADB, based in Manila, is dedicated to reducing poverty in the Asia and Pacific region through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members - 48 from the region. In 2007, it approved $10.1 billion of loans, $673 million of grant projects, and technical assistance amounting to $243 million.

The funds - MAP Clean Energy Fund, China Environment Fund III, GEF South Asia Clean Energy Fund, Asia Clean Energy Fund, and China Clean Energy Capital - will each receive up to $20 million in capital from ADB. The five funds were selected from 19 fund managers responding to ADB’s call for proposals issued in July 2007.

By 2030, global energy demand will likely rise 53% from current levels, and developing Asia represents a large portion of it. The energy investment in Asia is strongly carbon-intensive, or highly dependent on coal-fired power generation. 'Significant resources need to be invested into clean energy and low-carbon investment alternatives over the next few decades,' Mr. Kim said.

Recent reports indicate that greenhouse gas emissions from China have already surpassed the United States and will likely eclipse all other nations by 2030 (see GLOBE-Net article Are We Underestimating Climate Change?).

The MAP Clean Energy Fund (MAP) has the largest target size of the five funds, aiming to invest a total of $400 million in 10 to 15 projects across Asia, with a focus on Indonesia and Southeast Asia. Project investments will range from $15 million to $40 million. Geothermal projects in Indonesia, wind projects in India and Pakistan, and bio-ethanol projects with no competition for food crops in the region are among those considered.

The China Environment Fund III (CEF III) has a target size of $200 million to $250 million and will invest in companies working to improve the environment by reducing, reusing, and recycling natural resources in People’s Republic of China (PRC). The Fund will make 15 to 20 investments of $5 million to $30 million each in a broad range of clean energy sectors. Among projects in the pipeline are solar photovoltaic modules, large-capacity batteries for wind farms, a laser-based monitoring system for clean coal-fired power plants, thermal technologies, coal-bed methane projects, and electronic control system for wind power, biogas projects, and energy efficiency projects.

GEF South Asia Clean Energy Fund (GEF-SA) has a target size of $200 million, and will make around 12 investments of $3 million to $15 million each across South Asia in companies and projects that promote the use of efficient, reliable, and cleaner forms of energy in Bangladesh, India, Nepal, Pakistan, and Sri Lanka. The Fund is jointly sponsored by Global Environment Fund, an international private equity firm with an 18-year record of investing in clean technology and emerging markets, and YES BANK Limited, an India-based private sector bank specializing in renewable energy and clean technologies.

The Asia Clean Energy Fund (ACE) has a target size of $200 million and will make about 15 investments of $10 million to $15 million each throughout Asia. Projects in the pipeline in Southeast Asia include palm oil projects, solar project expansions, and replacement of used transformers. Additionally, it will also be involved in a solar photovoltaic business in Indonesia, a waste-to-energy project, biodiesel companies in the Republic of Korea, and a power plant rehabilitation project with a focus on PRC and India.

The China Clean Energy Capital (CCEC) fund has a target size of $100 million to $150 million, and will make 8 to 12 investments of $5 million to $30 million each in renewable energy projects, energy savings and energy efficiency, and other clean energy technologies in PRC. CCEC’s pipeline includes renewable power generation projects/technologies (biomass, wind farm, solar thermal), alternative fuels (bio-diesel, straw-to-ethanol), and energy savings/energy efficiency technologies (new construction materials) in PRC.

The need for private investment in renewable energy projects in both the developing and developed world is continually stated by climate change experts around the world and investors are answering the call as noted in a previous GLOBE-Net Article The Changing Climate of Investment.

'It’s been an action-packed and vibrant period for sustainable finance and responsible investment,' said Paul Clements-Hunt, Head of the United Nations Environment Programme’s Finance Initiative (UNEP-FI). 'In just four short months since the UNEP FI gathering, we have seen a series of pivotal international meetings that are starting to forge a new agenda for the financial services sector in coming years that recognizes the need to deal with climate change,'

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