James Maguire - The Energy Efficiency Opportunity
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Transcript of James Maguire - The Energy Efficiency Opportunity
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Asia Clean Energy Forum
2012
Managing Risks in Clean EnergyProjects Session 22
7 June 2012
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Agenda
1. The Energy Efficiency Opportunity
2. Climate Change and the Insurance Industry
3. Financial Risk Management Instruments and Energy Efficiency
4. China Case Study
5. Practical Lessons Learned
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The Energy Efficiency Opportunity
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The Energy Efficiency Opportunity
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Energy Efficiency Projects (EEPs) in Asia
Accelerate EEPs in Asia requires financial risk management innovation
Scale and scalability impacts financing - Hosts and ESCOs
Key barriers to development of EEPs in Asia
Credit Default and/or Counter Party risk
Performance Risk Utilize insurance platforms and financial risk management instruments
Financial Risk Management Instruments to accelerate EEPs in Asia Pacific
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Major catastrophic event patterns 1989 - 2011
8
Since 2004, focus has been on Windstorm losses in the USnow shifting to Earthquake risks, with an international concentration of events
(Insured losses, $ billions)Major catastrophic property risk exposures and events
Hard Market Turn
Katrina / Wilma / Rita
1H 2011 Total CAT lossesestimated at $80 to $90 bn
Australia Cyclone /Australia
Flood / New Zealand II /Japan / US Tornadoes /
New Zealand III
Event Year
Insuredl
ossin
$
bn
Earthquake
Windstorm
Terrorism
Flood
Hugo
Andrew
Northridge
9/11
CharleyIvan
FrancesJeanne
GustavIke
XynthiaChile
New Zealand
HardMarketTurn
HardMarket
Turn
7.3
23.8
11.3
22.8
4.2 6.212.5
5.02.3
5.2
11.3
2.2
8.0
1.0
8.1
45.3
2.9
12.0
8.5
1.4
39.0
15.0
1.07.0
5.0
0
10
20
30
40
50
60
70
80
90
1989 1992 1994 2001 2004 2005 2008 2010 2011
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Financial Risk Management Instruments - Energy Savings Insurance
Address counterparty credit default exposure in Energy Efficiency Projects andconsequential impact to debt service obligations. Two key perils to be insured: Performance Shortfall
Credit default and/or insolvency of host facility (ies)
Reimburse the Loan Provider(s) and Loan Recipient(s) when a reduction in expectedperformance levels exceeds a fixed % of the expected savings
Reimburse the Loan Provider (s) and Loan Recipient (s) for up to 90% of lossesresulting from non-payment due to: Customer or host bankruptcy,
default on payment, and /or
energy management contract cancellation.
Term of Coverage: Term of the Loan or maximum 5 years
Per project and annual aggregate caps to be negotiated - linked to debt/equity ratios
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Financial Risk Management Instruments Energy Savings Insurance
Investors
Payment fromMeasured andVerified SavingsAchieved
EnergyEfficiencyServices
Host Facility
ESCO Credit Facility
Finance forEnergyEfficiencyProject
Source: Aon Risk Solutions
EnergySavings
Insurance
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Financial Risk Management Instruments - Performance Guarantee Facility (ies)
Investors
Payment fromMeasured andVerified SavingsAchieved
EnergyEfficiencyServices
Host Facility
ESCO Credit Facility
Finance forEnergyEfficiencyProject
Source: Aon Risk Solutions
PerformanceGuarantee
Facility
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Financing Energy Efficiency Projects (EEPs) - China Case Study
Concept of Supply Chain Carbon Risk Management
Chinas emissions could grow as much as 90% from 2005 to 2020
Over 50% of Chinese exports manufactured for foreign companies Scale and scalability impacts financing costs - Hosts and ESCOs
Global Corporates and supply chain carbon risk management
Chinas 12th Five Year Plan Energy Efficiency Regulation - Suppliers need to prepare
for regulatory or other changes associated with climate change and GHG emissions
A new paradigm EEP platform based on supply chain risk management and
product liability insurance procurement model
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EEP China Case Study Practical Lessons Learned
Lenders/Insurers perception of ESCO and Host Facility credit risk
Lack of reliable data on credit risk/default
Scale and scalability is objective for both equity, debt and insurers
ESCO bandwidth global versus local and horses for courses
Role of Sponsor
Provide incentives to supply chain (increased orders, longer contracts)?
Secure payment streams?
Participate in funding?
Public private partnership framework to address market barriers
Insurance Industry must lead by example:
Presently funding the cost of extreme weather
Financial risk management instruments to support investment in Energy Efficiency
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Contact List
James A. Maguire Gary Swinfield
Regional Managing Director, Asia Regional Director, South & Southeast Asia
Construction, Power & Infrastructure Specialty Construction, Power & Infrastructure Specialty
+852.2862.4293 +65.6231.6315
[email protected] gary.swinfield @ aon.com
Brian DeBruin
Regional Director, North Asia
Construction, Power & Infrastructure Specialty
+852.2862.4296
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected] -
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Statement of Confidentiality
This document and all/any supporting papers (collectively known as the Document)
contain information which is confidential to:Aon Corporation
Accordingly, we trust you will understand this Document may
not be reproduced in any form and communicated to any
other person, firm or company without the prior written approval of
Aon Corporation
In addition, unless otherwise agreed to in writing, this
Document remains at all times the property of Aon Corporation
and,
Aon Corporation reserves the right to recover all copies of the Document.
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Aon Risk Solutions
28/F, Tower 1, Times Square, 1Matheson Street, Causeway Bay
Hong Kong
www.aon.com