Session II: Key Elements of Structured Finance for Renewable Programs and Energy Efficiency...

Session II: Key Elements of Structured Finance for Renewable Programs and Energy Efficiency“Financial Instruments to Promote Sustainability and Climate Change Mitigation

Morelia, Mexico, Nov 29, 2012

2| Itaú BBA | Título da Apresentação | Mês Ano

Development and Energy are Intrinsically Linked

Source: http://holtz.org/Library/Social%20Science/Geography%20and%20Economic%20Development%20by%20Gallup,%20Sachs/GDP%20Density%20Map.gif downloaded 12Nov2012

Source:http://www.cojoweb.com/earthlights_dmsp_big.jpg , downloaded 12Nov2012


Yet, Energy and the Biggest Threat to Development, Climate Change, are also Intrinsically Linked…

Source: China’s Energy and Carbon Emissions Outlook to 2050, Nan Zhou, David Fridley, Michael McNeil, Nina Zheng, Jing Ke, and Mark Levine, Lawrence Berkeley National Laboratory, Report LBNL-4472E, April 2012


For a Good (?) Reason (So Far!)…

Source:Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011, http://www.eia.gov/oiaf/aeo/electricity_generation.html , downloaded 23Nov2012

Itaú Unibanco: Global Presence

Itaú Unibanco has a strong presence in South America …

... and global distribution capabilities.

Itaú BBA USA Securities Inc.

Itaú BBA NY Rep. Office

Itaú Unibanco NY Branch

Itaú Unibanco S.A. Nassau Branch

Itaú BBA Nassau Branch

Itaú Bank & Trust Bahamas Ltd.

Itaú Unibanco S.A. Cayman Branch

Itaú Unibanco Holding S.A. Cayman Branch

BIE Cayman Ltd.

Itaú Unibanco S.A. . (Brazil)

Banco Itaú BBA S.A. (Brazil)

Banco Itaú Uruguay S.A.

Banco Itaú Argentina S.A.

Banco Itaú Paraguay S.A.

Banco Itaú Chile

Itaú BBA U.K. Securities Ltd.

Banco Itaú BBA Intl S.A. (London)

Banco Itaú BBA Intl S.A. (Lisbon)

Banco Itaú BBA Intl Madrid Rep. OfficeItaú BBA Shanghai Rep. Office

Itaú Ásia Securities Ltd. (Hong Kong)

Itaú Asia Securities Ltd.

Tokyo Branch

Itaú Unibanco Tokyo

Branch

Itaú Middle East

Ltd. (Dubai)

Banco Itaú BBA Intl Paris Rep. Office

Banco Itaú Europa Luxembourg S.A.

Banco Itaú Suisse S.A. Switzerland

Banco Itaú BBA Intl Frankfurt Rep. Office

Banco Itaú Europa Intl (Miami)

Itaú BBA Securities Inc Miami

Banco Itaú BBA S.A. Peru Rep. Office

Banco Itaú BBA Colombia

Our overriding purpose is to contribute decisively to the success of our clients, developing their business in order to achieve sustainable leadership, playing a significant role in the growth of the countries where we operate, and in the advancement of the people who are directly or indirectly served by the projects we support. (…) A great deal of certainty is dangerous. (…) We understand that even when we believe deeply in something we should still question it. The strength of our reputation springs from our capacity to do things better and differently (…)”


Keys to Successful Climate Change Strategies:

• Developed through a transparent partnership process involving stakeholders of different sectors

• Reflects national conditions and preferences, natural resources base, and institutional framework (“national policy goals and national circumstances”)

• Focus on long-term goals but recognizes short-term tradeoffs

• Allows for intermediate adjustments, if necessary


Green Standards Are Fundamental – But Not Enough

• Large Events Like the 2014 World Cup Are a Great Opportunity to Upgrade Building standards

• Engagement Between Develpment and Commercial Banks: Focus on Supply Chain


Social Issues: Low Income Households and the “Poverty Trap” – the Case of Power Distribuition in Brazil

Improvement in Social Conditions Lead to

Improvement in Economic and

Financial Results!


Ethanol – from Proálcool to flex-fuel

• Designed in the 70’s as a response for the Oil Crisis• Sugar cane production dates back to early XVI century• Incentives to increase sugar cane and ethanol

production, develop technology, gain consumer support• Huge initial success• Major difficulties during 80’s, when oil prices fell• Solution: technological development (flex fuel), continued

support for production• Issues: trade-off food x fuel?• Financial incentives for agriculture vs. fossil fuel

subsidies


Birth, crisis and success: Technology is the Key Factor!


481% growth 1979-2011!!!

292% growth 1979-2011!!!

Biofuels: Energy X Food? Not if You Do It Properly...


Renewables – Wind Power

• Booming industry worldwide• Very low environmental footprint• Brazil has estimated 143GW potential• Issue: high costs, and lack of local expertise• First Govt. Sponsored support program did not deliver• Solution: change incentives; support local production• Solution: technological development and increased scale

of production => lower costs


A Global Success Story for Renewable Energy

Perspectives on Windpower for the world and for Brazil – technical, economical and political questions, Jens Peter Molly, Deutsches Windenergie-Institut GmbH, April 2006

Global Windpower (installed)Forecast (2006) Actual Growth

Source: Windpower.net


In Spite of Many Local Difficulties...Key to Success: Adjust to Local Conditions

15| Itaú BBA | Título da Apresentação | Mês Ano 15

Hydropower Environmental Footprint:

Challenges

Source: Aneel. Image from http://www.bicusa.org/es/Article.11709.aspx


Energy Sector – Large Hydro

Challenges and Opportunities

UHE Balbina Flooded Area: 3150 km2

Capacity: 250 MW

(9,44 km2/MW)

UHE TucuruiFlooded Area : 2430 km2

Capacity: 4240 MW

(0,57 km2/MW)

UHE SamuelFlooded Area : 560 km2

Capacity: 217 MW

(2,58 km2/MW)


Energy Sector – Large Hydro


UHE Balbina Flooded Area: 3150 km2

Capacity: 250 MW

(9,44 km2/MW)

UHE TucuruiFlooded Area : 2430 km2

Capacity: 4240 MW

(0,57 km2/MW)

UHE SamuelFlooded Area : 560 km2

Capacity: 217 MW

(2,58 km2/MW)

104

560

2430

3150

0

500

1000

1500

2000

2500

3000

3500

Santo Domingo UHE Samuel UHE Tucurui UHE Balbina

km2

Area Comparison


Source: Legal Issues Guidebook to the Clean Development Mechanism, June 2004

Hydropower Environmental Footprint:

Solutions and Opportunities



19

Summing up…

Source: http://www.ethicalmarkets.com/2010/02/09/hoax-precautionary-principle-anyone-2/

The benefits of strong, early action on climate change outweigh the costs. The effects of our actions now on future changes in the climate have long lead times (...)what we do in the next 10 or 20 years can have a

profound effect on the climate in the second half of this century and in the next. No-one can predict the consequences of climate change with complete certainty; but we now know enough to understand the risks. Mitigation - taking strong action to reduce emissions - must be viewed as an investment, a cost

incurred now and in the coming few decades to avoid the risks of very severe consequences in the future. If these investments are made wisely, the costs will be manageable, and there will be a wide range of

opportunities for growth and development along the way. For this to work well, policy must promote sound market signals, overcome market failures and have equity and risk mitigation at its core.

Stern Review, The Economics of Climate Change, 2006

Obrigado!

Session II: Key Elements of Structured Finance for Renewable Programs and Energy Efficiency...

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