AFB/B.17/Inf.4 14 March, 2012 Adaptation Fund Board Seventeenth Meeting Bonn, 14-16 March, 2012 PRESENTATION ON CER MONETIZATION
ADAPTATION FUND TRUST FUND Update on Status of Resources and CER Monetization Program March 2012 Prepared by the World Bank as Interim Trustee of the Adaptation Fund Adaptation Fund Trustee The World Bank
Agenda 1. Status of Resources Roadmap 2. Investment Management 3. CER Monetization CER Price Levels • • CER Monetization Program Adaptation Fund Trustee The World Bank
Status of Resources December 31, 2011 (US$ millions) Cumulative Receipts (1) 273.13 Cash receipts from CER sales proceeds 168.34 Cash receipts from Donors and Other Sources 103.54 Investment Income 1.25 Cumulative Disbursements (2) 30.17 Projects and Programs 16.92 Administrative Budgets 13.25 Funds Held in Trust (3) = (1) – (2) 242.96 Adaptation Fund Trustee The World Bank
Schedule of Funds Available December 31, 2011 (US$ millions) Funds Held in Trust (3) 242.96 Operational Reserve (4) 3.00 Amounts Committed, Not Disbursed (5) 93.40 Funds Available (6) = (3) – (4) – (5) 146.57 Adaptation Fund Trustee The World Bank
Total Programs/Projects Approved to date by NIE and MIE NIE, 17% MIE, 83% Adaptation Fund Trustee The World Bank
Status of Resources CERs and Donor Proceeds 30 300 25 250 20 200 in USD millions 15 150 10 100 5 50 - - Apr-10 Apr-11 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Monetized CERs Donor Contributions TF Balance Adaptation Fund Trustee The World Bank
Potential Resources for the AF to end-2012 250 223 204 CER Proceeds High Case 200 187 CER Proceeds Medium Case CER Proceeds Low Case 157 150 USD, millions Funds Available Actual CER Proceeds 100 Paid-in Donor Contributions Potential Resources Medium Case 50 Potential Resources Low Case Potential Resources High Case 18 - FY09 FY10 FY11-Dec 2012 (Est.) Adaptation Fund Trustee The World Bank
Adaptation Fund Trust Fund Investment Management • The Adaptation Fund Trust Fund liquid portfolio returned 0.25% through the 2011 calendar year . In keeping with the Tranche 0 investment strategy, Adaptation Fund assets were primarily invested in short dated deposits in highly rated global financial institutions. • AF resources are not currently invested in other, longer term Tranches , on the expectation that all funds would be required for projects and programs before the end of the one-year horizon period applicable to the next available investment tranche (Tranche 1). • Cash transfer projections provided by the AF Secretariat indicate that at least $100 million in AF Trust Fund resources will remain in the AF Trust Fund for at least 1 year, therefore based on the above, and liquidity requirements of the AF, the Trustee will allocate the AF Trust Fund balances between Tranche 0 and Tranche 1 based on the above, and liquidity requirements of the AF. Adaptation Fund Trustee The World Bank
Adaptation Fund Investment Returns Adaptation Fund returns are closely linked to USD Libor. Adaptation Fund Trustee The World Bank
Agenda 2. CER Monetization Roadmap • CER Price Levels Adaptation Fund Trustee The World Bank
CER Price Levels Daily Prices 13 All-time low of 3.51 Euro per ton on January 16, 2012 11 9 Euro (per ton) 7 5 3 30-Dec-10 29-Apr-11 27-Aug-11 26-Oct-11 25-Dec-11 29-Jan-11 28-Feb-11 30-Mar-11 29-May-11 28-Jun-11 28-Jul-11 26-Sep-11 25-Nov-11 24-Jan-12 23-Feb-12 Adaptation Fund Trustee Source: Bloomberg The World Bank 11
CERs and Energy Commodities Indexed Sept 2011 to Feb 2012 120 110 100 90 80 Recovery correlates with Oil and Gas 70 60 50 40 30 15-Oct-11 30-Oct-11 14-Nov-11 29-Nov-11 31-Aug-11 15-Sep-11 30-Sep-11 14-Dec-11 29-Dec-11 13-Jan-12 28-Jan-12 12-Feb-12 27-Feb-12 Oil CERs Gas Adaptation Fund Trustee Source: Bloomberg The World Bank 12
European Union Set-Aside Timeline 100 December 20th: 90 June/July EU Environmental 80 Full Parliament and Committee votes to Environmental withhold 1.4 bill EUAs in 70 Minister's vote to Phase 3; Carbon prices February 28th: 60 become law rise over 18% Industrial 50 Committee agrees to set-aside, but 40 does not specify 30 amount; Carbon 20 prices fall 5% 10 0 10-Feb-12 24-Feb-12 23-Mar-12 20-Apr-12 18-May-12 16-Dec-11 30-Dec-11 13-Jan-12 27-Jan-12 9-Mar-12 6-Apr-12 4-May-12 1-Jun-12 15-Jun-12 29-Jun-12 13-Jul-12 27-Jul-12 Adaptation Fund Trustee Source: Point Carbon The World Bank 13
Aviation Issue Aviation accounts for between 2% to 3% of greenhouse gas pollution Incorporated in European Trading System as of January 1 st • • Thomas Reuters Point Carbon estimates cost to airlines will be over 500 million Euro for 2012 Governments of United States, China, India, Russia and over 20 other countries oppose United Nation’s International Civil Aviation Organization asked to • help find solution Adaptation Fund Trustee Source: Point Carbon The World Bank 14
Agenda 2. CER Monetization Roadmap • CER Monetization Program Adaptation Fund Trustee The World Bank
CER Monetization CER Prices break out of 2+ year trading range of 11 – 14 in early July 2011 • Monetized 9.5 million tons locking in average price of 12.59 per ton • Continued to sell July through October 5 th on BlueNext, selling 430,000 tons at an average price of 8.71 per ton • Added 3.6 mill Euro or USD 4.7 mill over BlueNext Closing Average Price BlueNext Average Price Closing Year Selling Period Achieved Average Added Value 2009 5/9 to 12/31 12.26 12.57 -0.31 2010 1/1 to 12/31 12.70 12.52 0.18 2011 1/1 to 10/5 11.75 11.04 0.71 Entire Period 12.43 12.07 0.36 Adaptation Fund Trustee Source: Bloomberg The World Bank 16
Selling Stoppage Oct 31 CDM Emergency 9 Nov 22 Only Basis Board Instructs to Stop 6.93 6.50 Opportunity Costs 8 • CDM Stoppage: 270,000 tons at 7.22 7 per ton • Board Stoppage: Feb 1 Euro (per ton) 490,000 at 4.53 per 6 Oct 5 Selling Resumes ton CDM Closed 4.13 7.85 5 Cumulative 10 Nov 21 million tons sold by CDM Opens New Feb 6, 2012 4 Procedure 6.31 3 15-Oct-11 30-Oct-11 14-Dec-11 29-Dec-11 30-Sep-11 14-Nov-11 29-Nov-11 13-Jan-12 28-Jan-12 12-Feb-12 27-Feb-12 Adaptation Fund Trustee Source: Bloomberg The World Bank 17
CER Monetization Program Sale Record as of February 29, 2012 CER Tons Sold (Thousands) 10.18 million CER 200 tons sold 4,110 $170 million raised 5,870 ( € 125 million) 466 separate transactions Exchange OTC Auction Adaptation Fund Trustee The World Bank 18
CER Monetization Program Monthly Sales by Tonnage 1,600 Sales resumed in 1,400 February, 220,000 tons sold 1,200 1,000 Tons (thousands) 800 600 400 200 - Adaptation Fund Trustee The World Bank 19
CER Monetization Program Monthly Average Price 14 12 Overall Average 12.26 10 Euro (per ton) 8 Average for 6 February 4.52 4 2 0 Adaptation Fund Trustee The World Bank 20
CER Monetization Program Adaptation Fund Inventory 7 6 5 Tons (Millions) 4 3 2 1 0 Adaptation Fund Trustee The World Bank 21
CER Monetization Program Appendix Daily Sales Record Adaptation Fund Trustee The World Bank 22
February 2012 Daily Sales February, 2012 Volume (tons) Adaptation Fund Sale Price BlueNext Closing Price Diff 1-Feb-12 10,000 4.11 4.13 -0.02 2-Feb-12 10,000 4.35 4.28 0.07 3-Feb-12 10,000 4.24 4.13 0.11 6-Feb-12 10,000 4.25 4.24 0.01 7-Feb-12 10,000 4.26 4.23 0.03 8-Feb-12 10,000 4.06 4.06 0.00 9-Feb-12 10,000 3.90 3.88 0.02 10-Feb-12 - n/a 3.83 n/a 13-Feb-12 10,000 3.75 3.75 0.00 14-Feb-12 10,000 3.92 4.02 -0.10 15-Feb-12 10,000 4.23 4.22 0.01 15-Feb-12 10,000 4.23 4.22 0.01 16-Feb-12 10,000 4.68 4.75 -0.07 16-Feb-12 10,000 4.79 4.75 0.04 17-Feb-12 10,000 5.07 5.08 -0.01 20-Feb-12 - n/a 4.80 n/a 21-Feb-12 10,000 4.92 4.92 0.00 22-Feb-12 10,000 5.00 4.97 0.03 23-Feb-12 - n/a 4.77 n/a 24-Feb-12 10,000 5.10 5.18 -0.08 24-Feb-12 10,000 5.10 5.18 -0.08 27-Feb-12 10,000 5.11 5.12 -0.01 28-Feb-12 10,000 4.92 4.94 -0.02 29-Feb-12 10,000 4.69 4.61 0.08 29-Feb-12 10,000 4.70 4.61 0.09 Adaptation Fund Trustee Total 220,000 4.52 4.47 0.05 The World Bank 23 Source: Bloomberg
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