International funding sources for major coal investment projects
AUTHOR: Terry L Hill
DATE: February 2006
This study investigates the key investors in clean coal technology (CCT) projects worldwide. After a brief overview of several clean coal technologies that are near commercial status, the report focuses on investors and their appetite for CCT project investments. Financing approaches are discussed in some detail, including most forms of debt and equity financing utilised for power plant development. This includes traditional bank loans, private placements and 114a securities, vendor financing, project financing and private equity. The financing structure of past large-scale CCT projects is discussed, as well as the structure and key participants in other complex power financing projects worldwide. Several examples of power project financings are given with development bank and commercial bank participation. Extensive lists of potential investors are provided, including commercial and investment banks, development banks, hedge funds, private equity firms and governments.
The lists were compiled from research on investors in CCT projects or energy/power projects with similar risk characteristics. A major section of the report discusses the key issues and risks for CCT investments. Government policy incentive levers are reviewed as to effectiveness: tax credits and deductions, loans, loan guarantees, rate incentives, price supports, availability insurance, performance guarantees and grants. Regulations and emissions trading schemes are also included in the discussion of government levers. The final section offers several conclusions and recommendations for how both public and private participants can encourage increased investments in clean coal technology projects over the next decade and beyond.