Important Financing Approaches to Promoting Cyclic Economy:

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• Important Financing Approaches to Promoting
  Cyclic Economy
• Carbon Financing
• Climate Change Capital (CCC)
• CEO of CCC,England
• Mr. Lu Yuebing

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Outline
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• Cyclic economy development in China and its major
  fields
• CCC-a leading investment banking group engaged in
  cyclic economy
• Investment fields
• Business modes
• Important financing approaches to cyclic economy
  Carbon financing
• Investment fields of CDM project
• Cases of CDM project
• CCCs CDM project in China

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1.1 Cyclic Economy Development --the Only Path
for China
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• In 2006, China puts out 5 of the world GDP by
  using 15 of the world resources.
• traditional extensive economic growth mode,
  characterized by high consumption, high emissions
  and low efficiency, need be replaced by the
  energy-conserving and environment-preserving mode
  
• In the first 20 years of 21st century, China will
  continuously pace up into industrialization and
  urbanization, the energy and environment
  condition will be more serious.
• To grasp the Important Strategic Opportunity
  Period and to realize all-around well-off
  society, we must highlight cyclic economy
  development.
• According to the principles of reduce, reuse,
  recycle, effective measures need be carried out
  to fulfill maximum output and minimum emissions
  of waste at the lowest expense of energy and
  environment, to balance economic development with
  environmental protection and social benefits, to
  increase resource efficiency, and to establish an
  environmentally-friendly society.

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1.2 Approaches to Develop Cyclic Economy
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• Changing Chinas economic growth mode, stepping
  on new industrial road, forming the modes of
  production and consumption that conserve energy
  and protect the environment
• Facilitating the adjustment of economic
  structure, accelerating the technology progress,
  enhancing the supervising management, increasing
  resource efficiency and reducing the output and
  emissions of the waste
• Making enterprises as the mainstay, with
  governments controlling, markets guiding and the
  public participating, to establish a policy
  system and society that promotes cyclic economy.
• Making full use of market mechanism and promoting
  cyclic economy, where foreign investment plays an
  important part. ?

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1.3 Key Elements to Develop Cyclic Economy
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• Changing Chinas economic growth mode, stepping
  on new industrial road, forming the modes of
  production and consumption that conserve energy
  and protect the environment
• Facilitating the adjustment of economic
  structure, accelerating the technology progress,
  enhancing the supervising management, increasing
  resource efficiency and reducing the output and
  emissions of the waste
• Making enterprises as the mainstay, with
  governments controlling, markets guiding and the
  public participating, to establish a policy
  system and society that promotes cyclic economy.
• Making full use of market mechanism and promoting
  cyclic economy, where foreign investment plays an
  important part.
• Effective combination of capital, technology,
  projects and human resources.?

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2.1 Climate Change Capital(CCC)
Climate Change Capital is the biggest and
professional investment banking group
specializing in the energy and environment
protection, providing services to projects,
companies, financial institutions and governments
whose activities are affected by policies that
are put in place to address climate change. CCC
provides the most authoritative advice spanning
markets, finance and regulations, and raises
funds for the four markets--clean power, clean
technology, clean fuels and carbon finance. CCC
now has about 100 staff in five agents London,
Beijing, Washington. D.C., Madrid and Paris. CCC
is structured by three distinct but complementary
groups, fully displaying its role as a investment
banking in the carbon markets. We believe a
integrated business mode has more advantages on
inner corporation and human resources, and put
out more value.
CCC is structured into three distinct, but
complementary groups
Advisory Organizational Financing Financial
Advisory Service Policy Research
Asset Management Raise and manage funds, fulfill
the transformation into a low carbon economy
Carbon Markets Invest for projects and companies
who produce CERs
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2.2 CCC Group 1 Advisory
The Advisory team's distinctive competence lies
in its ability to blend a level of policy insight
generally not seen in the financial sector with a
level of financial insight not seen in the policy
arena. Our experiences from advisory improve our
abilities on raising and managing funds. Thus to
gain more carbon assets under the elastic
mechanism of Kyoto Protocol. We provide advices
for the following clients
developing policies in ways that will lead to the
most efficient and effective deployment of
capital to meet required objectives. CCC is now
serving for California State Government, USA,
Department of Trade and Industry, UK, Department
of Communication, UK and EU.
Governments
engaged in new technologies or new business areas
looking for innovative ways to finance migration
towards a low-carbon economy. CCC is now
assisting an integrated petroleum company to
implement main asset divestment.
Energy-intensive Industries
CCC provides advices on strategy, financing, IPO,
MA for companies looking to manage the risk of
climate change policy or to realize the
opportunities that it presents for their
business. We are now serving for DI Oils Green
Spirit Fuels.
Solution Providers
whose investment portfolios, or potential
investments, include assets that are affected by
policies in our core area. CCC is now serving
for many financial institutions.
Financial Institutions
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2.3 CCC Group 2Asset Management
The CCC Asset Management group develops and
manages funds that invest in companies, projects
and technologies that provide products or
services facilitating the reduction of greenhouse
gases.

• The team has significant experience in the
  renewable energy and clean technology sectors and
  a combined involvement in over 500 million of
  renewable energy transactions, creating over
  1000MW of capacity across a range of generating
  technologies and legal jurisdictions.
• CCC manages The Ventus Funds, the largest group
  of funds specifically targeted at the UK
  renewable energy sector. By April,2006, Ventus 2
  VCT plc and Ventus 3 VCT plc have a combined 20
  million of capital.
• CCC is planning to launch a 150 million
  pan-European private equity fund focusing on
  expansion capital and buy-out investments in the
  Clean Tech sectors Clean Power, Clean Transport,
  Energy Efficiency, Waste Recovery and Water.
• CCCs carbon finance business directly benefits
  from the abundant experience of the asset
  management group. The investment directors are
  expertise in wind power, landfill gas,
  bio-energy, water power and other fields. And
  they know pretty well about other legal ER
  technologies.

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2.4 CCC Group 3 Carbon Finance
With over 1billion under management, the Climate
Change Capital Carbon Funds invest in emission
reduction projects in emerging markets, and does
business in the European Emissions Trading System
(ETS).

• CCC has so far purchased a large number of CERs
  and invested in quite a few projects including
  renewable energy project in China, methane
  treatment in Hungary, and industrial waste gas
  treatment in India through CDM and JL.
• As a long term partner of the host country, CCC
  Carbon Funds is attentive enough to ensure that
  the projects and businesses are performed and
  managed to the requirements and considerations of
  the host country. We promise we will render the
  service to the best that CDM should bring.
• CCC looks forward to cooperation with technical
  partners and the local companies in exploring the
  market.
• CCC will work together with certified technology
  provider in investment appraisal and try to use
  different methodologies in exploiting carbon
  assets, including landfill gas and CMM treatment,
  indusial waste gas treatment, farming garbage
  treatment.

Our investment strategies enable us to be more
flexible and quick than other carbon buyers. CCC
can provide solutions of advance payment, pricing
and financing for the development of projects.
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2.5 CCC Investment Strategy in China

• China is the most important market for CCC.
• Ensure CCCs strategy is correspondent with the
  priority fields of Chinas cyclic economy.
• With huge carbon funds being the
  breaking-through, CCC is launching a investment
  of over 600 million on CDM projects in China,
  becoming the largest CERs purchaser.
• CCC will provide all-around services and
  solutions for Chinas industries, such as
  financial advisory, equity investment, projects
  financing and CDM.
• To sharpen their competitiveness in energy
  conservation, consumption reduction and
  environment protection, by introducing capital,
  advanced technologies and unique management
  skills.

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3.1 CDM and Carbon Financing

• CDM, set forth in Article 12, Kyoto Protocol, is
  directed at the reduction of greenhouse gas
  emission through the cooperation of developed
  countries and developing countries. The gist is
  that developed countries provide extra capital
  and technologies in the project cooperation with
  developing countries and in return, they obtain
  CERs, which are counted as proofs for their
  fulfillment of commitment in Kyoto Protocol
  regarding greenhouse gas emission limitation or
  reduction.
• CDM is a win-win mechanism on the one hand,
  developing countries can through the cooperation
  gain extra capital and environment-friendly
  technologies and so as to boost their development
  sustainability on the other hand, through
  investing in developing countries where cost is
  low, developed countries can shrink emission
  reduction moves at homes, where is cost is
  expensive, so that they can fulfill their
  commitment in Kyoto Protocol more cheaply. CDM
  involves cooperation both between governmental
  programs and between enterprises.

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3.2 Investing Financing Opportunities of CDM
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• Goals of Kyoto Protocol reducing CO2 emissions
  of at least 5 billion tons by 2012
• At least 2.5 billion tons come from the exchange
  of ER Right.
• The emerging contracts only take 10 of the
  market share.
• Business opportunities supposing the ER Right is
  10 per ton, it means 25 billion to developing
  countries and economy-transformation countries.
• 50 CDM projects are supposed to happen in China.

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3.3 Investing Financing Characteristics of CDM
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• In many projects, purchasing ER is the only
  exchanging way.
• The allocation of risks between developers and
  investors varies in different exchanges.
• The price of CERs is defined by the market demand
  supply and the risks.
• Most CERs investors pay on arrival to lower the
  risks.
• In some of the CERs exchanges, investors can
  prepay part of the expenses.
• Current trend investors invest equity or loan in
  projects and acquire CERs.

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3.4 Major Fields of CDM Projects Invested in
China

• Clean energy, renewable energy projects (wind
  power biomass or waste biomass power generation
  small hydraulic power plant etc.)
• Coal bed gas (vas), coke oven gas power
  generation projects
• Projects intended to increase industrial energy
  efficiency (cement, iron steel, chemical
  industry etc.)
• Waste and refuse treatment (landfill gas power
  generation farming wastes, animal manure, power
  generation using methane gas produced from
  alcoholic residue or starch residue)
• Natural gas power generation in replacement of
  coal or petroleum
• Gather and utilize oil associated gas from direct
  burning
• Industrial gas emission reduction programs
  (HFC-23?N2O?SF6?PFC etc.)

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3.5 CDM Project-Steel Industry

• During the producing process, plenty of surplus
  energy, such as surplus gas, heat and pressure,
  are coming out.
• surplus gas refers to by-product gases, like
  blast-furnace gas, coke oven gas, converter gas
  and corex gas
• Waste heat mainly comes from heat in recovery
  boiler duct, red coke waste heat, coke over fuel
  gas, sintering waster heat and other reclaimable
  waste heat.
• Waste pressure mainly comes from the waste
  pressure on the top of the gas fired blast
  furnace.

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CDM projectpower generation by waste gas, heat
and pressure in iron steel industry (continued)

• There are three categories
• Category I is the use of redundant heat,including
  redundant coke oven gas, converter gas, and blast
  furnace gas, which can be used for the building
  of CCPP, and blast furnace gas-fired power plant.
  
• Category II is the use of heat, including dry
  quenching coke heat and sintering mine heat for
  power generation.
• Category III is the use of the residue pressure
  from the top of blast furnace.
• The above methods reduce the use of fossil fuels
  in general power generation or in industrial
  power plants and so serve to reduce CO2
  emission.
• For examplea 50 MW plant (any of the above
  three categories) can reduce CO2 discharge by
  350,000 ton each year. If registered to become a
  CDM program, it can earn an extra income of about
  2.8 million Euro each year.

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3.6 CDM ProjectsRenewable Energy Wind power

• Wind power in replacement of renewable energy
• Economic benefit
• Because of the thermal power dominance in
  China,grid factors are high in many regions. As a
  result, wind power projects may produce more
  greenhouse gas emission reduction.
• CDM projects can increase about 10 of the income
  of the employers.
• of 1 MW wind power Installed capacity
• ? 2,0001,600 tCO2/ year
• ? 160,000130,000 Yuan/year

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3.7 CDM project study utilization of coal bed
gas

• Introduction of project
• Extract and utilize coal bed gas
• In most CDM projects of coal bed gas , coal bed
  gas, which is discharged into atmosphere or
  burned otherwise, is gathered to produce power
  and heat so that greenhouse gas emission is
  reduced.
• Coal bed gas can also be transmitted to the
  households for daily use, for which CERs is
  calculated with different methodology.
• CDM project economic benefit
• Technological cost approximported equipments
  1million/MW,domestic equipments 20,000/MW
• CDM project benefit
• Coal bed gas burning 3.3 4 t CO2e/MWh (260-
  320 RMB/MWh)
• Coal bed gas burning power generation 0.8 1 t
  CO2e/MWh (64- 80 RMB/MWh)
• Coal bed gas burning heat supply 0.1 0.12 t
  CO2e/GJ (8- 10 RMB/MWh)
• Example
• A coal mine with an annual capacity of 10 million
  ton produces 40-50 million cubic meter of coal
  bed gas each year
• Installed capacity up to 19 MW
• Annual power generation 136.8 million KWH (19 MW
  7200 hours)
• Annual heat supply 410, 000 billion joule
  (1??10???)
• 555 000 CERs/year, about RMB 4,500,000 Yuan/year

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3.8 CDM project study treatment of sewage and
animal manure Cases of CDM Program

• Introduction
• Use digestion device and biomass gas utilizing
  equipment to extract and utilize methane gas from
  anaerobe-degraded industrial sewage or animal
  manure
• CDM project economic benefit
• Many employers make use of CDM project for early
  stage financing and can bring about very good
  economic benefit.
• US 5-8 millions worth of investment in fixed
  assets can produce 1 million CERs by 2012, which
  can be sold for US 10 million (calculated at US
  10/CER)
• Example

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3.9 CCCs CDM project in China

• CCC hold the capital of over 1 billion to invest
  on industries and projects that are entitled to
  the emission credit of greenhouse gas.

• The developer is experienced in landfill
  management, but not good at landfill methane gas
  reclamation and burning.
• CCC, by hiring the internationally famous
  landfill methane gas experts,has helped design a
  reclamation system for the developer so as to be
  able to reclaim methane gas. CERs has also been
  increased as a result of it.
• Because of the participation of CCC, the project
  will bring more CERs and the construction has
  also considerably accelerated, too.

• CCC has cooperated with a chemical company in
  Northern China and developed a HFC-23 project by
  using waste gas storage system, CCC has increased
  its CERs by 2 million plus ton and it will buy
  from the project more than 20 million tons
  carbon dioxide equivalent.
• In Sept. 2006, CCC concluded the largest carbon
  financing transaction ever seen in the private
  sector with a chemical company form Zhejiang. In
  6 years, CCC will buy about 30 million tons
  carbon dioxide equivalent from the project and
  will each year pay hundreds of millions of Yuan
  to Juhua Group Corporation of Zhejiang.

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3.10 CCCs Investment in China

• CCC hold the capital of over 1 billion to invest
  on industries and projects that are entitled to
  the emission credit of greenhouse gas.

• CCC provided important financial support for a
  49.3MW wind power plant in Shuangliao City,
  Jilin, China. CCC is now cooperating with the
  developer of the project Jilin Datang and
  International Wind Power Development
  Organization. The project will reduce carbon
  dioxide emission by 650,000 ton between 2006 and
  2013.
• CCC has invested in Jilin Changling Wind Power
  Project. In Feb. 2006, the project landed an
  agency contract for a wind power plant project in
  Changling County, Jilin. The project includes 11
  sets of Gamesa G58 850 kW wind turbines. From
  2006 to 2012, it wll reduce carbon dioxide
  equivalent emission by 133,307 ton.

• CCC has reached agreement with one of the top 10
  coal mine businesses in China, Pingdingshan Coal
  Group, regarding the use of vas of 6 mines for
  power generation and heat supply. CCC will
  provide part of the equipment financing for
  Pingdingshan Coal and introduce worldly advanced
  technologies (ventilation air methane oxidation
  device, which has been used recently for the
  first time at home). The project will bring
  820,812 tons CERs each year.

• CCC cooperates with Hebei Cement Factory in
• redundant heat power generation and cement raw
• material replacement project, providing project
  financing
• and CDM development. The annual benefit of the
• project comes from Power generation and CO2
• emission reduction.

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Climate Change Capital
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• CCC London (Head Office)
• 49 Grosvenor Street, London,
• W1K 3HP
• Tel [phone]
• Fax [phone]
• Web www.c-c-capital.com

CCC China 9/F China Life Tower,16 Chao Wai Da
Jie     Beijing 100020Tel [phone]