Introduction to CDM Project Idea Note and Project Design Document Department of Environment and Natural Resources CDM Training Workshop November 4-6,2003

Introduction to CDMIntroduction to CDMProject Idea Note and Project Idea Note and

Project Design Project Design DocumentDocument

Department of Environment and Natural Resources

CDM Training Workshop

November 4-6,2003

Climate Change Information Center Conference Room

Manila Observatory, Ateneo de Manila Campus

OutlineOutline

• Overview of the Project Idea Note and the Project Design Document

• Contents of the PIN

• Contents of the PDD

• Summary

Sample PIN : Guatemala El Canada Hydroelectric Project

Overview of theOverview of theProject Idea Note (PIN) and the Project Idea Note (PIN) and the Project Design Document (PDD)Project Design Document (PDD)

What is a Project Idea Note ?What is a Project Idea Note ?

• Developed to standardize submission requirements and review of project ideas to the various funds sources

• First step in the development of a project

• Provides indicative information on:

Type and size of the project

Location

the anticipated total amount of Greenhouse Gas (GHG) reduction compared to the “business-as-usual” scenario

suggested crediting life time

suggested Certified Emission Reductions (CER) price in $/ton CO2eq reduced

financial structuring

socio-economic or environmental effects/benefits

PIN TemplatesPIN Templates

• PIN For CDM Projects

• PIN for Small Scale Projects

• PIN for LULUCF Projects

Main Differences Main Differences

• PIN for Small Scale Projects– Only for projects that conform to the definition of small

scale projects

– MUST provide a description of how the project will improve the welfare of the community(ies) involved in it

• PIN for LULUCF Projects– Only for Land Use, Land Use Change and Forestry

Projects

– Must identify the code of the LULUCF category that the project belongs to

LULUCF PIN Template: LULUCF PIN Template: Illustrative Project Categories Illustrative Project Categories

Categories accepted for the 1st commitment

period

What is a Project Design What is a Project Design Document (CDM-PDD) ?Document (CDM-PDD) ?

A standardized document format developed and adopted by the CDM Executive Board to be used for submitting CDM Proposals

Outlined in Appendix B to the Modalities and Procedures for CDM

First Version (CDM-PDD) launched on Aug. 29, 2002; Simplified Version for small-scale (SSC-PDD) projects launched on January 31, 2003

Information on

project

project context

Kyoto Protocol

CDM M&P

etc.

Baseline Study (BLS)Baseline Study (BLS)

Monitoring Plan (MP)Monitoring Plan (MP)

Emission Reduction Study (ERS)

Emission Reduction Study (ERS)

Project Design Document (PDD)

Project Design Document (PDD)

Project Activity Summary with Annexes:

• Baseline methodology – Simplified modalities

• Monitoring methodology and plan– Simplified modalities

• Additionality Requirements - Simplified checklist provided

• Environmental impacts– Documentation on analysis of environmental

impacts of the project activity must be provided only if required by the host country

Main Differences for Small Main Differences for Small Scale CDM ProjectsScale CDM Projects

Contents of the PINContents of the PIN(Project Idea Note)(Project Idea Note)

Contents of PINContents of PIN

A. Project Description, Type, Location and Schedule

B. Expected Environmental and Social Benefits

C. Finance

A. A. Project Description, Type, Project Description, Type, Location and ScheduleLocation and Schedule

Objective of the Project

Project Description and Proposed activities

Technology to be employed

Project

Developer/Sponsors

Type of Project

Location

Expected Schedule

Current Status of Acceptance of Host Country

B. B. Expected Environmental and Expected Environmental and Social BenefitsSocial Benefits

Estimate of GHG abated/CO2 Sequestered

Baseline Scenario

Specific Global and Local Environmental Benefits

Socio-Economic Aspects

Environmental Strategy/Priorities of the Host Countries

C. FinanceC. Finance

Total Project Cost Estimate

Sources of Finance to be Sought or already Identified

Sources of Carbon Finance

Indicative CER Price

Total ERPA Value

PIN TemplatePIN Template

A. Project description, type, location and schedule Name of Project:____________________________

Technical summary of the project Date submitted:_____________ Objective of the project Describe in less than 5 lines Project description and proposed activities (including a technical description of the project)

About ½ page

Technology to be employed Describe in less than 5 lines. Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed.

Project Idea Note: An ExampleProject Idea Note: An Example

Name of the project: – El Canada Hydroelectric Project

A. Objective of the project Construction of a 43 MW peaking run-of-river hydroelectric plant

located on the Samala River, Guatemala to generate total electricity of 178Gwh/year

Output of the Project to be sold to the Grid through a commercial distributor on a 10 year Power Purchase Agreement

Will displace fossil fuel thermal power generation sources


A. Project Description and Proposed activities

El Canada project is a 43 MW gross peaking hydroelectric plant producing an average of 178 Gwh/year.

The Project will collect power flows from the existing Santa Maria power plant and also collects spillages from the Santa Maria dam and local inflow from the area between the Santa Maria dam and the project diversion dam.

The collected power flows will flow through a desander and are subsequently diverted through a tunnel to a regulating pond. The penstock will be approximately 2400 m long (in plan) and will convey the power flows from the regulating reservoir to the powerhouse and submitted to a substation for delivery to the grid.


A. Technology to be employed The project will use hydro power as source of electricity.


Project developer Name of the project developer Organizational category Government / Government agency / Municipality / Private company

/ Non Governmental Organization (mention what is applicable)

Other function(s) of the project developer in the project

Sponsor / Operational entity / Intermediary / Technical advisor / (mention what is applicable)

Summary of the relevant experience of the project developer

Describe in less than 5 lines

Address Address, PO Box, City, Country Contact person Name of the Project Development Manager Telephone / fax E-mail and web address, if any


A. Project Developer

Name of the project developer

Generadora de Occidente, S.A. (“Project Company”)

Organizational category: Private Company

Other function (s) of the project developer in the project:

Construct, own, operate and finance the project

Address: Diagonal 6 10-65 Zona 10, Torre I, Nivel 8, Oficina 80101010 Guatemala

Contact person:Juan Carlos Mendez, Project Manager

502-339-3174 ext. 137

[email protected]

mailto:[email protected]

mailto:[email protected]


Project sponsors (List and provide the following information for all project sponsors) Name of the project sponsor

Organizational category Government / Government agency / Municipality / Private company / Non Governmental Organization / (mention what is applicable)

Address (include web address, if any)

Address, PO Box, City, Country

Main activities Not more than 5 lines Summary of the financials

Summarize the financials (total assets, revenues, profit, etc.) in less than 5 lines.


A. Project Sponsor

Name of the project sponsor:

EGI Guatemala S.A. and Mesoamerica Power Development Ltd. Both companies are subsidiaries

of Energía Global International Ltd.

Organizational category: Private company

Address: Energia Global International, Ltd.

c/o CHI Energy, Inc.

Andover Business Park MA 01810

United States

Main activities: Development and operations of renewable energy electricity generation facilities in Latin

America

PIN TemplatePIN TemplateType of the project Greenhouse gases targeted CO2 / CH4 / N2O / HFCs / PCFs / SF6

(mention what is applicable) Type of activities Abatement / CO2 Sequestration Field of activities a. Energy supply Renewable energy, excluding biomass / biomass /

cogeneration / improving energy efficiency by replacing existing equipment / minimization of transport and distribution / fuel switch (e.g., switch coal to biomass) (mention what is applicable)

b. Energy demand Replacement of existing “household equipment” / improvement of energy efficiency of existing production equipment (mention what is applicable)

c. Transport More efficient engines for transport / modal shift / fuel switch (e.g. public transport buses fuelled by natural gas) (mention what is applicable)

d. Waste management Capture of landfill methane emissions / utilization of waste and wastewater emissions (mention what is applicable)

e. Land Use Change and Forestry

Afforestation/ reforestation/ forest management/ wetlands management/ watershed management/ improved agriculture / land degradation prevention (mention what is applicable)


A. Type of the Project

Greenhouse gases targeted : CO2

Type of activities: Abatement

Field of the activities:

a. Energy supply: Renewable energy (hydroelectricity)

b. Energy demand N/A

c. Transport N/A

d. Waste management N/A


Location of the project

Region East Asia & Pacific / South Asia / Central Asia / Middle East / North Africa / Subsaharan Africa / Southern Africa / Central America & the Caribbean / South America/Central & Eastern Europe (mention what is applicable)

Country City Brief description of the location of the plant

No more than 3 - 5 lines


A. Location of the Project

Region: Central America

Country: Guatemala

City: Quetzaltenango

Brief description of the location of the plant:

The Project is located on the Samalá River, 12 kilometers south of the Quetzaltenango Municipality

and 198 kilometers due west from Guatemala City. The Samalá River is nearly 130 kilometers in

length.

PIN TemplatePIN TemplateExpected schedule Earliest project start date Year in which the plant will be operational Estimate of time required before becoming operational after approval of the PIN

Time required for financial commitments: xx months Time required for legal matters: xx months Time required for negotiations: xx months Time required for construction: xx months

Expected first year of CER delivery

Year

Project lifetime Number of years Current status or phase of the project

Identification and pre-selection phase / opportunity study finished / pre-feasibility study finished / feasibility study finished / negotiations phase / contracting phase / etc. (mention what is applicable and indicate the documentation [e.g., the feasibility study] available)

Current status of the acceptance of the Host Country

Letter of No Objection is available / Letter of Endorsement is under discussion or available / Letter of Approval is under discussion or available / Host Country Agreement is under discussion or signed / Memorandum of Understanding is under discussion or available / etc. (mention what is applicable)


A. Expected Schedule

Earliest project start date:

The project is expected to begin Commercial Operations in the 4th quarter of 2003.

Estimate of time required before becoming operational after approval of the PIN: N/A

Expected first year of CER-delivery: End of 2003

Project lifetime:

The useful life of a hydroelectric plant typically exceeds 50 years


A. Expected Schedule

Current status or phase of the project:

The Project Developer has recently completed EPC contract negotiations and is in the preliminary states of construction

start- up. Detailed project design and engineering has commenced, with site construction expected to begin late in the 1st quarter or early in the 2nd quarter of 2002. Construction is expected to take 22 months. The Project Company has entered into a mandate letter with a multilateral lending institution and is in negotiations to secure and structure debt financing.

A. Current status of the acceptance of the Host Country

A preliminary contact with Guatemalan Government for Letter of Endorsement is under way.


The position of the Host Country with regard to the Kyoto Protocol

The Host Country a. signed, signed and ratified, accepted,

approved or acceded to the Kyoto Protocol or

b. signed and has demonstrated a clear interest in becoming a party in due time (e.g., countries which have already started or are on the verge of starting the national ratification, acceptance or approval process) or

c. has already started or is on the verge of starting the national accession process

d. other. (mention what is applicable)


A.A. The position of the Host Country with regard to the Kyoto The position of the Host Country with regard to the Kyoto ProtocolProtocol

Guatemala has signed and ratified the Kyoto Protocol


B. Expected environmental and social benefits Estimate of Greenhouse Gases abated / CO2 Sequestered (in metric tons of CO2-equivalent)

Annual: Up to and including 2012: xx tCO2-equivalent Up to a period of 10 years: xx tCO2-equivalent Up to a period of 7 years: xx tCO2-equivalent Up to a period of 14 years: xx tCO2-equivalent


B. Estimate of GHG Abated

Annual:

Up to and including 2012: 1.5 million tCO2-equivalents

Up to a period of 10 years: 1.67 million tCO2-equivalents




Baseline scenario CDM projects must result in GHG emissions being lower than “business-as-usual” in the Host Country. At the PIN stage questions to be answered are at least:

What is the proposed Clean Development Mechanism (CDM) project displacing?

What would the future look like without the proposed CDM project?

What would the estimated total GHG reduction be?

(About ¼ - ½ page)


B. Baseline Scenario Displace electricity that would otherwise have been generated by

thermal plants.

Guatemala is experiencing accelerated growth in demand for electricity while, at the same time, finding itself unable to meet the demand with projected hydro and other sources of electricity due to delays in construction. The demand gap has been filled with low-cost, quickly developed bunker fuel generated electricity to avoid power shortages in the near term. The El Canada Project will displace these emergency measures by producing electricity to meet part of the demand using hydro resources and will help avoid the installation of new fossil plants upon retirement of older ones.

• The El Canada Project would offset approximately 167,000 metric tons of CO2 equivalent for each full year of operations


Specific global & local environmental benefits

(In total about ¼ page)

Which guidelines will be applied?

Name and, if possible, the website location

Local benefits Global benefits


B. Specific Global and Local Environmental Benefits Which guidelines will be applied to?

The Project will be subject to local regulations from the Guatemalan Ministry of Environment and is being constructed to comply with applicable World Bank environmental guidelines.

Local benefits

Protection of water sources found locally in the area near the Project’s water intake The project has committed to reforesting certain INDE (the Guatemalan national utility) properties on which the Project is being constructed.

Global benefits

The Project utilizes natural resources for the generation of electric energy rather than contaminating technologies/fuels.

This achieves the objective of benefiting both the local and global populations by reducing greenhouse gas emissions.

PIN TemplatePIN TemplateSocio-economic aspects What social and economic effects can be attributed to the project and which would not have occurred in a comparable situation without that project?

(In total about ¼ page)

Which guidelines will be applied?

Name and, if possible, the website location

What are the possible direct effects (e.g., employment creation, capital required, foreign exchange effects)?

What are the possible other effects? For example: training/education

associated with the introduction of new processes, technologies and products and/or

the effects of a project on other industries


B. Socio Economic Aspects What social and economic effects can be attributed to the project

and which would not have occurred in a comparable situation without that project?

The Project will have the ability to open the river to future projects since an additional 30 to 50 MW can be developed down river after the Project is operating. The Project will

provide relatively clean and filtered water to these other potential projects down river and will avoid the need to construct

regulating reservoirs.

The geographic location of the Project also has an important impact of the stability and reduction of electric losses in the electricity distribution system due to the increased levels

and quality of service in the area. This will also benefit the local

communities.


B. Socio Economic Aspects

Which guidelines will be applied to?

Project will be subject to local regulations from the Guatemalan Ministry of Environment and is being constructed to comply with World Bank environmental guidelines.

What are the possible direct effects (e.g. employment creation, capital required, foreign exchange effects)?

Approximately 200 to 250 direct local jobs will be created directly.

It is estimated that at least US $30 million will be invested in the Guatemalan economy.

What are the possible other effects? None


Environmental strategy/ priorities of the Host Country

A brief description of the relationship of the consistency of the project with environmental strategy and priorities of the Host Country (Not more than ¼ page)


B. Environmental strategy/ priorities of the Host Country

The Guatemalan Ministry of Energy and Mines urged discussion about and approval of a law which would provide incentives for the development and construction of renewable energy projects. Amongst renewable energy, projects using hydro technology have received the most interest, given that in Guatemala there is a large identified (but largely under-utilized) hydro potential.


C. Finance Total project cost estimate

Development costs xx US$ million Installed costs xx US$ million Other costs xx US$million Total project costs xx US$million


C. Total Project Cost Estimate

Development costs: 3.27 EURO million (US$ 2,841,000)

Installed costs: 50.6 EURO million (US$ 44,034,000)

Other costs: 11.1 EURO million (US$ 9,625,000)

Total project costs: 65 EURO million (US$ 56,500,000)

PIN TemplatePIN TemplateSources of finance to be sought or already identified

Equity Name of the organizations and finance (in xx US$million)

Debt – Long-term Name of the organizations and finance (in xx US$million)

Debt - Short term Name of the organizations and finance (in xx US$million)

Not identified xx US$million CDM contribution sought xx US$million CDM contribution in advance payments. (The quantum of upfront payment will depend on the assessed risk of the project by the World Bank, and will not exceed 25% of the total ER value purchased by the World Bank for the project. Any upfront payment will be discounted by a factor considered appropriate by the World Bank for the project.)

xx US$million and a brief clarification (not more than 5 lines)


C. Sources of Finance to be Sought or Already Identified

Equity: Shareholders equity contributions are expected to be approximately 22.7 EURO million (US$ 19,775,000). Final equity contributions level will be determined once project financing has been completed.

Debt - Long-term: To be determined

Debt - Short term: N/A

Not identified: N/A

CDM contribution sought:5-7 EURO million depending on time frame (US$4.5-6.2 million)

CDM contribution in advance payments:

Not yet determined.

PIN TemplatePIN TemplateSources of carbon finance

Name of carbon financiers other than PCF that your are contacting (if any)

Indicative CER Price (subject to negotiation and financial due diligence)

Total Emission Reduction Purchase Agreement (ERPA) Value

A period until 2012 (end of the first budget period)

xxUS$

A period of 10 years xx US$ A period of 7 years xx US$ A period of 14 years (2 * 7 years)

xxUS$


If financial analysis is available for the proposed CDM activity, provide the forecast financial internal rate of return for the project with and without the CER revenues. Provide the financial rate of return at the expected CER price above and US$3/ tCO2e. DO NOT assume any up-front payment from the PCF in the financial analysis that includes PCF revenue stream.

Please provide a spreadsheet to support these calculations.


C. Sources of Carbon Finance (other than PCF): None

Indicative CER Price

Total Emission Reduction Purchase Agreement Value

A period until 2012: 5.25 EURO/mt CO2

A period of 10 years: 5.25 EURO/mt CO2

A period of 14 years : 5.25 EURO/mt CO2

A period of 21 years: 5.25 EURO/mt CO2

Financial Analysis: not yet available

Contents of the PDDContents of the PDD

Contents of CDM-PDDContents of CDM-PDD

A. General description of project activity

B. Baseline methodology

C. Duration of the project activity/

Crediting period

D. Monitoring methodology and plan

E. Calculations of GHG emissions by sources

F. Environmental impacts

G. Stakeholders comments

Contents of CDM-PDDContents of CDM-PDD

Annex 1. Contact Information on Project Participants

Annex 2. Information Regarding Public Funding

Annex 3. New Baseline Methodology

Annex 4. New Monitoring Methodology

Annex 5. Table of Baseline Data

SummarySummary

- Contents of the PIN

- PIN templates

- Contents of the PDD

• Sample PINs and PDDs are available at the following websites:

http://www.dnv.com/certification/ClimateChange/

http://unfccc.int/cdm

http://prototypecarbonfund.org

Jeanette S. LaurenteClimate Change Information CenterManila ObservatoryAteneo de Manila CampusTel. No. (02) 426-6134 to 37Fax. No.(02) 426-6070Email: [email protected]

Thank You!Thank You!

Documents

Introduction to CDM Project Idea Note and Project Design Document Department of Environment and Natural Resources CDM Training Workshop November 4-6,2003