Effective Employment of Solar PV MiniGrids in African Mining

GG Energy Holdings Stable Power Stable Pricing Page | 1

Employing Solar PV in African Mining

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The Mission of GG Energy

STABLE POWER AT STABLE PRICES!

Generating needed & affordable power Targeting long-term contracts directly with

bankable private customers in the African Industrial & Mining Sectors

GG Energy Holdings Stable Power Stable Pricing Page |

GG Energy Credentials

• Track record of 150 MW installed and operating renewable energy projects

• 100 plus MW under development in the Mining Sector

• Financed over $350 million sustainable energy projects

• Founding Sponsor of US Power Africa Initiative

• Working relationships with global technology leaders

• Financial Strength – Commitments in excess of $400MM for initial projects

• Sponsors of African Energy & Mining Forum

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Increasing Demand for Power At Mines

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Source: World Bank – The Power of the Mine

• Forecast Demand CAGR of 5.6% to 2020 • Continuous growth in South Africa • Increasing growth in Sub Saharan Africa


Macro Challenges to Power at Mines

Mining in Africa suffers from Macro issues: availability, quality and pricing:

• Declining Hydro levels

• Where gas is available - Slow integration of domestic natural gas supply:

o Little attention to national policy

o High cost of extraction

o Glut of supply limits price and market potential

• Overall move towards Cost reflective tariffs

• Potential Introduction of Carbon Tax – impacting expanded use of coal

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Unstable Power...

Power Issues Facing Mines in Africa

Poor grid maintenance and distribution leads to erratic voltage levels and power availability.


Intermittent Outages…


Power availability issues are agnostic to grid availability especially in core mining countries... South African issues are no less acute.


Escalating Pricing Uncertainty!


* Simple linear extrapolation based on approved annual average tariff increases


Overcoming the Power Crisis at the Mines

In sum, Africa is engulfed in Long-term structural issues leading to:

Unstable Power

Intermittent Outages

Escalating Pricing Uncertainty

Mines seek Power Reliability and Quality, which for many reasons is not fully present in Africa.

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Why Go Solar?

Important Reasons for deploying Solar PV at Mines:

1. Reduce risk of power loss from supply disruptions;

2. High potential to reduce and stabilize electricity costs;

3. Reduce carbon emissions;

4. Enable Mines to repurpose land used;

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5. Opportunities for cooperation with neighboring industries/communities.


Powering Mines with Solar PV

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Off-Grid

• Long-term pricing hedge

• Thermal-Solar Hybrid for lower cost of power

• Baseload with Energy Storage

• Rapid Deployment

On-Grid


• Load Balancing


Weak-Grid


• Load Balancing

• Grid Stabilization

• N2 Baseload with Energy Storage

• Thermal-Solar Hybrid for lower cost of power



Winning plan for Solar PV

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• Fast and flexible deployment • Provide for Long-term pricing hedge • Road map to succeed in deployment of Solar PV:

a. Technical Challenges b. Commercial Issues c. Regulatory statutes

Structure for success!


Overcoming the Technical Challenge Customized Solar PV solutions must provide for:

Power Reliability and Quality Ensure continuous operation and performance

MAINTAIN MINE SAFETY!

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On-Grid Applications:

• Meet Load Shedding needs

• Ability to maintain power over tie-line controls

• Support Gen-sets for Black Start during power failure (Island Mode)

Hybrid Solutions for Off-Grid Applications:

• 24/7 Solution

• Conventional Power base

• Solar PV provide 60 to 80% of load

• Utilize storage for load balancing and minimize spinning reserve requirement


Complete Micro-Grid Solution

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GG Energy and CAT provide integrated Power Solution for 24/7 efficient operation: • Diesel/HFO Generators • Solar PV Power Modules • Battery Storage • Hybrid Controller

Minimize Fuel Consumption Seamless integration Reduced emissions


Solving the Commercial issues • IFRS treatment of PPA or Lease arrangements on

Balance Sheet

• Capital Costs – Inverse relationship between Solar PV and Conventional Power

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• Pay upfront – Solar PV Take-or-Pay Framework vs. Pay-as-you-go for Conventional

• Life of Mine – often shorter pay-back period than Solar PV project!

• Potentially Stronger Business Case for Solar PV/Hybrid systems in remote, off-grid locations! Shorter Life of Mine; Offsetting higher priced fuels

• Consider using Mining company subsidiary SPV structure for Power company – becomes a self-production venture.


Effective Financial Structures • Balance risk allocation to those best able to manage it!

o Contract/Termination Risk – according to source of default

o Construction Risk – seek strong EPC to backup

o Payment Risk – possibly include ultimate off-taker coverage

• PPA Payments – target to Levelized cost of electricity and expected cost of power

• Separate Availability (capacity) and Minimum Output payments

• Optimize debt sources – Integrate DFI lending and ECA coverage for longer tenure and lower cost

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How Making Renewables work

Work Cooperatively – IPP and Mine are not adversaries!

• Focus on Grid Parity – Seek integrated solutions priced to meet customers long-term power costs

• Investigate Lease Models – Match commitment to buy power consumed

• Expand off-take group – sell to mining consortium/ regional power pools

• Include sustainability and environmental issues in cost-benefit analysis

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FOCUS ON THE LONG TERM!


Thinking “out of the Box”

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Tender for Partners not Projects!

• Saves time and costs on all sides

• Work cooperatively for the most cost-effective solution and approach

Secondary Off-takers – Look for

local off-taker opportunities to backup primary

PPA

Establish a joint-venture with the IPP:

• Self-production Model

• Overcomes regulatory and commercial hurdles

• Mitigate potential tax/balance sheet implications

Bring in Utility as a partner:

• Direct PPA between IPP and Utility

• Mine can provide guaranteed off-take

• Utility provides load balancing

• Grid benefits from stabilization from Solar PV


Closing Words

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• Long-term structural issues impacting Energy supplies and pricing;

• Mines have to be proactive and bold in sourcing alternative power sources;

• Solar PV is the fastest clean energy source that can deployed at Mines;

• Cooperation between the IPP and the Mine in early stages of a project is critical to successful and beneficial implementation of Solar PV Solutions at Mines -

• Collaboration is the Best way to overcome:

Regulatory obstacles

Technical issues

Commercial challenges


Questions and Follow Up

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Ira Green Managing Partner

GG Energy Holdings LLC Tel +1 646 443-0513

[email protected]

Effective Employment of Solar PV MiniGrids in African Mining

Economy & Finance

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