IFC - ENERGY · 2018. 2. 12. · 2 A Leading Investor in the Emerging Markets Power Sector 1...
Transcript of IFC - ENERGY · 2018. 2. 12. · 2 A Leading Investor in the Emerging Markets Power Sector 1...
Helsinki
December 14th, 2017
IFC - ENERGY
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1. Overview of IFC’s Energy business
2. Power Sector Trends
3. IFC's Energy Strategy
4. Example 1: A WBG approach to Scaling up Solar
5. Example 2: Intervening Early to Help Create Market IFC - InfraVentures
6. Example 3: Disruptive Opportunities – Offgrid Solar
TABLE OF CONTENTS
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A Leading Investor in the Emerging Markets Power Sector
Overview of IFC’s Energy Business1
• IFC’s FY2017 Power gross commitments amounted to US$2.5 bn (12.4% CAGR since 2012)
• IFC’s FY2017 Renewable Energy* gross commitments amounted to US$1.2 bn (48% of IFC Power)
IFC Invests in:
• Generation – 43,000+ MWs to date
• Transmission – 13 investments to date, including financing of greenfield private transmission assets
• Distribution – 37 investments to date, reaching > 164 million customers
• Early stage start ups in renewable energy, distributed generation and battery storage
• Financial intermediaries (banks, PE funds) who reach smaller assets/companies
• Platforms, HoldCos and sub-sovereign entities with regional or global footprint
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IFC has Reoriented its Strategy Towards Renewables
Overview of IFC’s Energy Business1
Note: IFC year-end is
June 30th
IFC Power sector portfolio shares by subsector and region
(FY07 to FY16), % portfolio share
Gas
Generation
T&D
Other
20162007
Renewable
Generation
Other Fossil
Fuel Generation
$5.8bn$1.8bn
2007
$1.8bn $5.8bn
2016
Power is the largest
real sector
component of IFC’s
portfolio, averaging
$2.2bn in
Commitments +
Mobilization from
FY12-FY16
4%
12%
8%
56%
26%
16%
28%
14%
12%
9%
20%
21%
21%
35%
19%16%
17%
14%
15%
20%
8%12%
Expected change
in portfolio share
Sub-Saharan
Africa
South Asia
Middle East and
North Africa
East Asia and
the Pacific
Europe and
Central Asia
Latin America and
the Caribbean
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Diverse Set of Companies Trust IFC as a Global Partner with Local Presence
Overview of IFC’s Energy Business1
Note: IFC year-end is June 30th
• Multinational companies comprise half of IFC power
business, such as:
Long-term partnerships with key strategic players
Work closely with renewable energy companies
expanding into emerging markets
Help companies access capital at project, holdco and
corporate levels
• “Local” companies are becoming regional / global and a
larger share of IFC business on the back of market reform.
IFC engages in the following ways:
Power companies investing in the ‘home’ country or
expanding into other emerging markets
Local industrials expanding into the power sector
• IFC also works with emerging renewable energy
companies
Supporting newly started local renewable energy firms,
as they begin to build their first projects
Players that are innovating in distributed energy,
storage, and other offgrid solutions
• IFC works with sub-sovereign entities and governments
to create vehicles for private participation
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IFC’s Value-Add in Power Transactions
Overview of IFC’s Energy Business1
From Patient Equity to
Long Term Debt Sector Expertise
Country Risk
Mitigation
Environmental
& Social Risk
Management
Advisory Services
EQUITY
Up to 20% in project or
company
Start-up equity / co-
developer (IFC
InfraVentures)
SUB-DEBT
Terms tailored to meet
project needs
DEBT
Long Maturities Tailored
to Project Needs
Fixed/Floating Rates,
Local Currencies
Flexible Amortization
Profile
Syndication/Mobilization
from commercial banks
and DFIs
Deep sector
knowledge gained
from experience
In-house
Engineers:
In-house Market
Expertise
In-house
Regulatory
Expertise
Government
Relations
Neutral broker
Role
World Bank
Synergies
World Bank
Guarantees
MIGA
Coordinated
approach
across WBG
services
• MIGA
Political
Risk
Insurance
(PRI)
• IDA Bank
Guarante
e
Environmental
and Social Best
Practices
Equator
Principles
Modeled after
IFC Standards
Governance
Private sector
perspective to
governments
Introductions +
matchmaking
Cross-border support
+ Sector knowledge
Access to Donor
Funding/Con-
cessionary Support
Coordination/Carbon
Finance
Programs to assist
client, including:
Local Supplier
Development,
Corporate
Governance,
Community
Development
Funding
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IFC is intervening with different tools and engaging in projects very early on
Overview of IFC’s Energy Business1
1 As reported by the World Economic Forum in Dec 2016
Sector wide engagements across the value chain
Partnerships with key stakeholders including Goverments
Close cooperation with the World Bank
Multiple products offered and processed in parallel:
• for IFC’s own account: senior debt, mezzanine financing, equity, hedging instruments
• mobilization products: underwriting, B loans, parallel loans and co-investment funds
• obtaining concessional financing from multi-donor sources, including soft loans, guarantees, equity and grants
US$150 million fund for early stage development risk in infrastructure projects
Up to $8 million of contributions to development costs per project
Conversion of development costs into equity at Financial Close
Upstream engagements Early stage equity (InfraVentures) Debt, Mezz. and Equity Financing
Improving the enabling environment
Developing Projects Closing Projects
Upstream structuring of
transformational projects (e.g.
sector reform in Nigeria)
IFC is co-developing a landmark
hydropower project in Cameroon
with EDF
Circa US$2.5 billion of financing
committed in the power sector in
FY17
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IFC is at the Forefront of Market Creation in the Power Sector
Overview of IFC’s Energy Business1
IFC has developed market creation capabilities that it will further leverage
Procurement
advisory
Solar PV
aggregation
InfraVentures
Transmission
&
Distribution
▪ Continued close coordination
with World Bank, government
and other actors is necessary in
upstream interventions
▪ Market creation requires
sustained efforts over extended
periods of time with uncertain
outcomes
Energy storage
▪ Jordan’s Seven Sisters project aggregates
7 small solar power projects into a
single, standardized financing structure
▪ Scaling Solar in Zambia aligns a “one-stop-
shop” aimed at creating bankable utility-
scale solar power projects
▪ Provides project development support
and financing to 24 projects, mainly wind
and hydro
▪ Established a bankable PPA regime and
energy auction process in Argentina
▪ Multiple investments in private
distribution; supported distribution
privatization; project financed private
transmission
▪ Building up capabilities in new market
segment through venture capital
investments
1 As reported by the World Economic Forum in Dec 2016
▪ Enables renewables penetration and
access
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1. Overview of IFC’s Energy business
2. Power Sector Trends
3. IFC's Energy Strategy
4. Example 1: Scaling Solar
5. Example 2: Intervening Early to Help Create Market IFC - InfraVentures
6. Example 3: Disruptive Opportunities – Offgrid Solar
TABLE OF CONTENTS
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The Power Sector is Experiencing a Profound Transformation, driven by shifts in
technology and business models
Power Sector Trends2
1 As reported by the World Economic Forum in Dec 2016
Shift in generation
away from fossil
fuels to
renewables
▪ Power generation is shifting away from fossil fuels to renewables, as solar PV and wind have reached price parity with new fossil fuel capacity in more than 30 countries1
– Renewables made up more than half of cumulative planned capacity additions by end of 2016
Increasing
importance of grid
flexibility and
resiliency
▪ Grids must be made more flexible and resilient via new investments and technologies to accommodate new renewables and increase efficiency
– Global smart grid market is expected to surpass $60bn in 2020; although majority is expected to be in OECD, investments in emerging markets are expected to follow
Rapid growth of
distributed
generation
▪ In regions where the grid is unavailable, unreliable or the cost of connection
and power is high, there will be continued growth in distributed generation
– Distributed generation accounted for $46bn of investment in 2015
Increase in new
business model
innovations
▪ Innovative businesses that deliver power as a service directly to consumers
are growing (e.g., Mobisol which provides solar home systems via a PAYGO
model) and are increasing their market share of consumer spend on power
at the expense of traditional utilities.
Shift in capital
flows to key sub-
sectors and
emerging markets
▪ Capital flows are shifting to renewables, distributed generation and to select emerging markets, creating more competitive capital markets
– Lower cost capital for power sector investments is increasingly being provided by local and international commercial banks, regional development banks, export credit agencies, and bilateral financing agencies – often via auctions
SOURCE: EIA, GTM research, WEF, World Energy Investment, UNEP's 10th Global Trends in Renewable Energy Investment,
Bloomberg New Energy Finance
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1. Overview of IFC’s Energy business
2. Power Sector Trends
3. IFC's Energy Strategy
4. Example 1: Scaling Solar
5. Example 2: Intervening Early to Help Create Market IFC - InfraVentures
6. Example 3: Disruptive Opportunities – Offgrid Solar
TABLE OF CONTENTS
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IFC’s Energy Strategy for the Next 3 Years in this Changing Landscape
IFC’s Energy Strategy3
Our objective is to…
Increase access to affordable, reliable and modern energy services by being the preferred provider of capital
and expertise to investors and countries seeking to capitalize on the expected benefits of the technological
improvements and regulatory best practice
Short- to medium-term
investments and market
enablement in key sub-
sectors:
a. Gas
b. Utility-scale
renewables
c. T&D investments
1
1a
1b
1c
Disruptive opportunities to
help investee countries and
corporate clients adjust to
technological change
a. Storage
b. Distributed generation
c. IT innovations in utilities
3
3a
3b
3c
Longer-term market creation that
opens up the power sector for
private investment and develop a
longer term pipeline through:
a. Country-level transformation
b. Procurement advisory
c. Financial intermediation
d. Project preparation at scale
2
2a
2b
2c
2d
To achieve this, we will develop a portfolio-approach that incorporates…
IFC 1.0 / 2.0IFC 3.0
Responding to Technological Changes Through Investments, Market Creation and Innovation
▪ Investment officers
▪ C3P
▪ WBG
▪ Investment officers
▪ Advisory services
▪ FIG
▪ WBG
▪ Investment officers
▪ Advisory services
▪ Venture Capital
▪ WBG
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1. Overview of IFC’s Energy business
2. Power Sector Trends
3. IFC's Energy Strategy
4. Example 1: Scaling Solar
5. Example 2: Intervening Early to Help Create Market IFC - InfraVentures
6. Example 3: Disruptive Opportunities – Offgrid Solar
TABLE OF CONTENTS
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• Scaling Solar is a “one-stop-shop” for Governments to rapidly mobilize competitive
privately funded grid connected solar projects within 2 years.
• It brings together several World Bank Group services under one engagement:
Advice to assess the right size and location for power plants.
Simple and rapid tendering to ensure strong competition.
Standardized, balanced project documents to speed up procurement.
Competitive financing and insurance available to all bidders.
Risk management and credit enhancement products to deliver lower tariffs.
The Opportunity
The Product
Creating Markets: Scaling Solar
• Utility-scale solar PV can now be built at or below grid parity in Africa
• Africa benefits from excellent irradiation levels, yet many countries depend on fossil fuels
• Solar can be built in as little as 6 months
The Innovation
• One packaged solution for Governments and Developers
• One standardized suite of documents creating a large scale market
• Coordinated delivery by the WBG
The Results
Financing signed for Bangweulu project in Zambia (Oct 2017), Scaling Solar’s first implementation
globally. Record low tariff of USc6.02/kWh (flat, over 25 years) => cheapest solar power in Africa
Underway in 4 countries: Zambia, Senegal, Ethiopia and Madagascar
Scaling Solar4
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The Bangweulu project (54 MWp) is the first project to be financed via the Scaling Solar program,
an innovative WBG approach to rapidly mobilize competitive privately funded grid connected solar
projects through a “one-stop-shop” approach.
Auction process produced a winning tariff bid of USc6.0/kWh, flat for 25 years, the lowest utility-
scale solar PV tariff seen in Sub-Saharan Africa to date.
Winning consortium (Sponsors) are: Neoen (55%), First Solar (25%) and Industrial Development
Corporation of Zambia (20%).
Case Study: Zambia – a record low tariff for solar power in Africa
4 Scaling Solar
MLAOctober 2017
A Loan: $13m
Blended Finance: $13m
Parallel Loan: $13m
Swap: $3m
Zambia
Scaling Solar Zambia
Bangweulu Project
WBG Role (IFC Investment, IFC Advisory, World Bank)
Providing advice to assess the right size and location for
power plants.
Designing simple and rapid tendering to ensure strong
competition.
Developing standardized, balanced project documents to
speed up procurement.
Competitive financing available to all bidders (IFC MLA)
Providing risk management and credit enhancement products
(WB PRG) to deliver lower tariffs.
Results
The project is the first Scaling Solar project to be
committed, with commissioning expected in
September 2018.
Further Scaling Solar projects / tenders coming
down the track:
Zambia: Enel (34 MWp) + 300 MW (Round 2)
Senegal: 60 MWp
Madagascar: 25 MWp
Ethiopia: 2 x 125 MWp
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1. Overview of IFC’s Energy business
2. Power Sector Trends
3. IFC's Energy Strategy
4. Example 1: Scaling Solar
5. Example 2: Intervening Early to Help Create Markets - IFC InfraVentures
6. Example 3: Disruptive Opportunities – Offgrid Solar
TABLE OF CONTENTS
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Creating Markets: IFC InfraVentures
Intervening Early to Help Create Markets - IFC InfraVentures5
Scatec Mali - Renewable Energy Promotion in
a Fragile and Conflict-Affected Country
Co-development of grid-connected renewable
energy source with Scatec Solar. IFC holds 30%
of the equity
US$52.6 million - 33MW Solar PV in Segou,
Mali
Increase access to much needed power in
fragile and conflict-affected state
The plant will reduce dependence on
expensive diesel and inefficient HFO plants,
while providing affordable energy during the day
First renewable IPP since the 2012 coup d’etat,
paving the way for further private investments in
the power sector
Help redirect energy subsidies to be utilized for
other social programs in need of funds
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1. Overview of IFC’s Energy business
2. Power Sector Trends
3. IFC's Energy Strategy
4. Example 1: Scaling Solar
5. Example 2: Intervening Early to Help Create Markets - IFC InfraVentures
6. Example 3: Disruptive Opportunities – Offgrid Solar
TABLE OF CONTENTS
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Mobisol
Disruptive Opportunities – Offgrid Solar6
A Leading Offgrid Player in East Africa
A market leading pay as you go solar energy service
(“Paygo Solar”) company operating in East Africa
(Tanzania, Rwanda, Kenya), providing solar home systems
that are a clean alternative to unhealthy,
environmentally harmful and expensive fossil fuels.
Business model: combines solar energy with an affordable
36 month payment plan via mobile phone, comprehensive
customer service and innovative remote monitoring
technology.
Mobisol solar home systems provide enough electricity to
power bright efficient LED lights, radios, mobile phones,
TVs, DC fridges etc. The systems are powerful enough to
run small businesses enabling entrepreneurial customers
to create incremental income.
So far, Mobisol has installed over 70,000 solar home
systems on households and businesses in East Africa, thus
enabling approximately 350,000 beneficiaries to access
clean, affordable and reliable solar energy.
This innovative payment approach keeps the cost of an
entry-level Mobisol system similar to what the typical
customer spends on kerosene, candles, batteries, and
mobile phone charging while offering superior value.
IFC Invesment
Along with FMO, IFC co-invested with its GP
Investec Africa Private Equity Fund in a EUR45M
Series C growth round in convertible preferred
equity. IFC and FMO contributed EUR5.4M and
EUR9M respectively to the round.
The financing will help accelerate Mobisol’s growth
in existing markets in Rwanda and Tanzania, and
to support its expansion into Kenya.