Industrial Development Corporation’s approach in developing Green Industries

August 2013

Focussing on Renewable Energy especially CSP

Rentia van TonderHead: Green Industries

2

Content

Green SBU: Focus, Portfolio & Strategies2

IDC & Renewable Energy 3

IDC’s role in CSP 4

Conclusion6

Funding RE5

IDC background1

3

Introducing IDC

o Established: 1940o Type of organisation: Development Finance Institution (DFI)o Ownership: State owned company, 100% owned by the SA governmento Total assets: R115 billion (30 September 2012 - group)o Total liabilities: R24 billion (30 September 2012 - group)o Funding status: Self financing, pays dividends and income taxo Credit rating: Baa1 (Moody’s) in line with sovereign ratingo Main business area: Industry development through the provision of

funding resulting in job creationo Geographic activities: South Africa and the rest of Africao Products: Custom financial products to suit a project’s needs

including debt, equity, guarantees or a combination of theseo Stage of investment: Project identification and development, feasibility,

commercialisation, expansion, modernisationo Number of employees: 804 (December 2012)

4

Vision, mission, objective and valuesVa

lues

Visi

on To be “the primary driving force of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent”

Mis

sion

The IDC is self-financing national development finance institution whose primary objectives are to contribute to the generation of balanced, sustainable economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound

business principles.

Obj

ectiv

e

Passion Professionalism Partnership

Out

com

es

Lead industrial capacity development

Primary: Facilitate sustainable direct and indirect employmentSecondary:• Improving regional equity, including the development of South African rural areas, poorer provinces and industrialisation in

the rest of Africa;• Growing the entrepreneurial and SME sectors• Transformational impact on communities and growing black industrialists• Environmentally sustainable growth• Growing sectoral diversity and increased localisation of production

5

Positioning

• Non-commercial focus• Fiscal transfers and grants• Development objectives (social)

Government / NGOs• High commercial focus• Private sector capital• Financial objectives• Known risks

Commercial Financiers• Commercial and development

focus• Sharing risk• Internally generated funds,

government funds, loans

DFIs

Greater importance on financial objectives

Greater importance on social and developmental objectives

IDC does not directly compete with other institutions, but encourages cooperation with a variety of these institutions to achieve its goals

• Industrial Development Corporation (IDC)

• Development Bank of Southern Africa (DBSA)

• sefa• National Empowerment Fund (NEF)• Etc.

• ABSA• Standard Bank• First National Bank• Nedbank• Etc.

Green Industries SBU: Focus

Energy efficiency

Heat, Electricity & building efficiency

Cleaner production / Industrial Efficiency

Transport Efficiency

Waste to Energy

Fuel Based Energy

Co-generation

Emission and pollution mitigation

Air pollution control

Waste Management/ Recycling

Clean stoves

Bio Fuels

Bio Ethanol Bio Diesel

Renewable Energy: Non-Fuel Power

Wind Power Generation

Concentrated Solar Power

Solar Photo Voltaic Power

Services related

to renewable

energy & energy

efficiency

Local

manufacturing

related to

renewable

energy & energy

efficiency

Hydro

Fuel Based Energy 12%

Energy Efficiency 4%

Renewable Energy 76%

Biofuels 8%

Green Port-folio

R10,4 bn

R7.5 bn

R1.4bn

R422mR1.1bn

16 ProjectsExposure R620m

20 ProjectsExposure R185m

3 ProjectsExposure R193m

20 ProjectsExposure R1.5bn

Green Industries SBU: Portfolio

IDC

Total Investment - R631m

Total Round 1 & 2

Investment R74.7bn

Total Investment – R16bn

Total Investment – R24bn

Total Investment – R34bn

6%

94%

IDC

32%

68%

SOLAR PV WIND

CSP HYDRO

8%

92%

IDC

22%

78%

IDC

Renewable Energy: IDC’s participation

Wind25%

Hydro3%

CSP44%

PV28%

IDC Total Investment

R7.7bn

• 7 Projects, 452MW, R1.9bn

• 1 Projects, 10MW, R204M

• 8 Projects, 213MW, R2.1bn

• 2 Projects, 150MW, R3.5bn

Renewable Energy: Portfolio analysis

No Small IPPs (1-5MW) • RfP released 20 Aug’13• IDC reviewed &

commented on draft

Nov 2011

June 2012

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20300

2

4

6

8

10

12

14

16

18

20 Cumulative Capacity per 3 main Technologies

Wind CSP PV

GW

By June 20122 500MWR75bn

Determination announced up to 2020: 6 900MW

Key considerations:• Grid availability• Grid

Intermittency & stability

• Number of “Large” scale PV & wind projects

• Lack of smart grid in SA

• Load factor compared to coal based energy

• Cost per kwh of RE

By 203018 000MWR500bn

Renewable Energy: Current reality…

PV Wind Hydro CSP0

100

200

300

400

500

600

700

800

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

80 147 139

694

38%

31%

78%

36%

Avg jobs per Project Avg Local Content %

Lo

cal

con

ten

t %

Avg

Jo

bs

• CSP has the highest potential for job creation

• CSP Highest capital per MW

• Local content targets expected to increase gradually with every bidding round

• Indirect impact on rural upliftment and job creation

Research conducted to date on localisation potential:SAPVIA: Rooftop study; Localisation Study with DTI SAWEA: Local content workshops & engagementSASTELA: Localisation study: Ernest&Young, GIZ, DTI CSIR: Solar Roadmap Study & WorkshopsDTI: Sets hurdle Local content for RE Projects

IDC

impact

Renewable Energy: Current reality…

2.4

2.5

2.6

2.7

2.8

2.9

3

3.1

3.2

R 3.14

R 2.85

R 2.69

R 2.52

CSP Tariff

R /k

Wh

50 MW : Round 2150 MW MW: Round 1Release of RfP by DoE:

CAP

NERSA REFIT

PROPOSAL

Nov

2011

Oct 2009 May

2012

Aug

2011

Oct 2010 : SASTELA co-

founded by IDC to promote CSP

• Minister of Energy

has made a further

determination in

December 2012 of

400 MW CSP

allocation.

• The industry is still

waiting for a formal

announcement

regarding the CSP

allocation for

Mar’14

• Preference towards

CSP with storage.

IDC

impact

Renewable Energy: CSP tariff roadmap

13

Molteno: DorperWind: 100MW

Jobs: 147

Rustenburg: RustmoSolar PV: 7MW

Full Time Equiv. Jobs: 48

Malmesbury: SwartlandSolar PV: 6MW

Jobs: 27

Oyster Bay: RedcapWind: 80MW

Jobs: 275

Pofadder: KaXuConcentrated Solar : 100MW

Jobs: 660

Caledon: KlipheuwelWind: 27MW

Jobs: 47

Pofadder: KonkoonsiesSolar PV: 10MW

Jobs: 85

De Aar: MuliloSolar PV: 10MW

Jobs: 35

Prieska: MuliloSolar PV: 20MW

Jobs: 71

Kenhardt: AriesSolar PV: 10MW

Full Time Equiv. Jobs: 60

Gouda: AvengWind: 138MW

Jobs: 124

Former Ciskei: Innowind ChabaWind: 21MW

Jobs: 96

Port Elizabeth: Innowind GrassridgeWind: 60MW

Jobs: 230

Grahamstown: Innowind Waainek

Wind: 24MW

Jobs: 107

Kakamas: KakamasHydro10 MW

Jobs: 139

Upington: KhiConcentrated Solar : 50MW

Jobs: 727

IDC funded 17 projects Sishen: AvengSolar PV: 75 MW

Jobs: 142

More opportunities for regional integration and development …

IDC

impact

Renewable Energy: Regional development & integration – SED and ED

Renewable Energy: Opportunities for regional development & integration – SED and ED

• Northern Cape (2% of population) got 52% of Investment = R39bn

• Revenue streams to communities (2 CSPs): – Trust dividends– 0.1% of total revenue on ED– 1.0% of total revenue on SED– 30% on preferential procurement

Initiated a workshop and task team between Green SBU, Strategy and R&I with CSIR to develop social impact assessment tool

2

% Investment

% Population

52%

IDC

impact

IDC’s role in CSP

• Key role through project development and funding of PFS and

BFS;

• Potential to provide base load electricity;

• Steep learning curve

• New industry development and risk taker

• Total potential exposure to CSP could be more than R7bn

(round 1 to 3);

• Support to develop industry and drive cost down.

• Potential to source funding to reduce cost, specifically for CSP

• Importance to position industry as strategically important for

future electricity supply.

IDC involvement in Concentrated Solar Power (CSP)

NameSize Technology Location Community IDC

Total IDC Exp Status

XaXu (Abengoa)100MW Trough Pofadder !KaXu

20% 29% Under construction

!Khi (Abengoa) 50MW Tower Keimoes !Khi

20% 29% Under construction

Sol Africa50MW Trough Upington 5% 25%

Round 2 (IDC only a development partner)

iLangalethu100MW Trough

Upington- Karoshoek 5% 20% Bid Round 3

Xina (Abengoa)100MW Trough Pofadder !Xina

20% 20% Bid Round 3

Tota

l po

ten

tial e

xpo

sure

: R7,

3bn

Financing CSP

Financing CSP in South Africa

• New industry – riskier compared to PV and Wind;

• Financing of Trough technology easier than

Tower;

• Requirements from commercial banks – risk

averse;

• Importance of EPC and O&M experience and

strength of partners;

• Long term investment approach;

IDC Funding possibilities for RE projects

• Project development through participation and cost sharing of bankable feasibility studies

• Equity participation– Minimum: Meaningful 10% with minority protection– Maximum: Not majority, 30%

• BEE and BBBEE funding– Lending to Community Trust or BEE shareholder to

invest in project– Repayment with dividends– Will allow 10-25% cash (trickle dividend) for community

trust / BEE shareholders– Favours community trust concept

• Debt participation– Senior debt with tenure of 15 years post commercial

operation date (COD)– Interest capitalisation during construction– Construction loan

CommunityTrust

BEE# “HoldCo-B”

Community“HoldCo-C”

IDC

BEE#

Project Company

Strategic Equity

Partners

Developer

IDC Funding with Preference Shares

Ordinary shareholding

# This could also be a BBBEE or NPO

Ownership and IDC funding

Renewable Energy: Project Structure for a REIPP Power Project in SA

Fixed priceLSTK Contract

Eskom20-Year

Take-or-payPower Purchase

Turbine supplier

10-Year Operation

& Maintenance

LandOwner

Long-term Land Lease AgreementBBBEE & BEE

1. Developer2. Strategic 2. Institutional 3. IDC

Main Sub-contractors

EPCContractor

RSABalance of Plant

Supplier

RSA Civil

Contractor

RSA Electrical Contractor

15%

85% ShareholdersAgreement &

Shareholder LoanAgreement

RE IPP Project Wind / Solar/ CSP/ Hydro

Independent PowerProducer (IPP)

EnvironmentalAuthorities

Construction Permit & ROD

25% Equity

InternationalTurbine/PV

Manufacturer

IntercreditorAgreement

IDC

Commercial Banks

Security SPV

Facility Agreements

CTA & Senior debt

Security Agreements& Indemnity

Debt GuarantorAgreement

Direct Agreements

75% Debt

Generation Licence NERSA

Conclusion

Khi tower Aug , 2013 at 173m height

Conclusion

The Industrial Development Corporation19 Fredman Drive, SandownPO Box 784055, Sandton, 2146South AfricaTelephone (011) 269 3000Facsimile (011) 269 2116E-mail callcentre@idc.co.za

Thanks