Is early stage seed capital the solution to accelerating project pipeline development in the clean...
-
Upload
tbli-conference -
Category
Economy & Finance
-
view
535 -
download
1
description
Transcript of Is early stage seed capital the solution to accelerating project pipeline development in the clean...
United Nations Environment Programme Division of Technology, Industry & Economics (DTIE)
Eric UsherHead, Renewable Energy and Finance Unit
Is early stage seed capital the solution to accelerating project pipeline development in
the clean energy sector ?
TBLI AsiaMay 25th, 2006, Bangkok
Example Enterprises
BETL, Tanzania• Business: Logistics company coordinating ag. wastes for fuel
substitution• Stage of Sector Development: Early Commercialization phase • AREED Support: $50,000 3-yr loan and Enterprise Dev.
Support from Tatedo, E+Co• Status: Increased sales from 500 Mt to 1200 Mt per month
Repayments current.
KPBS, Zambia• Business: Charcoal production from sawmill waste• Stage of Sector Dev.: Proof of concept phase • AREED Support: $73,000, 4 yr loan and enterprise
development support from CEEEZ, E+Co• Status: Construction of 15 kilns completed. Production,
distribution and sales of charcoal started Feb 2003. Enterprise folded in 2004
Example Enterprises
EntrepreneurEntrepreneurEntrepreneurEntrepreneur CustomersCustomersCustomersCustomers
SeedFinancing
EnterpriseDevelopmentServices
Projects/Services
SEED FINANCE- Typically 3-5 year loans in local or
US currency.- Concessionality
-> Elevated risk appetite-> Provision of enterprise
development services
- Terms/conditions flexibly matched to what the enterprise can handle
SEED FINANCE- Typically 3-5 year loans in local or
US currency.- Concessionality
-> Elevated risk appetite-> Provision of enterprise
development services
- Terms/conditions flexibly matched to what the enterprise can handle
Sodigaz, Mali• Business: LPG distribution• Stage of Sector Dev.: Replication phase • AREED Support: $183,000, 5 yr local currency loan
and enterprise development support from MFC, E+Co• Status: Repayments current, supply capacity doubled
within a burgeoning market.
Clean Energy Enterprise - Timeline
Concept
Project devmt,pilotBusiness
planning Aggregate Investment
Growth
Construction
seed
AREED Investments 2001 - 2006
- 50,000 100,000 150,000 200,000
RCI (Biofuel)*
TSADC (SThermal)*
Bagani (Biofuel)*
Ubwato (Cookstoves)*
USISS (Crop Drying)
Rasma (Cookstoves)*
Translegacy (LPG-Stove)
Foyers Amel. (LPG-Stove)
VEV (Wind Pumps)
Prosoleil (SThermal)
BETL (Biomass)
Fadeco (SThermal)
Fee Hi (LPG)
Energie R (SPV)
AME (SThermal)*
Kalola Farms (Wind Pump)
Bansim (LPG)
Aprocer (Cookstoves)
Mona (SPV)
M38 (LPG)
RESCO (LPG)
Anasset (LPG)
Chavuma (EEfficiency)
KBPS (Biomass)*
Seeco (SPV)
LMDB (LPG)
Lambark (LPG)
Motagrisol (SPV)
Gladym (ELighting)
AB Mgt (EEfficiency)
Eco'Home (ELighting)
Sodigaz (LPG)
Enterprises
Size (US$)
Type 1 REED Investment: Proof of Concept• e.g., Jotropha, crop drying, PV mills • Very low risk-adjusted returns.• High Innovation impact on sector development• Typical Loan Size: $25,000• Ave defaults: 30%• Ave returns: 2%
Type 3 REED Investment: Replication• e.g., Urban LPG, efficient lighting• Moderate risk-adjusted returns• High direct impacts• Low Innovation impact• Typical Loan Size: $130,000• Ave defaults: 4% • Ave returns: 6%
Type 2 REED Investment: Commercialization• e.g., Waste to energy, rural LPG• Low risk-adjusted returns•Typical Loan Size: $70,000• Ave defaults: 27% • Ave returns: 4%
Segmenting the AREED Portfolio
* Denotes full or partial write-off
African Rural Energy Enterprise Development
Portfolio Observations
• 3% to 5% Financial returns are achievable, and • non financial TBL returns can also be significant• Enterprise development costs are high
• 20 to 50 cents on each dollar invested• Public Perspective
• After costs, we still see a positive cash flow model• Private Perspective
• Seed financing can be an effective means of generating project pipeline
• Why aren’t energy investors providing seed financing today ? Enterprise development and transaction costs Insufficient risk adjusted returns
ReturnsEnhancement
Seed Capital Window
Transaction Cost Sharing
Sustainable Energy Fund
Enterprise Development
Support
SeedCapital
Seed Capital Assistance
Facility(SCAF)
Closing the Gaps -Seed Capital Assistance Facility (SCAF)
Commercial Energy Fund
Development Finance
Commercial Investors
Local Banks
InvestmentCapital
Clean Energy Enterprise - Timeline
Concept
Project devmt,pilotBusiness
planning Aggregate Investment
Growth
Construction
Seed Fund
SCAF Eligibility
• GEF eligible countries in Asia, Africa
• Renewable energy / Energy efficiency investments under $250,000
• Typical SCAF Supported clean energy fund– $3 to $5 million seed window within $30 to $100mn fund.
– SCAF Support• 2.5% mgt fee increased to 4%
• 3% - 4% return boost per qualified investment for 4 yr period– > $400K - $800K of SCAF support
Foster a sustainable energy finance community
that brings together financiers and catalyses
public-private alliances to share costs
and lower barriers to investment.
Provide Information Facilitate Networks Develop Partnerships
http://sefi.unep.orghttp://sefi.unep.org
http://www.unep.fr/energy/finance http://sefi.unep.org
The challenge of supplying small scale energy services• is NOT a lack of technology, business models, capital or the ability to pay; • it is the MISMATCH between the needs of the enterprise and the types of financing currently available.
Phil Larocco, E+Co
Eric Usher [email protected]
THANK YOU!