UNIDO / GEF Global Clean Tech Innovation Programme

Special Event at VEF An Introduction to

Private Financing Advisory Network

Peter Storey

Vienna 9th May 2017

Overview Clean Energy Investment Accelerator: PFAN advises low-carbon, climate resilient businesses in developing countries, and matches projects to appropriate private financing.

PFAN mobilizes private financing to reduce GHG emissions and build climate resilience – contributing to Paris Agreement and Sustainable Development Goals:

o Paris Agreement Impact: Mobilize USD 100 billion per year by 2020 of private and public financing

o SDG Impact: SDGs 7 (Energy), 9 (Industry), 13 (Climate Action), and 17 (Partnership).

PFAN operates on a low-risk, low overhead networking model based on fixed-fee project development and transaction advisory services

Where We Are Now (2)

PFAN is one of few actors in the climate finance space addressing key barriers for Small and Medium-sized Enterprises (SMEs) in developing countries and emerging economies:

DEMAND

Oversupply of poorly structured projects

Lack of financial & commercial

skills

SUPPLY

Large Financing Supplies

Underdeveloped investment cultures and risk assessment

Low familiarity with

technologies & business models

Limited supply of Investor Ready Projects / Limited Investment Readiness

PFAN – Rationale A multi-pronged approach

PFAN Development Profile

Project

Idea /

Concept

Pre-

Feasibility

Development

Technical

Feasibility

Commercial

Feasibility Implementation

High Risk Decreasing Risk

Own Money

Sweat Equity

Friends & Family

Angel Investors

Dvpt Finance

DFIs

Philanthropic Institutions

Strategic Investors

Private Equity

Impact Investors

Development Banks

Venture Capital

Financial Investors

Banks

Linkages with DFI Activities / Programmes

Tipping Point TA Facility PFAN

PFAN Services

• Professional advice

• Proven methodology

• Network members

• Local and global understanding

• Investor forums

• Investor Roadshows

• 1-1 introductions

• Investor Network

• Identifies strengths and weaknesses for focus of coaching

• Feedback from investors and experts

• Deal facilitation

• Technical studies

• Due diligence and legal costs

• Co-funding Tipping Point

Technical Assistance

Project ID Investment Readiness

Assessment

Strategic Advisory & Coaching

Financing Facilitation

Project Criteria

PFAN PROJECTS

Commercially Viable

Growth Potential

Experienced

Management Team

Development Impact

(SDGs)

Climate Impact

Technically Viable

• USD 1–50 million total investment in low carbon, climate resilient projects

• Micro projects (< USD 1 million)

• Wind/ Solar / W2E Biogas / Hydro / Energy Efficiency / Biomass / Biofuels / Geothermal / Rural Electrification / Clean Transport / Mitigation / Adaptation

• Technology Neutral

Global Snap Shot of PFAN

PFAN Track Record

USD 1,2 billion raised

87 projects

701 MW installed capacity

Projects closed

Leverage ratio:

1 / 80

2,6 million tonnes CO2e pa

141 GWh pa

energy savings

USD 8,7 billion Pipeline 358

projects

4.900 MW

capacity

17,6 million tonnes CO2e pa

Pipeline Analysis

15% 0%

7%

28%

2%

17%

13%

8%

3%

7%

Region

S Asia Asia Pacific

China SE Asia

CISCA East Africa

Southern Africa West Africa

LA / Brasil CAC

8%

18% 13% 5%

3%

15%

5% 19% 2%

7%

5%

Technology

Biofuels Biomass Biogas

W2E Clean Transport Hydro

Wind Solar Geothermal

EE Other

Closed Projects Analysis

12% 10%

3%

33%

27%

12%

3%

Region

Southern Africa E Africa W Africa

SE Asia S Asia China

LAC

Hydro 17%

13%

W2E 4%

Wind 6%

Biofuels 6%

Solar 18%

EE 14%

Biogas 16%

Clean Transport 6%

Technology

Hydro Biomass W2E

Wind Biofuels Solar

EE Biogas Clean Transport

PFAN Value Added

• Comparative advantage: Originating quality, investment-grade pipeline for multilateral and private sector investors

• PFAN is a complementary Technical Assistance Service focused on SMEs that facilitates effective disbursal of climate financing, including through the Regional Development Banks, the Green Climate Fund and the UN Climate Technology Centre and Network

• High degrees of financial leverage for Donors

USD 80–100 leveraged for every dollar of public funding

Unique low overhead networking business model based on fixed fee investment advisory services

Contact Us!

PFAN Global Coordinator: Peter Storey

peter.storey@ppl-int.com

UNIDO: Patrick Nussbaumer p.nussbaumer@unido.org

REEEP: Martin Hiller martin.hiller@reeep.org

www.cti-pfan.net

Thank You!

Project ID 221/REEEP_022

Regions Southern Africa

Country South Africa

Technology Types Biogas

Business Type Greenfield

Debt Asking Amount

$9,450,000

Equity Asking Amount

$4,050,000

GHG Mitigation Potential (tonnes CO2e pa)

17,000

Bio2Watt Bronkhorstspruit Biogas Power Plant

South Africa

BPP uses cow manure from an industrial scale cattle lot to produce biogas and generate electricity for supply to a dedicated industrial off-taker, generating 4MW of electrical power and 4MW of thermal power

Project ID 280/NIG_204

Regions West Africa

Country Nigeria

Technology Types Biofuels

Business Type Scale-Up

Debt Asking Amount

$15,700,000

Equity Asking Amount

$850,000

GHG Mitigation Potential (tonnes CO2e pa)

5,400

SME Funds / Green Energy & Biofuels Ethanol Bio-Refinery Plant Scale-Up

Nigeria

SME uses waste saw dust and water hyacinth to produce bio-ethanol and bio-ethanol gel using its proprietary 2nd Generation biofuels technology in mini-refineries. The bio-gel is distributed with cook stoves to households in rural Nigeria through an innovative distribution model

Solar Project Fund for Commercial Off-grid Solar and Rural Micro-grids in

Nepal

Project ID 394/GCC_245

Regions Asia

Country Nepal

Technology Types Solar

Business Type Scale-Up

Debt Asking Amount

$18,414,000

Equity Asking Amount

$8,276,400

GHG Mitigation Potential (tonnes CO2e pa)

17,520

Gham Power uses a unique project aggregation platform that enables rapid qualification and development of large scale projects that primarily focus on powering commercial activities for financial sustainability.

Learnings from Projects Seen (1)

• Lack of Ask

• In-appropriate Capital Structure

• Investment Vehicle

• Un-realistic Valuation & calculation basis

• Unrealistic Exit Options

• eg listings or IPOs

• Investors prefer self-liquidating structures or strategic sales

• Poor Understanding of Business Model

• Project Rationale

• Pricing, Positioning, Value Proposition, Investment Readiness

• Plausible & verified assumptions

Learnings from Projects Seen (2)

• Poor presentation, manipulation of Financial Information

• Ownership & Understanding

• Appropriate Ratios & Metrics

• Poor Risk Analysis & Mitigation

• Which are the risks which put you out of business?

• Some risks not capable of mitigation

• Climate & Agricultural risks

• Some risks may also represent opportunities

• Correlation of risk to Key Success Factors

• Mismatch of Developers’ & Investors’ Expectations

• Approaching the ‘wrong’ investor at the ‘wrong’ time

Trends & Observations

• RE Assets are increasingly a recognized asset class in their own right

• Competitiveness of Solar without need for subsidy or support

• Esp in Rural Electrification & Off-grid Applications

• Innovative Business Models for BoP markets

• DESCOs / DREU / PAYG

• Integration of ICT / Mobile Technology / Mobile Money

• Demographic challenges of distribution & servicing rural communities

• Businesses face early stage funding gaps for stock replenishment and to support financing packages

• Biomass & W2E remain challenging technologies / business areas

• Logistics for feedstock supply

• Volatility of feedstock supply and pricing

Trends & Observations (2)

• Favoured funding instruments:

• Convertible Debt Instruments

• Guaranteed Preference Shares

• Lack of funding for early stage proof of concept and late stage due diligence and fulfilment of conditions precedent

• Local Banking Markets are shallow and illiquid

• Need to develop the secondary market and access to wholesale capital markets

• Issues of Scale

• How do we reconcile top down approach of financing and capital markets and necessity for bottom up project identification and development?

•