Renewable Energy Financing

30 September 2014

CONTENTS
Africas Infrastructure Needs
South African Energy Landscape
Renewable Energy Programme:
Context
Allocation of MW
DBSAs Financing Role in REIPP
DBSA Products and Services
Key Financing Considerations
Examples of Financed Projects

Africas Infrastructure Funding Needs Contextual Background

Studies include:
Africas Infrastructure A Time for Transformation World Bank
(2010). Findings Include:

The cost of addressing Africas infrastructure needs is

around $93 billion a year, one-third of which is for
maintenance
Even if major potential efficiency gains are captured,
Africa would still face an infrastructure funding gap of
$31 billion a year, mainly in power
Infrastructure to 2030 (OECD) Partnerships will be key

Broad recognition of the need to pursue various forms

of partnerships with the private sector if the required
infrastructure is to be provided
3

South Africas Energy Landscape

Integrated Resource Plan
The Integrated Resource Plan (IRP) 2010 is a living plan
that forms the strategy of new generation capacity by 2030.
The IRP 2010 aims to increase investments into new power
projects by 40,000MW by 2030.
The IRP 2010 provided the following:
Coals total share expected to increase by 15%
Nuclears total share expected to increase from 5%
(2010) to 23%
Renewable energys share expected to increase by
42%, a significant milestone given that modern forms
of renewable energy have been almost non-existent
in SAs current generation mix.
4

South Africas Energy Landscape

Integrated Resource Plan (IRP2010)

Source: RSA Department of Energy

Renewable Energy Programme Context

Renewable Energy Independent Power Producer Procurement Programme
In light of the IRP (2010), a procurement programme has been approved
paving the way for the construction of renewable power generation capacity
under the first phase of the IRP 2010-2030.
The Renewable Energy Independent Power Producers Procurement
Programme (REIPPPP) is being run in 5 rounds as follows:

Round

Bid submission date

Round 1

4 November 2011

Round 2

5 March 2012

Round 3

19 August 2013

Round 4

August 2014

Round 5

August 2015

The technologies forming part of the programme include onshore

wind, concentrated solar power, solar photovoltaic, biomass, biogas,
landfill gas and small hydro ( 10MW)
6
1

REIPP Programme - Allocation of MW

The Department of Energy has the mandate to develop policy for the development
of the energy sector in RSA.
The Minister of Energys first
determination allocated 3,625MW of
renewable energy
Technology

Total MW Allocation

Onshore Wind

1,850

Solar PV

1,450

CSP
Small Hydro

200

The Minister of Energys second

determination allocated an additional
3,200MW of renewable energy
Technology
Onshore Wind

1,470

Solar PV

1,075

CSP

Biomass

400

75
Small Hydro

Landfill Gas

Total MW Allocation

60

25
Biomass

47.5

Biogas

47.5

Small Projects

100

12.5

Biogas

12.5

TOTAL

3,625

TOTAL

3,200
7

REIPP Programme Context

Pursuant to the determinations, the following amounts were awarded in the
various procurement rounds:
Round 1

Round 2

Round 3*

Total

Wind

634

563

787

1,984

PV

632

417

435

1,484

CSP

150

50

200

400

14.3

34

48

1,044

1,456

3,916

Other
Total

1,416

Note: round 3 projects are currently working towards financial close

REIPPP - DBSAs Financing Role

Specifically for renewable energy projects under the REIPPP, DBSAs committed
exposure is as follows:
REIPPP Rounds 1 and 2
No of committed projects

13

Technology profile

Solar photovoltaic
Concentrated solar power
Wind

MW

896

Status

8 projects successfully completed and

are in the operations phase
5 projects under construction

Total funding committed

ZAR 6.7 billion

BEE funding committed

ZAR 1.3 billion

DBSA Products and Services for REIPP Projects

The following products are typically applied towards REIPP projects:
Debt

Long-term debt, 15 years ZAR financing

Empowerment
Finance

Equity Finance to support the BEE partners

Arranging

Lead Arranger

Underwriting

Underwrite to ensure complete financing package

Other products that could potentially be applied to enhance the projects:

Project
Preparation
Assistance

Funding applied towards feasibility studies and project

preparation

10

Key Financing Considerations

Clarity and Regulatory
Framework:
Acts enabling Legislation,
Licenses and Conditions

Regulatory and Legal:

Clarity in the regulatory environment
Transparent procurement system
Key terms of the PPA
Understanding of the tariff regime
Contracting regime
Security

14

Key Financing Considerations

Commercial:
Sponsors and
Operators with
experience and a
proven track record

Government support and commitment

Strong transaction advisory support
Strong sponsors and operators
Committed partners
Technology
Resource Considerations
Currency considerations

12

Key Financing Considerations

Improving the livelihood of
the people through
improved access to services

Development Impact:
Environmental Issues
Improved access to services
Job creation
Local Economic Development
Skills Development
Transfer of Risks

13

Example of Financed REIPP Project

Project Description

138 MW Jeffreys Bay Wind Farm Project

Sponsors

Mainstream Renewable Power;

Globeleq;
Thebe Investment Corporation;
Amandla Omoya Trust;
Enzani Technologies;
Usizo Engineering.

Technology

Commercially proven Wind Turbines

(Siemens)

Funding Consortium

ABSA Capital;
Liberty Group;
Sanlam;
DBSA.

DBSA Participation

Senior Debt funder;

Empowerment/Equity Funder (to
facilitate the acquisition of equity
shareholding by BEE Investors)

Project Status

Reached Commercial Operation Date (Mid

2014)

14

Conclusion and Parting Thoughts

REIPPs can be
successfully applied
in the region

Taking cognizance of the challenges

REIPPs in energy are a viable
proposition:
Various sources of funding can be
leveraged
Government has the opportunity to
influence and guide development
outcomes
Opportunities are created for Investors,
Local Economic Empowerment and
transformation

17

Contact Details
Development Bank of Southern Africa
Physical Address

Postal Address

Tel/Fax

1258 Lever Road

Headway Hill
Midrand

P.O. Box 1234

Midrand
1685

+27 11 313 3822

+27 11 206 3822

Lucy Chege

General Manager Infrastructure Finance

18

Thank You