Industrial Development Corporation 25 March 2015 IDC funding for Green Energy – with a Waste focus Rishel Dharmapall Green Industries SBU.

Industrial Development Corporation

25 March 2015

IDC funding for Green Energy – with a Waste focus

Rishel DharmapallGreen Industries SBU

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Content

• IDC and its mandate• IDC funding options for various stages of projects• IDC Green SBU - Green Funds• Types of Green Waste Projects funded by IDC

– Waste recycling – Waste gases/heat for cogen– Biogas projects & CHP & in Transport– Developing Waste energy projects n

• IDC’s role & offer

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The Industrial Development Corporationo Established: 1940o Type of organisation: Development Finance Institution (DFI)o Ownership: South African Governmento Total assets: over R112 billiono Main business area: Providing funding for entrepreneurs and projects (greenfields

and expansions) that are contributing to industrialisation and job creationo Geographic activities: South Africa and the rest of Africao Products: Wide range of custom financial products to suit a project’s needs

including debt, equity, guarantees or a mixture of theseo Stage of investment: Early stage (feasibility), commercialisation, expansiono Project development: Identification and development of projects adding to the industrial base

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Positioning as Industrial Development Funder

• 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

• Industrial Development Corporation (IDC)• Development Bank of Southern Africa DBSA)• National Empowerment Fund (NEF) etc

IDC encourages cooperation with a variety of these institutions to achieve its goalsIDC addresses market failures / gaps by supporting investments, which may otherwise not happen, in partnership with

private sector companies

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IDC can be involved in Project Development Phases

Concept (Pre-scoping) stage

• Fit IDC & SBU mandate?

• Viability?

• Screening of other parties/shareholders?

Implementation

• Plant construction,

commission and operation

Feasibility study (may have 2 steps to Bankable)

• Pilot Study

• Financial model

• Signing of all Agreements

• All Regulatory approvals

• Funding Approval for debt and equity

Pre feasibility study

• Review of Technology/Process and identify preferred choice

• Operating partner• Regulations (e.g.

Carbon credits, EIA, Waste License, etc)

• Raw material security (e.g. waste supply Volumes)

• Offtake/Supply of Product

• Financial model

Scoping stage

• Desktop financial model and BA type report

• Outline scope of work to implementation stage• Focus Pre-

feasibility & Feasibility

• Request project development budget (internal and external costs)– used to carry out subsequent stages

Green Industries SBU: Focus

Energy efficiency

Heat, Electricity & building efficiency

Cleaner production / Industrial Efficiency

Transport Efficiency

Waste to Energy

Fuel Based Energy

Biogas/ CHP/Cogen

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 Green Energy: Industry structure

Municipal solid waste or

Biomass or Tyres

Grown biomass

Organic waste

Sewage sludge

Animal litter

Feedstock

Waste Gas

Pyrolysis

Sorting

Anaerobic Digestion

Combustion Incineration or

Waste heat

Gasification

Primary Process

Steam turbine or organic rankine

cycle

Electricity

Industrial fuel

On-site heating

Vehicle fuel

End Use

Recycling

CHP/CogenInternal gas combustion

Gas Cleaning

Liquefied Biogas (LBG)

Compressed Biogas (CBG)

Steam

Piped gas

Secondary Process

Fuel Based Green Energy: Approach Biogas, Waste to energy and CHP/Co-generation

Feedstock

OfftakesRevenue

Process various options

Investment decision

Project

Feedstock (Fuel) security:• No feedstock security, no start• Challenge: Long term supply agreement to

cover debt tenure + 2 years• Quality, quantity, price & period• MFMA requirements for municipalities

Process/Investment options:• Driven by feedstock qualities, quantities

term and off take options• Typical cost R15-35m/MW• High load factors (eg 90%)

Offtakes:• Low O&M cost• If Offtake/feedstock price strong• Repay debt quickly

Green Energy Efficiency Funds, eg, KfW & Afd

KfW /AfdConcessional debt funding

Technical assistance grant

IDC Develop Green Industries

Capacity building in clean energy finance

Addresses market failure and funding barriers

Reduced interest loan - up to Prime less 2% or fixed at 10% (fund dependent)

Long payment term ( up to 15 years)

Green Energy Efficiency Fund

Stimulate energy efficiency and renewable energy investment

Technical assistance to: -identify energy efficiency and renewable energy opportunities

-calculate the economic and financial benefits

-support the selection of eligible equipment and enhanced performance technologies.

Promote long term business competitiveness

-Modernisation of businesses

-Increased company profitability

-Improved product quality and production capacity

-Lower vulnerability to increasing energy prices.

Contribute to global climate protection

-Measurement of energy savings and carbon reduction

-Enhanced company image due to contribution to reduction of carbon footprint.

GEEF Characteristics

Criteria Own use Energy savings of 25% +

• Facility size: R500 million

• Loan size: R1 – 50 million

• Interest rate: Prime less 2%

• Term: Up to 15 years, based on payback period of the investment

• Standard fees will apply Programme supported by the German Cooperation and Development Ministry

Agency Development & Support (ADS)

• Establishment & facilitation of funds and support for public local economic development agencies

• Designed to bridge gap between the public and private sectors and other development organisations at a local level

• Currently funding some 34 agencies in various stages of development

Constraints for Project Development

• Compared to EU: Cheaper electricity, lower landfill tipping fees, minimal offtake for heat.

• Access to municipal waste (DWA infrastructure for hydro)• MFMA regulations on length of contracts• Inability to fund municipalities• PPP regulations & complexities, skills capacity in Municipality• Bankable off-takers• Wheeling arrangements• Regulatory framework for alternative fuels

Jobs from Gas Sources

* Includes vehicle conversions distribution & filling station capex

Gas SystemJobs/R million Capex *

Jobs versus crude refining

Jobs per 10 % national fuel

volumes

Biogas from Waste 0.3 25x 40 000

Biogas from Crops 2 200x 350 000

Landfill Gas 0.4 20x 25 000

CNG Only 1 14x 14 000

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Prospects

Thank you

Industrial Development Corporation19 Fredman Drive, SandownPO Box 784055, Sandton, 2146South AfricaTelephone 011 269 3000Facsimile 011 269 2116E-mail [email protected]