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]