Transcript Renewables Presentation

BANKABILITY OF
RENEWABLE & CLEANER
ENERGY IN AFRICA
Prepared by Marc J.M. Buiting ([email protected])
Renewable Energy

Low impact hydro, run of river or with small storage,
seldom > 20MW

Geothermal, wind, solar

Agricultural and forestry wastes, energy crops

Waste derived – landfill gas, sewage gas, mass-burn
municipal solid waste

Sometimes cogeneration is included
2.
Renewable Energy 5.5 TW in 2020
1997
Capacity
in GW
Energy Demand 1995 - 2020
4,000
3,079
3,000
2,000
1,000
1995 Capacity
Capacity in GW
5,000
Replacement
667
3,103
5,515
Hydro
703
1,036
333
47
Wind
8
63
55
688
Biomass
31
54
23
74
Geothermal
8
17
9
113
Solar/Other
1
8
8
700
2020 Capacity requirement
Capacity Growth
1995 - 2020
2,436
Capacity Additions
1995 - 2020
6,000
2020
Increase
Capacity
in GW
in GW in %
0
1995
Year
$3,103 billion market of which
renewables are likely to represent
some 20% (being a market for
new-build of some $500 billion).
2020
Total RES
As share of World
Total World
Source: EIA base case expectations; World Economic Outlook 2000/01.
751
23%
3,221
1,178
21%
5,515
3.
Future holds stronger Role Developing Countries
Increase
Increase
Installed Capacity in
Europe
1997
183 GW
2020
257 GW
in GW
in %
74
40%
Installed Capacity in
Middle East
1997
2020
6 GW
in GW
10 GW
Increase
in %
4
70%
Installed Capacity in
Transition Economies
1997
89 GW
2020
105 GW
in GW
17
in %
19%
Increase
Installed Capacity in
China
1997
61 GW
2020
175 GW
in GW
in %
115 190%
Increase
Installed Capacity in
North America
1997
185 GW
2020
212 GW
in GW
in %
27
15%
Increase
Installed Capacity in
South Asia
1997
29 GW
2020
69 GW
in GW
in %
40 136%
Increase
Installed Capacity in
Increase
Installed Capacity in
Latin America
1997
115 GW
2020
203 GW
in GW
East Asia
in %
88
1997
33 GW
2020
67 GW
in GW
in %
34 102%
76%
Increase
Installed Capacity in
Africa
1997
20 GW
2020
32 GW
in GW
11
in %
55%
Increase
Installed Capacity in
Pacific
Source: EIA base case expectations; World Economic Outlook 2000/01.
1997
31 GW
2020
48 GW
in GW
17
in %
55%
4.
Source: PB Power.
Renewables still less Economic in Cost/kWh
5.
Renewables and Direct Government Support EU
HIGH
Tendering
NON-BANKABLE
PROJECT
Obligation
D
K
Perceived Risk
I
R
Fiscal
ES
NL
At
T
B
L
It
S
w
Feed-in Tariffs
Pt
G
U
K
Fr
Gr
BANKABLE
PROJECT
LOW
LOW
Bankability
HIGH
6.
Source: World Bank.
Governmental Policy Matters
7.
Where is Wind Power supposed to be Installed in 2020?
Total Globally Installed Wind Energy 2001: 25GW
7%
2%
1%
6%
Western Europe
USA
South Asia (India)
17%
China
Other
67%
Total Globally Installed Wind Energy 2020: 1,260GW
2%
12%
18%
OECD Europe
2%
OECD North America
OECD Pacific
Latin America
15%
East Asia
South Asia
China
25%
5%
Middle East
Transition Economies
Africa
6%
8%
7%
85% of 2001 wind capacity is in OECD
countries whereas it is foreseen that half of
2020’s capacity will be in non-OECD
countries.
Source: Wind Force 12, Greenpeace & EWEA.
East Asia (Japan)
8.
Who will Finance the Developing World Projects?
Different institutions address different risks:
HIGH
P
E
R
C
E
I
V
E
D
PUBLIC SECTOR:
WORLD BANK
PRIVATE SECTOR:
DFI’s
EXPORT CREDIT
AGENCIES
INSURANCE
COMPANIES
R
I
S
K
COMMERCIAL BANKS
BANKABLE
INSTITUTIONAL INVESTORS
CAPITAL MARKETS
LOW
LOW
BANKABILITY
HIGH
Only development banks and specific funds available for
projects in developing countries.
9.
The General Project (Finance) Feasibility Matrix
HIGH
GOVERNMENT
SUPPORT
NON-BANKABLE
PROJECT
Perceived Risk
MARKET
ECONOMICS
PROJECT
ECONOMICS
CONTRACT
STRUCTURE
BANKABLE
PROJECT
SECURITY
PACKAGE
SPONSOR
SUPPORT
LOW
LOW
Bankability
FINANCIAL
STRUCTURING

Financial market-forms /
financial products

Bond Investor / Lender
requirements

Project Sponsor
requirements
HIGH
10.
Renewable Energy: Main Banking Risks
GOVERNMEN
T
SUPPORT
• Acceptable country risk?
• Regulatory framework IPP’s bankable?
• Kyoto signed? (Carbon credits possible?) What scheme to support renewables?
MARKET
ECONOMICS
• Electricity shortages? Base load opportunity? Supportive industry?
• Specific sources (such as hydro) available that make other RES less-bankable?
• How does specific windpower project compare to other windpower projects?
PROJECT
ECONOMICS
• Technology to be used, efficiencies and track record turbines? Costs per MW?
• Use of carbon credits and subsidies from support scheme?
• Financing options?
CONTRACT
STRUCTURE
• Single borrower? Long term PPA possible with validity exceeding longest debt tenor?
• Turnkey contractor under fixed price date certain contract?
• Reputable O&M contractor? (in windparks often equipment vendor)
SECURITY
PACKAGE
• Product warranties? (in windparks generally a minimum of 5 years)
• Comprehensive risk coverage available from equipment vendors?
• Mortage possible on land or other assets?
SPONSOR
SUPPORT
• Reputable and experienced sponsor?
• Level of equity investment?
• Level of contingent equity available for completion?
11.
Our Approach is Twofold

FMO takes leading positions in wind and biofuel projects in Africa
through structuring projects in a ‘template’ manner (portfolio approach);
we support or create developers:
o
Conventional technologies: Aldwych International
o
Renewables Wind: Aeolus Africa Development Corporation
o
Renewables Biofuels: Dutch Jatropha Consortium

FMO focuses on sustainable renewable CDM projects (private sector
only) in (non-exclusive) co-operation with the Dutch Ministry VROM.
12.
FMOs Co-operation with the Dutch Ministry of VROM




FMO can make available convertible grants in the feasibility phase of the project (early
equity), equity, subordinated loan or senior debt, not necessarily in hard currency. FMO
operates as a fully untied institution.
Through the facility FMO offers to a Project a choice is given to the project company in
a ‘net’ or ‘gross’ amount. The gross amount includes a facility that will be made
available by VROM.
In return for the carbon credits of a project VROM contemplates to fund upfront
the net present value of 25% of 70% of the carbon credits cash flow. The other 75% of
the 70% are paid against delivery of the carbon credits in the future. The upfront amount
need not to be paid back when the rights accompanying this payment are actually
delivered. VROM obtaines a purchase option for the remainder 30% of the future carbon
credits. Contractual period is preferably 7 or 14 years.
VROM assumes all responsibility for the accreditation process, including the cost
involved. In addition, if needed VROM makes capacity development available for the
recipient country.
13.
Ministry of VROMs involvement Illustrative
bio US$
illustrative
0.3
0.2
0.1
Cash flow for debt service
and dividends
O&M costs
0
-0.5
-
0
Investment
2
4
6
8
10
year
12
VROM provides an AAA-income
stream to a project:
- 75% of 70% of potential carbon
credits contracted (quantity*price)
- 30% against future price (option)
-1
After Tax
VROM provides a possibility to lower project cost: 25% of 70% of potential carbon
credits contracted (quantity*price)
14.
Renewables in Africa differ in Reference Point: Load Curve
less important vs cost of HFO/Diesel fired Stations
Average Generation Price in Africa?

At reference prices of HFO/Diesel
fired stations quite some renewable
projects can be made bankable, the more
with use of CDM.

Power purchase agreements can be
structured with Independent Power
Producers at prices of EURct 6 to 9/kWh
which still represent a good deal for both
parties.

Thank you.
15.