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AfDB Experience in Bioenergy Finance Geoffrey Manley Principal Investment Officer Private sector Operations Department African Development Bank Outline • Introduction • What projects are bankable? Three Keys • Project Examples Emerging AfDB approach to bioenergy • Policy: – 2009: Bioenergy “concept note” – 2011: Bioenergy to be mainstreamed in forthcoming Energy Strategy • Operations: – 2010: first project with bioenergy component – 2011: first pure bioenergy project – Current focus on sugarcane-based projects – Food and fuel Why focus on sugarcane? • Proven agriculture, proven technology • Can be implemented at scale • Most energy efficient feedstock • Significant carbon savings • Electricity co-generation valuable in African context • Ability to incorporate other sugar feedstocks such as sweet sorghum and cassava Three keys to Bankability Sustainability Sponsorship Structuring Bankability: Sponsorship • Financial muscle: Sustainability – Development costs = $5-30 million – Substantial contribution to project costs – Completion support • Expertise: Sponsorship Structuring – Agricultural, technical, market • Capacity: – Human/institutional resources to project development Bankability: Structuring • Strong technical partners: Sustainability – Agricultural – Construction – Operations • Market: Sponsorship Structuring – Offtake agreement – PPA • Government: – Investment agreement – Land/water usage Bankability: Sustainability • Environmental: Sustainability – Land/water issues – Farming techniques – Carbon savings • Social: Sponsorship Structuring – Engagement / consultation – Resettlement / displacement – Food security – Labor • Economic: – Balanced distribution of benefits Mali: Markala Project Project Description • 15,000 ha irrigated sugarcane to sugar, ethanol and power • PPP structure: Government financing of agriculture component, private financing of industrial component Business Strategy • Domestic/regional markets • Revenues: 75% sugar, 15% ethanol, 10% power • Strong outgrower component: 40% of cane Financing Structure • • • • Benefits • Strong job creation • Eliminate sugar production deficit • Renewable electricity supply Total cost: $280 million industrial component, 60/40 debt/equity Equity: Sponsor, local investors, Government Debt: DFIs (regional and international) AfDB role: lead arranger, lender (private and public) Sierra Leone: Addax Bioenergy Project Description • 10,000 ha irrigated sugarcane to ethanol and power • Roughly 85,000 m3 annual production • Farmer development program for food production Business Strategy • Ethanol to EU, electricity for domestic market • Revenues: 75% ethanol, 25% power • Core plantation initially, outgrowers added later Financing Structure • • • • Benefits • Strong job creation • Renewable electricity supply • Export generation Total cost: $340 million, 60/40 debt/equity Equity: Sponsor + DFIs Debt: DFIs AfDB role: Lender East Africa: Add-on Bioenergy Project Description • Expansion of electricity generation capacity of existing sugar mill to 40 MW of which roughly 30 MW to grid through PPA with national electricity utility Business Strategy • Domestic markets • Revenues: 85% sugar, 15% power • Exclusive reliance on outgrowers Financing Structure • • • • Benefits • Renewable electricity supply • Expand outgrower network Total cost: $60 million, 70/30 debt/equity Equity: Sponsor Debt: DFIs AfDB role: senior lender, project development funding Concluding thoughts • Bioenergy in Africa still in its infancy but could be part of the solution to the global energy challenge • Africa has great potential and a number of business models may be viable • Food vs. fuel: from mutually exclusive to mutually reinforcing Questions • How can the Bank help Africa tap the potential for small-scale distributed bioenergy? • Should the Bank play a role helping countries to develop national or regional bioenergy policies and frameworks? How? • How can carbon initiatives be better leveraged for bioenergy? • Would a bioenergy scorecard be helpful for Bank decisionmakers in this sector?