Transcript Slide 1

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
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•
•
•
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
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•
•
•
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?