Post on 27-Mar-2015
BANKABILITY OF RENEWABLE & CLEANER ENERGY IN AFRICA
Prepared by Marc J.M. Buiting (m.buiting@fmo.nl)
2.
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
3.
Renewable Energy 5.5 TW in 2020
1997 2020
Capacity Capacity
703 1,036
8 63
31 54
8 17
1 8
751 1,178
23% 21%
3,221 5,515
Total RESAs share of World
Wind
Biomass
Geothermal
Hydro
Solar/Other
Total World
Source: EIA base case expectations; World Economic Outlook 2000/01.
in GW in GW
333
55
23
9
8
Increase
in GW in %
47
688
74
113
700
3,079
667
2,436 3,103 5,515
0
1,000
2,000
3,000
4,000
5,000
6,000
1995 Year 2020
Cap
acit
y in
GW
Repla-cement
1995
Cap
acit
y
2020
Cap
acit
y re
qu
irem
ent
Cap
acit
y A
dd
itio
ns
1995
- 2
020
Cap
acit
y G
row
th19
95 -
202
0
$3,103 billion market of which renewables are likely to represent some 20% (being a market for new-build of some $500 billion).
Energy Demand 1995 - 2020
4.
Future holds stronger Role Developing Countries
Increase
Installed Capacity in 1997 2020 in GW in %
North America 185 GW 212 GW 27 15%
Increase
Installed Capacity in 1997 2020 in GW in %
Latin America 115 GW 203 GW 88 76%
Increase
Installed Capacity in 1997 2020 in GW in %
Europe 183 GW 257 GW 74 40%
Increase
Installed Capacity in 1997 2020 in GW in %
Africa 20 GW 32 GW 11 55%
Increase
Installed Capacity in 1997 2020 in GW in %
Transition Economies 89 GW 105 GW 17 19%
Increase
Installed Capacity in 1997 2020 in GW in %
China 61 GW 175 GW 115 190%
Increase
Installed Capacity in 1997 2020 in GW in %
South Asia 29 GW 69 GW 40 136%
Increase
Installed Capacity in 1997 2020 in GW in %
East Asia 33 GW 67 GW 34 102%
Increase
Installed Capacity in 1997 2020 in GW in %
Middle East 6 GW 10 GW 4 70%
Increase
Installed Capacity in 1997 2020 in GW in %
Pacific 31 GW 48 GW 17 55%
Source: EIA base case expectations; World Economic Outlook 2000/01.
5.
Renewables still less Economic in Cost/kWh
Sou
rce:
PB
Pow
er.
6.
Renewables and Direct Government Support EU
LOW
HIGH
BANKABLEPROJECT
HIGH
LOW
Per
ceiv
ed R
isk
Bankability
IR
Tendering
Obligation
Fiscal
Feed-in Tariffs
G
Fr
ESNL
Gr
Sw
At
It
BL Pt
UK
NON-BANKABLEPROJECT
DK
T
7.
Governmental Policy Matters
Sou
rce:
Wor
ld B
ank.
8.
Where is Wind Power supposed to be Installed in 2020?
Sou
rce:
Win
d F
orce
12,
Gre
enpe
ace
& E
WE
A.
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.
Total Globally Installed Wind Energy 2001: 25GW
67%
17%
6%
1%2%7%
Western Europe
USA
South Asia (India)
East Asia (Japan)
China
Other
Total Globally Installed Wind Energy 2020: 1,260GW
18%
25%
7%8%
6%
5%
15%
2%
12%2%
OECD Europe
OECD North America
OECD Pacif ic
Latin America
East Asia
South Asia
China
Middle East
Transition Economies
Africa
9.
BANKABILITYLOW HIGH
HIGH
LOW
PE
RCEIVED
RISK
BANKABLE
PUBLIC SECTOR:WORLD BANK
PRIVATE SECTOR: DFI’s
EXPORT CREDIT AGENCIES
INSURANCECOMPANIES
COMMERCIAL BANKS
INSTITUTIONAL INVESTORS
CAPITAL MARKETS
Who will Finance the Developing World Projects?
Different institutions address different risks:
Only development banks and specific funds available for projects in developing countries.
10.
The General Project (Finance) Feasibility Matrix
LOW
HIGH
BANKABLEPROJECT
HIGH
LOW
SPONSORSUPPORT
SECURITYPACKAGE
CONTRACTSTRUCTURE
PROJECT ECONOMICS
Per
ceiv
ed R
isk
Bankability
FINANCIAL STRUCTURIN
G
Financial market-forms / financial products
Bond Investor / Lender requirements
Project Sponsor requirements
MARKET ECONOMICS
GOVERNMENT SUPPORTNON-BANKABLE
PROJECT
11.
Renewable Energy: Main Banking Risks
• Acceptable country risk?• Regulatory framework IPP’s bankable?• Kyoto signed? (Carbon credits possible?) What scheme to support renewables?
• 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?
• Technology to be used, efficiencies and track record turbines? Costs per MW?• Use of carbon credits and subsidies from support scheme?• Financing options?
• 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)
• Product warranties? (in windparks generally a minimum of 5 years)• Comprehensive risk coverage available from equipment vendors?• Mortage possible on land or other assets?
• Reputable and experienced sponsor? • Level of equity investment?• Level of contingent equity available for completion?
GOVERNMENT
SUPPORT
MARKET ECONOMICS
PROJECT ECONOMICS
CONTRACTSTRUCTURE
SECURITYPACKAGE
SPONSORSUPPORT
12.
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 Internationalo Renewables Wind: Aeolus Africa Development
Corporationo 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.
13.
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.
14.
- 1
-0.5
0
0.1
0.2
0.3
- 0 2 4 6 8 10 12
Investment
bio US$
Cash flow for debt service and dividends
O&M costs
year
illustrative
After Tax
Ministry of VROMs involvement Illustrative
VROM provides an AAA-income
stream to a project:
- 75% of 70% of potential carbon
credits contracted (quantity*price)
- 30% against future price (option)
VROM provides a possibility to lower project cost: 25% of 70% of potential carbon
credits contracted (quantity*price)
15.
Renewables in Africa differ in Reference Point: Load Curve less important vs cost of HFO/Diesel fired Stations
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.
Average Generation Price in Africa?