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Financing and Certification of Local Renewable Projects Presentation

Explore solutions for financing and certification of locally produced renewable projects. Presentation covers banking sector role, procurement experiences, key issues prognosis, and more.

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Financing and Certification of Local Renewable Projects Presentation

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  1. EXPLORING SOLUTIONS TO CHALLENGES ON FINANCING & CERTIFICATION ON LOCALLY PRODUCED RENEWABLE PROJECTS PRESENTATION TO THE NATIONAL ASSEMBLY PORTFOLIO COMMITEE ON ENERGY ENERGY STAKEHOLDER MEETING, 30 August 2012

  2. OVERVIEW • ROLE & CONTRIBUTION OF BANKING SECTOR • EXPERIENCES/LESSONS IN PROCUREMENT OF RENEWABLES • PROGNOSIS ON KEY ISSUES

  3. ROLE & CONTRIBUTION OF BANKING SECTOR • INDEPENDENT POWER PRODUCERS (IPPS) • SUCCESS STORY - IRP INTRODUCED MARCH 2011 (17 MONTHS AGO) • - 2011 -2% RENEWABLES (RE) • - 2030 -IRP 42% CAPACITY (17 000 MW) RE • - 2016- 3 625 MW (RE TARGET) • - 2012 - 2 460 MW (ACHIEVED 68% OF RE TARGET) • - FIRST RE PLANT ON LINE APRIL 2013 • - 2012 IPP RE PROJECT FINANCE R100 BN OF WHICH R70 BN FROM • DEBT FINANCE (COMMERCIAL BANKS PROVIDED/WILL PROVIDE IN • EXCESS OF 80% OF THIS FUNDING) • - LOCAL CONTENT (ROUND 1: 28.5%, ROUND 2:47.5%, TARGET • 60/65%) • - COMPETITION (ROUND 1&2) HAS ALREADY DRIVEN DOWN PRICES • PV 2.8C/KWH TO 1.7C/KWH, WIND R1.14/KWH TO 89C/KWH • - SURPLUS BIDDERS/FINANCIAL INTEREST • RENEWABLE ENERGY IS AT CRITICAL STAGE. EARLY SIGNS ARE ENCOURAGING BUT THERE IS A LONG ROAD AHEAD

  4. ROLE & CONTRIBUTION OF BANKING SECTOR (CONT.) • COMMERCIAL BANKS WILL COMPETE FOR & EXPLOIT ANY VIABLE & RESPONSIBLE • OPPORTUNITY (COMMERCIALLY VIABLE & SUSTAINABLE). DFIs (SUB-COMMERCIAL, RISK • SHARING) • ALREADY MOVED INTO: • - INVESTING SOLUTIONS E.G. GREEN EXCHANGE TRADED FUND (+30% • JSE OUT-PERFORMANCE) • - FX • - INTEREST RATE & COMMODITY HEDGING • - AGENCY/TRANSACTIONAL SERVICES • - CDM (R100M ALREADY INVESTED) • CAPITAL IS NOT AN ISSUE • BANKS ALREADY RETROFITTING THEIR EXISTING PREMISES (PLUS R100M SPENT) • - WHY: IT WORKS, DECREASES SUPPLY PRESSURE, DECREASES OPERATING • COSTS, STATE REBATES/TAX IINCENTIVES MAKE IT ATTRACTIVE (BEHAVIOURAL • ECONOMICS) • IT PLATFORM ELECTRICITY BACK UP (COST UNKNOWN) • ALREADY 3 -5 GREEN STAR AWARDS ON NEW BUILDINGS

  5. EXPERIENCES/LESSONS IN PROCUREMENT OF RE • CHALLENGES(IPP’S) • - RISK • - TIME CONSTRAINTS • - INEXPERIENCE OF BIDDERS • - BUREAUCRACY • - STATE: BALANCE BETWEEN SOCIAL & ECONOMIC IMPERATIVES • - INABILITY TO REACH LOCAL CONTENT CRITERIA • - CORE MANUFACTURING LOW – ESPECIALLY IN PV AREA (NEED FOR AN ENABLING ENVIRONMENT: FINANCE REASSURANCE, MARKET LONGETIVITY) • - FEED-IN TARIFFS • - STATE BOTH “REFEREE & PLAYER” • CRITICAL FOCUS AREAS FOR RE: • - MARKET CERTAINTY • - LOCAL CONTENT • - FOREIGN MANUFACTURING INVESTMENT • - SUITABLE FINANCE (NBI CO-ORDINATED “GREEN FINANCE” • PROJECT (BANKS,DBSA,IDC). OUTCOME BY END 2012 • - LACK OF EXPERTISE • - DECOUPLING VALUE CHAIN TO PROMOTE COMPETITION & TO • ENABLE MARKET TO GROW BEYOND ITS “INFANCY” • - RE INFRASTRUCTURE SUPPORT

  6. PROGNOSIS ON KEY ISSUES • BEHAVIOURAL ECONOMICS AT PLAY: MARKET WILL RESPOND • - COMMERCIALLY/ECONOMICALLY VIABLE/SUSTAINABLE • - ENABLING ENVIRONMENT (STATE SUPPORT, RIGHT LEVEL OF REGULATORY • FRAMEWORK (DON’T OVERDO)) • - COMPETITION • - OPPORTUNITY • - MARKET CERTAINTY (MANUFACTURERS, IPPS,CONSUMERS,) • - CONSUMER EDUCATION • FOCUS ON IMPLEMENTATION - KEY FOCUS AREAS/PRIORITIES (IT’S OK TO MAKE A • MISTAKE - LESS TALK/POLICY PERFECTION - MORE IMPLEMENTATION FOCUS) • NEED TO SEE LOCAL CONTENT/JOB CREATION IN BROADER VALUE CHAIN SENSE • (SA INC. OPERATES WITHIN GLOBAL CONTEXT WHERE INVESTMENT • & SKILLS FLOWS ARE MOBILE AND CONVERGE TO MOST ATTRACTIVE • DESTINATION/S (SIGNIFICANCE OF SA WITHIN GLOBAL CONTEXT, CORE COMPETENCIES, • SKILLS, COMPETITIVENESS, STABLE POLITICAL/MACRO-ECONOMICS, INVESTOR • PROTECTION ETC.) • BALANCE SOCIO/ECONOMIC DEMANDS OR FRIGHTEN BOTH LOCAL/ INTERNATIONAL INVESTORS AWAY

  7. ANY QUESTIONS ?

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