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ENERGY STAKEHOLDER MEETING, 30 August 2012

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. OVERVIEW. ROLE & CONTRIBUTION OF BANKING SECTOR

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ENERGY STAKEHOLDER MEETING, 30 August 2012

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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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