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 StructuringSponsorship

Bankability: Sponsorship Financial muscle: – Development costs = $5-30 million – Substantial contribution to project costs – Completion support Expertise: – Agricultural, technical, market Capacity: – Human/institutional resources to project development Sustainability Structuring

Bankability: Structuring Strong technical partners: – Agricultural – Construction – Operations Market: – Offtake agreement – PPA Government: – Investment agreement – Land/water usage Sustainability Sponsorship

Bankability: Sustainability Environmental: – Land/water issues – Farming techniques – Carbon savings Social: – Engagement / consultation – Resettlement / displacement – Food security – Labor Economic: – Balanced distribution of benefits StructuringSponsorship

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 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 Domestic/regional markets Revenues: 75% sugar, 15% ethanol, 10% power Strong outgrower component: 40% of cane Financing Structure 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) 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) Benefits Strong job creation Eliminate sugar production deficit Renewable electricity supply Strong job creation Eliminate sugar production deficit Renewable electricity supply

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 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 Ethanol to EU, electricity for domestic market Revenues: 75% ethanol, 25% power Core plantation initially, outgrowers added later Financing Structure Total cost: $340 million, 60/40 debt/equity Equity: Sponsor + DFIs Debt: DFIs AfDB role: Lender Total cost: $340 million, 60/40 debt/equity Equity: Sponsor + DFIs Debt: DFIs AfDB role: Lender Benefits Strong job creation Renewable electricity supply Export generation Strong job creation Renewable electricity supply Export generation

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 Domestic markets Revenues: 85% sugar, 15% power Exclusive reliance on outgrowers Financing Structure Total cost: $60 million, 70/30 debt/equity Equity: Sponsor Debt: DFIs AfDB role: senior lender, project development funding Total cost: $60 million, 70/30 debt/equity Equity: Sponsor Debt: DFIs AfDB role: senior lender, project development funding Benefits Renewable electricity supply Expand outgrower network Renewable electricity supply Expand outgrower network

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?