Industrial Development Corporation 25 March 2015 IDC funding for Green Energy – with a Waste focus Rishel Dharmapall Green Industries SBU

IDC funding options for various stages of projects Content IDC and its mandate IDC funding options for various stages of projects IDC Green SBU - Green Funds Types of Green Waste Projects funded by IDC Waste recycling Waste gases/heat for cogen Biogas projects & CHP & in Transport Developing Waste energy projects n IDC’s role & offer

The Industrial Development Corporation Established: 1940 Type of organisation: Development Finance Institution (DFI) Ownership: South African Government Total assets: over R112 billion Main business area: Providing funding for entrepreneurs and projects (greenfields and expansions) that are contributing to industrialisation and job creation Geographic activities: South Africa and the rest of Africa Products: Wide range of custom financial products to suit a project’s needs including debt, equity, guarantees or a mixture of these Stage of investment: Early stage (feasibility), commercialisation, expansion Project development: Identification and development of projects adding to the industrial base

Positioning as Industrial Development Funder Greater importance on social and developmental objectives Greater importance on financial objectives Government / NGOs DFIs Commercial Financiers Non-commercial focus Fiscal transfers and grants Development objectives (social) Commercial and development focus Sharing risk Internally generated funds, government funds, loans High commercial focus Private sector capital Financial objectives Known risks Industrial Development Corporation (IDC) Development Bank of Southern Africa DBSA) National Empowerment Fund (NEF) etc IDC encourages cooperation with a variety of these institutions to achieve its goals IDC addresses market failures / gaps by supporting investments, which may otherwise not happen, in partnership with private sector companies

IDC can be involved in Project Development Phases Concept (Pre-scoping) stage Fit IDC & SBU mandate? Viability? Screening of other parties/shareholders? Scoping stage Desktop financial model and BA type report Outline scope of work to implementation stage Focus Pre-feasibility & Feasibility Request project development budget (internal and external costs)– used to carry out subsequent stages Pre feasibility study Review of Technology/Process and identify preferred choice Operating partner Regulations (e.g. Carbon credits, EIA, Waste License, etc) Raw material security (e.g. waste supply Volumes) Offtake/Supply of Product Financial model Feasibility study (may have 2 steps to Bankable) Pilot Study Financial model Signing of all Agreements All Regulatory approvals Funding Approval for debt and equity Implementation Plant construction, commission and operation

Green Industries SBU: Focus Renewable Energy: Non-Fuel Power Energy efficiency Services related to renewable energy & energy efficiency Local manufacturing related to renewable energy & energy efficiency Wind Power Generation Concentrated Solar Power Heat, Electricity & building efficiency Cleaner production / Industrial Efficiency Transport Efficiency Solar Photo Voltaic Power Hydro Fuel Based Energy Waste to Energy Biogas/ CHP/Cogen Emission and pollution mitigation Bio Fuels Air pollution control Waste Management/ Recycling Clean stoves Bio Ethanol Bio Diesel

Fuel Based Green Energy: Industry structure Municipal solid waste or Biomass or Tyres Grown biomass Organic waste Sewage sludge Animal litter Feedstock Waste Gas Pyrolysis Sorting Anaerobic Digestion Combustion Incineration or Waste heat Gasification Primary Process Steam turbine or organic rankine cycle Electricity Industrial fuel On-site heating Vehicle fuel End Use Recycling CHP/Cogen Internal gas combustion Gas Cleaning Liquefied Biogas (LBG) Compressed Biogas (CBG) Steam Piped gas Secondary Process

Process various options Fuel Based Green Energy: Approach Biogas, Waste to energy and CHP/Co-generation Feedstock (Fuel) security: No feedstock security, no start Challenge: Long term supply agreement to cover debt tenure + 2 years Quality, quantity, price & period MFMA requirements for municipalities Feedstock Offtakes Revenue Process various options Investment decision Process/Investment options: Driven by feedstock qualities, quantities term and off take options Typical cost R15-35m/MW High load factors (eg 90%) Offtakes: Low O&M cost If Offtake/feedstock price strong Repay debt quickly Project

Green Energy Efficiency Funds, eg, KfW & Afd Concessional debt funding Technical assistance grant IDC Develop Green Industries Capacity building in clean energy finance Addresses market failure and funding barriers Reduced interest loan - up to Prime less 2% or fixed at 10% (fund dependent) Long payment term ( up to 15 years) Stimulate energy efficiency and renewable energy investment Technical assistance to: -identify energy efficiency and renewable energy opportunities -calculate the economic and financial benefits -support the selection of eligible equipment and enhanced performance technologies. Promote long term business competitiveness -Modernisation of businesses -Increased company profitability -Improved product quality and production capacity -Lower vulnerability to increasing energy prices. Contribute to global climate protection -Measurement of energy savings and carbon reduction -Enhanced company image due to contribution to reduction of carbon footprint.

GEEF Characteristics Criteria Own use Energy savings of 25% + Facility size: R500 million Loan size: R1 – 50 million Interest rate: Prime less 2% Term: Up to 15 years, based on payback period of the investment Standard fees will apply The total credit facility is R500 million And provides loans ranging from R1 million to R50 million at a concessionary rate of prime less 2%. GEEF allows for loan repayments of up to 15 years, depending on the payback period of the energy efficiency or renewable energy technology Standard IDC fees apply including a raising fee of 1% and a commitment fee of 0.5% per annum All IDC credit policies and procedures will apply. Programme supported by the German Cooperation and Development Ministry

Agency Development & Support (ADS) Establishment & facilitation of funds and support for public local economic development agencies Designed to bridge gap between the public and private sectors and other development organisations at a local level Currently funding some 34 agencies in various stages of development The total credit facility is R500 million And provides loans ranging from R1 million to R50 million at a concessionary rate of prime less 2%. GEEF allows for loan repayments of up to 15 years, depending on the payback period of the energy efficiency or renewable energy technology Standard IDC fees apply including a raising fee of 1% and a commitment fee of 0.5% per annum All IDC credit policies and procedures will apply.

Constraints for Project Development Compared to EU: Cheaper electricity, lower landfill tipping fees, minimal offtake for heat. Access to municipal waste (DWA infrastructure for hydro) MFMA regulations on length of contracts Inability to fund municipalities PPP regulations & complexities, skills capacity in Municipality Bankable off-takers Wheeling arrangements Regulatory framework for alternative fuels

Jobs versus crude refining Jobs per 10 % national fuel volumes Jobs from Gas Sources Gas System Jobs/R million Capex * Jobs versus crude refining Jobs per 10 % national fuel volumes Biogas from Waste 0.3 25x 40 000 Biogas from Crops 2 200x 350 000 Landfill Gas 0.4 20x 25 000 CNG Only 1 14x 14 000 * Includes vehicle conversions distribution & filling station capex

Prospects Thank you Industrial Development Corporation 19 Fredman Drive, Sandown PO Box 784055, Sandton, 2146 South Africa Telephone 011 269 3000 Facsimile 011 269 2116 E-mail callcentre@idc.co.za