1. BANKABILITY OF RENEWABLE & CLEANER ENERGY IN AFRICA
Prepared by Marc J.M. Buiting

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 Energy Demand 1995 - 2020
1997
2020
Capacity
Capacity
Increase
Energy Demand
in GW
in GW
in GW
in %
6,000
2,436
3,103
5,515
Hydro
703
1,036
333 47
5,000
Capacity Growth
4,000
Capacity Additions
Wind 8 63 55
688
3,079
Capacity in GW
3,000
Repla-
2020 Capacity requirement
cement
Biomass
667 31 54 23 74
2,000
1995 Capacity
1,000
Geothermal 8 17 9
113
1995
Year
2020
Solar/Other 1 8 8
700
$3,103 billion market of which renewables are likely to represent some 20% (being a market for new-build of some $500 billion).
Total RES
As share of World
751
1,178
23%
21%
Total World
3,221
5,515
Source: EIA base case expectations; World Economic Outlook 2000/01.

4. Future holds stronger Role Developing Countries
Source: EIA base case expectations; World Economic Outlook 2000/01.

5. Renewables still less Economic in Cost/kWh
3/28/2017
Renewables still less Economic in Cost/kWh
Initieel zijn windparken met name gefinancierd op projectbasis. Windparken werden beoordeeld als IPP’s door banken en als zodanig behandeld: bepaald eigen vermogen percentage (30%) en afnamegaranties.
Midden jaren 90 zijn er een aantal subsidieregelingen gelanceerd. Het gebrek aan belastingcapaciteit van elektriciteitsbedrijven heeft het gebruik van sale & lease back structuren (gebruik van fiscale capaciteit banken) in de hand gewerkt. Veelal onder garanties.
Het kunnen gebruiken van de eigen belastingcapaciteit vanaf 2001 maakt project financieringen weer aantrekkelijker: delen van risico met banken.
Source: PB Power.

6. Renewables and Direct Government Support EU
HIGH
Tendering
NON-BANKABLE
PROJECT
Obligation DK
Fiscal ES IR At NL T B
Feed-in Tariffs Pt L It Sw G
Perceived Risk UK Fr Gr
BANKABLE
PROJECT
LOW
LOW
Bankability
HIGH

7. Governmental Policy Matters
3/28/2017
Governmental Policy Matters
Initieel zijn windparken met name gefinancierd op projectbasis. Windparken werden beoordeeld als IPP’s door banken en als zodanig behandeld: bepaald eigen vermogen percentage (30%) en afnamegaranties.
Midden jaren 90 zijn er een aantal subsidieregelingen gelanceerd. Het gebrek aan belastingcapaciteit van elektriciteitsbedrijven heeft het gebruik van sale & lease back structuren (gebruik van fiscale capaciteit banken) in de hand gewerkt. Veelal onder garanties.
Het kunnen gebruiken van de eigen belastingcapaciteit vanaf 2001 maakt project financieringen weer aantrekkelijker: delen van risico met banken.
Source: World Bank.

8. Where is Wind Power supposed to be Installed in 2020?
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.
Source: Wind Force 12, Greenpeace & EWEA.

9. Who will Finance the Developing World Projects?
Different institutions address different risks:
HIGH
PUBLIC SECTOR:
WORLD BANK
PRIVATE SECTOR: DFI’s
EXPORT CREDIT AGENCIES
PE R C E I V D R S K
INSURANCE COMPANIES
COMMERCIAL BANKS
BANKABLE
INSTITUTIONAL INVESTORS
CAPITAL MARKETS
LOW
LOW
BANKABILITY
HIGH
Only development banks and specific funds available for
projects in developing countries.

10. FINANCIAL STRUCTURING
The General Project (Finance) Feasibility Matrix
GOVERNMENT SUPPORT
HIGH
NON-BANKABLE
PROJECT
MARKET ECONOMICS
PROJECT ECONOMICS
FINANCIAL STRUCTURING
CONTRACT
STRUCTURE
Perceived Risk
SECURITY
PACKAGE
Financial market-forms /
financial products
Bond Investor / Lender requirements
Project Sponsor
requirements
BANKABLE
PROJECT
SPONSOR
SUPPORT
LOW
LOW
Bankability
HIGH

11. Renewable Energy: Main Banking Risks
GOVERNMENT
SUPPORT
Acceptable country risk?
Regulatory framework IPP’s bankable?
Kyoto signed? (Carbon credits possible?) What scheme to support renewables?
MARKET ECONOMICS
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?
PROJECT ECONOMICS
Technology to be used, efficiencies and track record turbines? Costs per MW?
Use of carbon credits and subsidies from support scheme?
Financing options?
CONTRACT
STRUCTURE
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)
SECURITY
PACKAGE
Product warranties? (in windparks generally a minimum of 5 years)
Comprehensive risk coverage available from equipment vendors?
Mortage possible on land or other assets?
SPONSOR
SUPPORT
Reputable and experienced sponsor?
Level of equity investment?
Level of contingent equity available for completion?

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:
Conventional technologies: Aldwych International
Renewables Wind: Aeolus Africa Development Corporation
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. Ministry of VROMs involvement Illustrative
bio US$
illustrative
0.3
0.2
VROM provides an AAA-income stream to a project: - 75% of 70% of potential carbon credits contracted (quantity*price) - 30% against future price (option)
0.1
Cash flow for debt service and dividends
O&M costs - 2 4 6 8 10 12
-0.5
year
Investment
- 1
After Tax
VROM provides a possibility to lower project cost: 25% of 70% of potential carbon credits contracted (quantity*price)

15. 3/28/2017
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?
Initieel zijn windparken met name gefinancierd op projectbasis. Windparken werden beoordeeld als IPP’s door banken en als zodanig behandeld: bepaald eigen vermogen percentage (30%) en afnamegaranties.
Midden jaren 90 zijn er een aantal subsidieregelingen gelanceerd. Het gebrek aan belastingcapaciteit van elektriciteitsbedrijven heeft het gebruik van sale & lease back structuren (gebruik van fiscale capaciteit banken) in de hand gewerkt. Veelal onder garanties.
Het kunnen gebruiken van de eigen belastingcapaciteit vanaf 2001 maakt project financieringen weer aantrekkelijker: delen van risico met banken.