Zimbabwe Mining & Infrastructure Indaba
Energy Options
Presenter: Jean Madzongwe
Date: 15 October 2015
AGENDA
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Sector Overview
Alternative Sources of Energy
Power trends in the Mining Sector
Options and Opportunities
SA REIPPP
Investment and Funding
Challenges for Project Implementation
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Sector Overview
 An
1.6 billion
in developing countries have no access to
• estimated
Mapaka
and people
Juana
electricity of which about 70% are in Sub-Saharan Africa (SSA)
 SSA and SADC has abundant energy resources that have not been exploited
• Region accounts for 13% of global population, but only 4% of its energy demand:
half of this is biomass
 Nearly all countries in SADC experiencing power challenges and load shedding due:
- Growing demand, high industrial growth, urbanization, etc
- Low levels of electrification (avg: 30% urban, 5-7% rural)
- No Bank:
new power
generation inIndicators
most countries
Source: World
World Development
database
- Limited transmission capacity
- Ageing infrastructure, low maintenance
- Poor reliability of power supply
- Tariffs that are not cost-reflective
 Energy drives economic and industrial growth
• Energy sector policies have fluctuated from security of supply to increasing access
to self-sufficiency and now focus on increasing power supply for export and
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power trading
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Alternative Sources of Energy
 •Solar
Photovoltaic
(PV) Juana
Mapaka
and
 Concentrated Solar Power (CSP) – Parabolic Trough, Tower, (offers storage for
peak times)
 Wind – Onshore, Off-shore
 Large Hydro and Mini-hydro
 Diesel, Heavy fuel oild (HFO), Light Crude Oil (LCO), etc
 Biomass
 Natural Gas – LNG, LPG, etc
 Landfill Gas, Waste-Treatment, etc
 Biogas
 Coal, Coal-bed methane (CBM)
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Africa is Rich in Energy Potential
In the last 5 years, almost 30% of global oil & gas discoveries were in sub-Saharan Africa;
the region has vast untapped renewables potential, notably hydro & solar
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Source : Africa Energy Outlook, BMI
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Power Trends in the Mining Sector
• Mapaka and Juana
 The mining industry is usually the largest consumer of electricity
(ranges from 30-70%)
 Unreliable power supply resulting in costly shut-downs
 Significant investment for self-generation (not core business)
 Many mines using high cost diesel/HFO as back-up power supply
 Cost of power tends to be high cost component of operations
 Special contractual arrangements and i.e. long-term
agreements, un-interruptible supply contracts
 Wholesale bulk tariff arrangements may provide lower cost
 Curtailment during times of peak when to avoid/reduce load
shedding (approx. 10% reduction)
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Options and Opportunities
Options:
•
Mapaka
and
Juana
 Mining companies considering alternative solutions to solve their
power supply challenges
 Use of diesel generation, gas generation
 Renewable energy options, power stored from CSP plants
 Opportunities for Demand-side management (DSM) and energy
efficient measures
World Bank:
World Development
Indicators
database
Source:
Consider
self-build
transmission
capacity
Opportunities:
 Mining companies can serve as ‘Anchor Customer’ or credit worthy
‘Power Off-taker’ to provide a bankable PPA
 Back-to-back power supply agreements
 Clubbing or group of small mines can consider special vehicle to
support PPA
 Can anchor imports
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Renewable Technologies
 Limited development of alternative sources as renewable energy
•technologies
Mapaka
and Juana
tend to be small expensive and imported but now growing
 Introduce Renewable IPP programme
 REFIT or competitive tariffs
 Mini and Off-grids are generally small electrical distribution systems
connecting multiple customers to multiple sources of generation and
storage.
 Technologies vary from PV, mini and micro-hydro plants, wind, diesel gens,
biomass gasification, gas engines etc.
 As the price of electricity increases, and the cost of PV becomes more
affordable, an increasing trend in PV installations by private households is
becoming evident.
Electricity Costs
PV Costs
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SA Renewable Energy Programme
 SA REIPP introduced in 2011 and designed to procure 12,825MW of
energy
from Juana
Independent Power producers (IPPS)
•renewable
Mapaka
and
 To date, 6,388MW procured in less than 4 years
 Total committed private sector investment approximately ZAR170 billion
 37 projects connected with a capacity of 1,827MW
 Eskom provided 30 year PPA with Government guarantee for power off-take
and obligations of Eskom
 Bid Windows and technologies are determined by the Minister of Energy
 A total 64 out of 223 Bidders have ben selected in 3 Rounds
 Tariff has dropped over time for all technologies, started with tariff cap in
BW 1 and subsequently dropped to competitive tariffs from BW 2 onwards
 Wind:
from R1,143 – R519/MWh
 Solar PV: from R2,738 – R659/MWh
 Solar CSP: from R2,686 - R1.460/MWh
 Only BW3 had 3 preferred bidders for Landfill gas
 No preferred bidders have been announced for biogas
 Financing structures have been through a bond, corporate and project
finance illustrative of a maturing market
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DBSA Role & Strategy in the Energy Sector
• •Invest
in sustainable
infrastructure for economic
Mapaka
and Juana
growth in Sub-Saharan Africa
• Increase regional co-operation and interconnectivity
• Assist to alleviate power shortfall through investments
in power generation, transmission & distribution
projects
• Provide funding for project preparation & development
• Support delivery of access to basic energy services in
an environmentally friendly manner
• Support diversification of regional power supply by
exploiting available energy resources
• Capacity building in key energy institutions
• Ensure job creation during and after construction
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DBSA Products and Services
•• Direct
investment
in projects
through term loans, subordinated
Mapaka
and
Juana
debt and equity
• Credit enhancement through innovative structures, risk
assumption and guarantees
• Invests in the development, rehabilitation and expansion of
economic infrastructure
• Flexible and competitive lending terms and conditions
• Offers a variety of products including co-financing arrangements
and loan syndication
• Advocates maximum development impact
• Mobilisation of funds from third parties
• Provision of technical assistance and institutional capacity building
• Support for black economic empowerment (BEE) initiatives and
indigenisation
• Development of local capital markets in order to provide access to
local currency to offset exchange rate risk, access to long-term
capital and increase investment alternatives
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Project Due Diligence
Institutional
Technical
Capacity to plan, implement, and
State of infrastructure
manage project
Country and regional market fit
Corporate structure and governance
Reliability and affordability
Legal and Regulatory environment
Procurement and pricing policy
Identification and mitigation of risks
Financial
Economic
Commercial viability
Economic Cost-Benefit
Sponsor support during construction
Development Impact
Realistic assumptions
Environmental
Risk assessment and management
Policy compliance
Social
Contribute to socio-economic
development
Consultation
Sustainability
Challenges in Project Implementation
Issue
Comment
Commitment
Planning, Decision-making, bureaucracy, need for
government guarantees, letters of support/comfort,
Concession award,
Regulatory
Environment
Predictable environment, Conducive and Regulatory
framework, Independent Regulator, Cost Reflective
Tariffs, Transparent Procurement Process
Institutional
Project structure (SPV, BOT, BOOT, BOO) Strong
Sponsor, Capacity to implement and operate, skills,
Asset management and Monitoring, Strong Sponsor,
Transaction Advisors
Technical
Commercially viable technology, Feasibility studies,
Hydrological and geological status, Availability of
data, Reliable off-taker, Experienced contractors (EPC
and O&M), Power evacuation,
•Political
Mapaka
Will / and Juana
Government Policies, Sector Reforms, Sector
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Challenges Cont’d
• Mapaka and Juana
Environmental & Social
Environmental compliance, EIA Studies,
Resettlement Action Plan, Compensation, Water Use
License, Occupational safety and health, increased ux
of people from other areas bring in social ills into the
area and dilution of culture, Benefits of jobs, socioeconomic benefits
Financial
Optimal structuring at project level
Term of loan
Proposed guarantee framework for EPC and O&M
contracts
Hedging to manage currency mismatch
Transparent financial structures
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THANK YOU