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17/05/2019 SUNREF
Overview of Issues Associated with Energy Efficiency Financing- including an Introduction to the IDC’s SUNREF II
Facility
Rob Short. SUNREF II Team Leader.
Cell: +27 82 454 2193 E-mail: [email protected]
17/05/2019
Issues we hear about EE financing:
- There is no funding available for EE projects (or no access).
- Banks don’t understand EE projects or an EE business (or the incentives available and how they work e.g. 12L).
- Financing institutions are unreasonable. Conditions are too onerous (especially around security).
- Never take risk.
- They take too long.
- Always wanting more information.
17/05/2019
Give you a sense of the key issues that are looked at:
- Will focus on project finance (SUNREF financing mechanism).
- For example an ESCO, with a partner, sets up a special purpose vehicle to provide an energy service to a company and the SPV takes on the finance including some debt.
- But there are other types of financing routes, for example: - Companies self fund.
- Companies borrow for a project.
- There is no silver bullet to getting financing.
17/05/2019
Projects Funded and Looked At:
- Energy optimisation in various industries e.g. bakery (also included a fuel switch from heavy oil to biomass).
- Energy efficient lighting installation in a number of retail outlets (special purpose vehicle set up).
- CHP project in a manufacturing facility.
- Manufacturing of energy efficient lighting.
17/05/2019
Its Not Different To Any Other Financing Deal:
The issues a financier will look at, include (focus here is a project):
Credible Off-Taker
- High probability revenue will be paid over to the project on timeand over its life-span.
- Ensure that the revenue stream can support the project (tariff being paid).
17/05/2019
Key Issue ……
Credible Project Implementer
- Credible technical partner with evidence of delivering similar projects (solid understanding of designing and implementing energy efficiency projects).
- Need to be sure savings are going to be delivered and how to prove it (and contract for it).
- Know what are the required, and how to put together, effective legal agreements.
- Experienced management and operating team (skills).
- Legal structure of partners and SPV gives comfort (e.g. directors).
- Empowerment addressed effectively.
17/05/2019
Key Issue ……
Solid Financial Analysis and Structure - Adequate financial structure with reasonable contribution by promoters
(debt to equity ratios). - Robust financial analysis and model (look at assumptions).- Profitable, sustainable and capable of repaying debt. - Business case must exhibit economic merit (DFIs look for development
impact e.g. GHG reductions, job creation, women and youth involvement).
- Optimised the incentives available?- All brought together in a solid business plan.
17/05/2019
Others ……
- Insurance in place (e.g. pubic liability in event of damage).
- Need for guarantees.
- Foreign exchange cover in place.
- Guarantee of equipment performance e.g. light bulbs by supplier.
- Identifying and satisfying all regulatory requirements.
- Specific funding requirements e.g. minimum size, repayment periods.
- Environmental issues e.g. disposal.
- In mandate.
17/05/2019
Comment ……
- Numerous issues that need to be addressed – but is an EE initiative any different from what you should be looking at normally to develop a solid project?
- Are there unique issues related to EE companies and projects or do they generally reflect the challenges SMMEs face?
- Is there something more the association could do? - Training on financing for ESCOs?
- Training on tendering for and contracting for EE projects for potential clients?
17/05/2019
SUNREF II Facility:Two elements:
- Credit line from the French Development Agency, AFD to the IDC- Focus is Renewable Energy and Energy Efficiency (objective is GHG Reductions)- US Dollars 66 Million. - Will close end June 2020. - IDC processes apply.
- Technical Assistance Facility- To support the IDC appraisal process to get projects to financial close. - Provision of independent technical advice (e.g. verification of energy savings and GHG
reductions).- Supporting the IDC in capacity- building around specific project types.- Remove internal barriers at the IDC - De-risking projects (ESCOs providing services to state entities?).- Use of guarantees.
17/05/2019
The Credit Line- EE and RE (“other” category)
- Debt facility only.
- For South Africa only.
- Private sector only.
- Maximum of Prime of + 1.6%.
- Minimum investment period of 3 years.
- Standard IDC fees and requirements apply.
- Minimum funding amount for the IDC is ZAR 1 million.
Projects can be supported by the technical assistance facility.
17/05/2019
Final Comments ……
- Its not rocket science.
- Solid methodical approach is required integrating numerous issues.
- From SUNREF side not been approached for process efficiency improvements – would like to see that.
- Our view is that there is a market – so are receptive to projects.
- Solid drivers exist e.g. energy price paths (liquid and electricity), regulatory initiatives on GHG reductions, energy security, competitiveness.
- Good to have an initial discussion and go from there – do a two pager.
17/05/2019
Contact Information
• Rob Short, Team Leader, [email protected] (+27 82 454 2193)
• Charlotte Ache, Project Assistance, [email protected]
• www.sunref.org
• Programme based at:SANEDI
Block E, Upper Grayston Office Park
150 Linden Street, Strathavon, Sandton
2146 South Africa
www.sunref.org