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TRANSCRIPT
Renewable Energy InvestmentsCentre for Environmental Rights
DATE:
24 October 2016
PRESENTER:
Peta Chennells
Senior Investment Analyst
Agenda
Why Renewable Energy Makes Sense
– South African energy requirements
– Investment opportunity
– Socio economic development
Mergence renewable energy project video
Questions
An authorised FSP: no. 16134
South African Renewable Energy Programme
South Africa’s Energy Dilemma
Low Cost
Low
Carbon
Security of
Supply
Low Water
Job
Creation
Abundant wind and solar resources
South African Wind Map
South African Solar Map
42% of new capacity build from renewable energy
Source: Policy adjusted IRP (2030) DOE 26 Aug 2016
6.3 6.3
2.6
17.8
9.6
Coal Gas Hydro Renewables Nuclear
Coal15%
Gas15%
Hydro6%
Renewables42%
Nuclear23%
6.4GWs allocated to 102 projects over 6 bid windows
1.4
1.0
1.5
2.2
0
1
2
3
4
5
6
7
BW1 (2011) BW2 (2012) BW3 (2013) BW3.5 (2014) BW4 (2014) Smalls (2015) Total
GW
s
Bid Window & Bidding Year
BW1 BW2 BW3 BW3.5 BW4 Smalls Total
Operational
(# of projects)100% 84% 0% 0% 0% 0%
43% (2.2GW,
44 projects)
Source: Policy adjusted IRP (2030) DOE 26 Aug 2016
Dramatic Tariff Decreases
3.65
2.18
1.17
0.91
0.62
1.51
1.19
0.870.75
0.62
BW1 (2011) BW2 (2012) BW3 (2013) BW4 (2014) BW4E (2015)
Bid Window & Bidding Year
Average tariff in R/kWh (Apr-2016-R)
Solar PV
Wind
Source: CSIR; Cost of new power generators in South Africa, Oct 2016
REIPP now 40% cheaper than Coal IPP
0.62
1.03
Renewable EnergyBW4E
CoalBW1
Average tariff in R/kWh (Apr-2016-R)
Source: CSIR; Cost of new power generators in South Africa, Oct 2016
An authorised FSP: no. 16134
Renewable Energy as an Investment Opportunity
Investment in Renewable Energy
R194bn committed investment
BW1 BW2 BW3 BW3.5 BW4 Smalls
R654bn forecast investment
Source: Policy adjusted IRP (2030) DOE 26 Aug 2016
194.1
654
2016 2030
Invested R1.2bn across 12 Projects
Track record:
- Invested R1.2bn in 12 Round 1 and Round 2 projects
- Committed over R400m to 5 small projects
- Fund raising for second renewable energy debt fund
Noblesfontein | NC8% Fund allocation
Soitec | Touwsriver, WC8% Fund allocation
Herbert | Douglas, NC9% Fund allocation
Van Stadens | PE, E Cape
8% Fund allocation
Greefspan | Prieska,
NC3% Fund allocation
Soutpan | Limpopo6% Fund allocation
Dassieklip | Caledon, WC8 % Fund allocation
Witkop | Limpopo9% Fund allocation
Kalkbult | De Aar, NC8% Fund allocation
Kouga | Oyster Bay, EC 4% Fund allocation
Solar Capital 1 | De Aar,
NC10% Fund allocation
74MW 44MW 20MW 27MW 10MW
28MW 27MW 30MW 75MW 80MW 75MW
Solar Capital 3 | De Aar,
NC18% Fund allocation
75MW
Renewable Energy as an Investment
Stable long term predictable cash flows
Strong returns coupled low volatility
Low probability of default & high recovery rates
Long-term Debt backed by Long-term Contracts
Mergence REDF
Project Co
Shareholders
Eskom Holdings
4. Debt (70%)1.Power
Purchases
3. Equity
(30%)
SA Government
2. Limited Guarantee
20 Year PPA
Other Financial Institutions
15 Year Loan
Long term stable and predictable returns to investors
0
20
40
60
80
100
120
140
160
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47
Semi-Annual Periods
Total Expenses Debt Servicing costs Total PPA Revenues(ZAR)
Source: Mergence data
Comparable market returns with reduced volatility
12.0%
8.5%
7.7%
10.0%
11.2%
9.1%
20 years 10 years 5 years
Bonds CPI + 5%
0%
5%
10%
15%
20%
25%
30%
35%
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
Bonds
CPI + 5%
Source: Mergence data, Rolling 3 year average annual geometric returns: 1990 - 2016
Low defaults and high recovery rates
Source: Addendum to Moody’s Project Finance Defaults Study, 1983 – 2013. World Availability Based PPP
2.5%
83.2%
Average default rate Average recovery rate
Mergence Performance Summaryas at 30 September 2016
100
105
110
115
120
125
130
135
140
145
Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16
Mergence Renewable Energy Debt Fund Jibar + 3%
Source: Mergence Renewable Energy Debt Fund, Sept 2016
• Excluding 10% capital appreciation – EY Valuations (since inception
19% increase)
• No defaults on any of our projects
Net Returns Since Inception
Fund 10.4%
JIBAR + 3% 9.3%
Outperformance 1.1%
An authorised FSP: no. 16134
Socio Economic BenefitsRenewable Energy Investments
Stringent Economic Development Criteria
Bidding Projects
Economic development commitments =
30% bid evaluation criteria
Includes:
– Local content % of total spend
– Job creation commitments
– Local community development
– BEE shareholding
– Socio Economic development spend
Successful Bidders
Successful projects legally commit to
economic development criteria
Monitored by DOE & Lenders
Failure to comply = loss of PPA
What’s been committed so far?
112 000 FTE Jobs
R29bn community
income
R65bnlocal content
spend
Source: Policy adjusted IRP (2030) DOE 26 Aug 2016
R25bn development
spend
Over R100bn
in investment
in South Africa
Mergence community impact
R300m receivable from 28MW solar farm
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
R’m
Social & enterprise development (cum)
Community dividends (cum)
Average impact of projects
Ownership
3 - 10% Local community Trust ownership
Socio-Economic Development
1 -1.5% of revenue for socio economic
development in local (mainly rural) communities
Enterprise Development
0.6% of turnover on enterprise development –
targets education and skills development
1 300 children will receive
school shoes and jerseys,
while 8 400 children will receive
books
Free community Wi-Fi to the
value of R745,000 installed within
previously disadvantaged
community
R700 000 spent on a computer
laboratory and equipped the
Community Training Centre
How the projects benefit their communities
Limpopo area De Aar, Northern Cape De Aar, Northern Cape
An authorised FSP: no. 16134
Conclusion
Conclusion
Renewable Energy makes sense for everyone!
An authorised FSP: no. 16134
Questions?