Industrial Development Corporation’s approach in developing Green Industries

1. Industrial Development Corporation’s approach in developing Green Industries August 2013 Focussing on Renewable Energy especially CSP Rentia van Tonder Head: Green Industries

2. Content 2 3 4 6 5 1 Green SBU: Focus, Portfolio & Strategies IDC & Renewable Energy IDC’s role in CSP Conclusion Funding RE IDC background

3. Introducing IDC • Established: 1940 • Type of organisation: Development Finance Institution (DFI) • Ownership: State owned company, 100% owned by the SA government • Total assets: R115 billion (30 September 2012 - group) • Total liabilities: R24 billion (30 September 2012 - group) • Funding status: Self financing, pays dividends and income tax • Credit rating: Baa1 (Moody’s) in line with sovereign rating • Main business area:Industry development through the provision of funding resulting in job creation • Geographic activities: South Africa and the rest of Africa • Products: Custom financial products to suit a project’s needs including debt, equity, guarantees or a combination of these • Stage of investment: Project identification and development, feasibility, commercialisation, expansion, modernisation • Number of employees: 804 (December 2012)

4. Vision, mission, objective and values To be “the primary driving force of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent” Vision The IDC is self-financing national development finance institution whose primary objectives are to contribute to the generation of balanced, sustainable economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles. Mission Lead industrial capacity development Objective • Primary: Facilitate sustainable direct and indirect employment • Secondary: • Improving regional equity, including the development of South African rural areas, poorer provinces and industrialisation in the rest of Africa; • Growing the entrepreneurial and SME sectors • Transformational impact on communities and growing black industrialists • Environmentally sustainable growth • Growing sectoral diversity and increased localisation of production Outcomes Passion Professionalism Partnership Values

5. Positioning Greater importance on social and developmental objectives Greater importance on financial objectives Government / NGOs DFIs Commercial Financiers • Commercial and development focus • Sharing risk • Internally generated funds, government funds, loans • Non-commercial focus • Fiscal transfers and grants • Development objectives (social) • High commercial focus • Private sector capital • Financial objectives • Known risks • ABSA • Standard Bank • First National Bank • Nedbank • Etc. • Industrial Development Corporation (IDC) • Development Bank of Southern Africa (DBSA) • sefa • National Empowerment Fund (NEF) • Etc. IDC does not directly compete with other institutions, but encourages cooperation with a variety of these institutions to achieve its goals

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

7. Green Industries SBU:Portfolio 3 Projects Exposure R193m 16 Projects Exposure R620m 20 Projects Exposure R185m 20 Projects Exposure R1.5bn

8. Renewable Energy: IDC’s participation SOLAR PV WIND Total Investment – R34bn Total Investment – R24bn Total Round 1 & 2 Investment R74.7bn IDC IDC CSP HYDRO Total Investment – R16bn Total Investment - R631m

9. Renewable Energy: Portfolio analysis • 7 Projects, 452MW, R1.9bn • 8 Projects, 213MW, R2.1bn IDC Total Investment R7.7bn • 2 Projects, 150MW, R3.5bn • 1 Projects, 10MW, R204M • No Small IPPs (1-5MW) • RfP released 20 Aug’13 • IDC reviewed & commented on draft

10. Renewable Energy: Current reality… • Key considerations: • Grid availability • Grid Intermittency & stability • Number of “Large” scale PV & wind projects • Lack of smart grid in SA • Load factor compared to coal based energy • Cost per kwh of RE Determination announced up to 2020: 6 900MW By 2030 18 000MW R500bn By June 2012 2 500MW R75bn GW

11. Renewable Energy: Current reality… Research conducted to date on localisation potential: SAPVIA: Rooftop study; Localisation Study with DTI SAWEA: Local content workshops & engagement SASTELA: Localisation study: Ernest&Young, GIZ, DTI CSIR: Solar Roadmap Study & Workshops DTI: Sets hurdle Local content for RE Projects IDC impact • CSP has the highest potential for job creation • CSP Highest capital per MW • Local content targets expected to increase gradually with every bidding round • Indirect impact on rural upliftment and job creation Avg Jobs Local content %

12. Renewable Energy: CSP tariff roadmap • Minister of Energy has made a further determination in December 2012 of 400 MW CSP allocation. • The industry is still waiting for a formal announcement regarding the CSP allocation for Mar’14 • Preference towards CSP with storage. Oct 2010 : SASTELA co-founded by IDC to promote CSP IDC impact May 2012 Nov 2011 Oct 2009 Aug 2011 50 MW : Round 2 NERSA REFIT PROPOSAL Release of RfP by DoE: CAP 150 MW MW: Round 1

13. Renewable Energy: Regional development & integration – SED and ED More opportunities for regional integration and development … IDC funded 17 projects IDC impact

14. Renewable Energy: Opportunities for regional development & integration – SED and ED • Northern Cape (2% of population) got 52% of Investment = R39bn • Revenue streams to communities (2 CSPs): • Trust dividends • 0.1% of total revenue on ED • 1.0% of total revenue on SED • 30% on preferential procurement Initiated a workshop and task team between Green SBU, Strategy and R&I with CSIR to develop social impact assessment tool IDC impact 2 52% % Population % Investment

15. IDC’s role in CSP • Key role through project development and funding of PFS and BFS; • Potential to provide base load electricity; • Steep learning curve • New industry development and risk taker • Total potential exposure to CSP could be more than R7bn (round 1 to 3); • Support to develop industry and drive cost down. • Potential to source funding to reduce cost, specifically for CSP • Importance to position industry as strategically important for future electricity supply.

16. IDC involvement in Concentrated Solar Power (CSP) Total potential exposure: R7,3bn

17. Financing CSP • Financing CSP in South Africa • New industry – riskier compared to PV and Wind; • Financing of Trough technology easier than Tower; • Requirements from commercial banks – risk averse; • Importance of EPC and O&M experience and strength of partners; • Long term investment approach;

18. IDC Funding possibilities for RE projects Community Trust Developer Community “HoldCo-C” Ownership and IDC funding • Project development through participation and cost sharing of bankable feasibility studies • Equity participation • Minimum: Meaningful 10% with minority protection • Maximum: Not majority, 30% • BEE and BBBEE funding • Lending to Community Trust or BEE shareholder to invest in project • Repayment with dividends • Will allow 10-25% cash (trickle dividend) for community trust / BEE shareholders • Favourscommunity trust concept • Debt participation • Senior debt with tenure of 15 years post commercial operation date (COD) • Interest capitalisation during construction • Construction loan Project Company IDC BEE# “HoldCo-B” Strategic Equity Partners BEE# IDC Funding with Preference Shares Ordinary shareholding # This could also be a BBBEE or NPO

19. IDC Facility Agreements CTA & Senior debt RE IPP Project Wind / Solar/ CSP/ Hydro Independent Power Producer (IPP) 75% Debt Commercial Banks Security Agreements & Indemnity Intercreditor Agreement Security SPV Debt Guarantor Agreement Direct Agreements Renewable Energy: Project Structure for a REIPP Power Project in SA • Developer • Strategic • 2. Institutional • 3. IDC 85% Shareholders Agreement & Shareholder Loan Agreement 25% Equity Long-term Land Lease Agreement Land Owner BBBEE & BEE 15% 10-Year Operation & Maintenance Turbine supplier 20-Year Take-or-pay Power Purchase Eskom Fixed price LSTK Contract Environmental Authorities EPC Contractor Construction Permit & ROD Main Sub-contractors Generation Licence NERSA RSA Balance of Plant Supplier RSA Electrical Contractor RSA Civil Contractor International Turbine/PV Manufacturer

20. Conclusion KhitowerAug , 2013 at 173m height

21. Conclusion

22. Thanks The 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