IDC’s approach in developing the Green Economy Towards a green future …

1. IDC’s approach in developing the Green EconomyTowards a green future … Presented by: Rentia van Tonder Head: Green Industries SBU

2. Contents • IDC’s alignment with IPAP2 and NGP; • Sectoral focus areas; • The Green Economy in the NGP and IPAP2; • IDC Green Economy focus areas; • Non-fuel based green energy; • Energy Efficiency: • Fuel based green energy • Conclusion.

3. IDC Aligned its Sectoral Focus Areas with the NGP and IPAP2 Logistics, infrastructure and cross-sector projects The green economy • Logistics • Industrial infrastructure • Green and energy saving industries • Bio fuels Tourism, creative industries and high-level services • Craft and film • Biotechnology • Business process services Agricultural value chain • Tourism • Agro-processing • Forestry, paper & pulp, furniture • Mining related technologies • Healthcare • ICT Manufacturing activities • Automotives, components, medium and heavy commercial vehicles • Metals fabrication, capital and transport equipment The mining value chain • Mining • Downstream mineral beneficiation • Advanced manufacturing • Plastics and chemicals • Clothing, textiles, footwear, leather • Pharmaceuti-cals • Oil and gas Other funding areas : Venture Capital Funding to distressed companies • Grreen industry components 3

4. Sectoral focus areas(continued)

5. Sectoral focus areas(continued)

6. The Green Economy in the NGP • The New Growth Path targets 300 000 additional direct jobs by 2020 to green the economy, with 80 000 in manufacturing and the rest in construction, operations and maintenance of new environmentally friendly infrastructure. • Additional jobs will be created by expanding the existing public employment schemes to protect the environment, as well as in production of biofuels. The IRP2 targets for renewable energy open up major new opportunities for investment and employment in manufacturing new energy technologies as well as in construction. • The main strategies to achieve these targets are: • Comprehensive support for energy efficiency and renewable energy as required by the IRP2, including appropriate pricing policies, combined with programmesto encourage the local production of inputs, starting with solar water heaters; • Public employment and recycling schemes geared to greening the economy; • Stronger programmes, institutions and systems to diffuse new technologies to SMEs and households; • Greater support for R&D and tertiary education linked to growth potential and developing South Africa as the higher education hub for the continent; and • Continuing to reduce the cost of and improve access to broadband. Source: The New Growth Path - The Framework

7. The Green Economy in IPAP2 • Key Sectors • Wind power generation • Photovoltaic power generation • Concentrated solar power generation • Industrial energy efficiency • Water efficiency • Waste management • Biomass and waste management • Energy-efficient vehicles • Key action programmes • Roll-out of national solar-water-heating programme – manufacturing and installation capacity • Solar and wind energy • Development of an industrial energy-efficiency programme • Strengthen water-efficiency standards • Demonstrate viability of Concentrated Solar Thermal (CST) power as a major renewable energy generation source • Biomass Energy • Clean and Multi-Energy Stoves • Water- and Energy-Efficient Appliances • Efficient Motors, Variable-Speed Drives, Energy Metering and Control and Electricity Storage (Batteries and Fuel Cells) • Waste and Waste Water Treatment • The South African Renewables Initiative (SARi) Source: Industrial Policy Action Plan 2011/12 – 2013/14 – February 2011

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

9. Non-fuel based green energyRenewable Energy • Exciting time for Renewable Energy development in SA and throughout Africa • Energy Crisis in South Africa and Region • Opportunities both in South Africa and throughout the Region – significant investor interest • SA need is for 50 000MW new generation capacity by 2030 • 19 000 MW to come from renewable technologies • Launch of South Africa’s REPP • IDC targets a R14bn investment over 5 years

10. IRP2010 33% of new capacity from wind and solar 19GW = R500bn

11. IRP2010 - Investment requirement – 5 Years The total investment up to 2030 = R500bn

12. IDC Funding possibilities for RE projects • 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 20-25% cash (trickle dividend) for community trust / BEE shareholders • Favours community trust concept • Debt participation • Senior debt with tenure of 15 years post commercial operation date (COD) • Interest capitalisation during construction • Construction loan Target investment of R14bn over 5 years. Projects under consideration: CSP - 4; Wind - 12; PV - 18 ; Hydro - 3

13. Current IDC initiatives to respond to demand Streamline IDC processes; Resource support – internal REFIT forum; Panel of technical advisors; Portfolio approach through partnering with other funders; Standardised IDC documents • Senior Debt Term Sheet • Sub-debt Term Sheet • Equity Term Sheet • BBBEE Pref Term Sheet • BEE Term Sheet • Trust Deed

14. Industry associations • SAPVIA • Founding member • NERSA presentations on revised REFIT • Sponsored launch event • Elected to Management Board and alternate nominated • Association has appointed admin manager • SASTELA • Founding member • IDC is hosted Special GM • IDC has Exco Seat • SAWEA • IDC to become a member • Association has appointed CEO • Associations co-operate well especially on liaising with government and legal opinions

15. IPP Procurement Programme RfP Highlights • Up to 5 Phased Bid process pending subscription by Bidders of total allocation of 3 725MW spread across renewable energy technologies; • First phase: submission of bids by 4 November 2011; • Two phased selection process – Qualification and Evaluation; • Key qualification criteria: Project Structure, Legal, Land, Financial, Environmental, Technical, Economic Development, Bid Guarantee; • Proven technology - equipment must have been installed on two previous projects; • Track record of contractor - must have constructed two similar projects; • A bid bond of R100k/MW must be provided with the bid, increasing to R200k/MW when the Project is selected as preferred bidder; • If Qualification is met the bid will be evaluated mainly against Price (70%) and Economic Development (30%); • Price not to exceed price caps for each technology; • Economic development matrix with focus on Jobs, local content, community and skills development.

16. IPP Procurement Programme RfP Highlights • Non-negotiable documentation include: PPA, Implementation, Direct and Connection Agreements; • Bidders must provide confirmation that equity is fully underwritten and preliminary approval for debt; • Bid must be accompanied by audited Sponsor and Banker Case Financial Model.

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

18. Energy EfficiencyKfW facility Opportunity: Facilitate the growth in EE • Energy Efficiency scheme: • R 500 million • Interest Rate at prime -3% • Targeting SME‘s with a 20% energy saving. • Support to IDC through implementing agents: • 2 years of Technical Assistance • Resident Team Leader • Pool of 15 international experts and local experts to provide Technical Assitance to IDC (through KfW grant) • GFA & other local consultants • - Energy Audits • - Business Plans • - Marketing Materials • - ESCO business know-how

19. Energy Efficiency: Example of SWH project • Solar Academy of Sub-Saharan Africa • The IDC approved funding for the roll-out of 200 000 solar water heaters to the South African market. The company has a diversified portfolio of projects including the mass roll out of the low pressure SWH, high pressure SWH and investigating opportunities within the renewable energy space. • The low pressure SWH project is the first programmatic CDM SWH Carbon Project globally to be registered at the UNFCCC. • The project has rolled out 60,000 LPSWH units to the impoverished RDP Communities, uplifting their standards of living by providing them with hot water on tap, benefiting at least 240,000 individuals. • The project supports localisation and in doing so is currently establishing a local manufacturing plant. The manufacturing facility would allow the local content of the product offering and service, creating 535 local job opportunities. The second phase of training will see 10% of all installers being trained to become qualified plumbers. Gauteng North West Free State KwaZulu-Natal Eastern Cape Western Cape

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

21. Fuel Based Green Energy (including hydro) To achieve TARGET ZONE: 1. FEEDSTOCK (FUEL) SECURITY! • No Feedstock security, no start! • Feedstock security means quantity, quality, price, period! • PROCESS/INVESTMENT options • largely driven by FEEDSTOCK QUALITIES, QUANTITIES, TERM and OFFTAKE OPTIONS • Typical R 15-35 mil per MW • High load factors eg 90 % (base load), or peaking for gas, hydro • High RATIO of OFFTAKE:FEEDSTOCK prices Project - Low O&M, so capital can be repaid if Scale sufficient & Offtake/Feedstock price ratio strong

22. Fuel type Feedstock and Processes

23. Example of Co-generation project • SA Calcium Carbide • SA Calcium Carbide is the only producer of calcium carbide in Africa, through the beneficiation of local limestone and coal mineral resources. • The company uses a large portion of the electricity supplied to the town of Newcastle. • Apart from the strain put on the electricity supply, recent tariff hikes will result in significantly higher production costs. • IDC will provide funding to assist with the installation of a co-generation facility, utilising furnace off-gas currently being flared, to reduce the company’s reliance on the national grid for electricity. • Co-generation promotes energy efficiency and reduces the use of coal in power stations and hence qualifies for carbon emissions reductions. KwaZulu-Natal

24. Conclusion • Pro-active approach to develop Green Industries • Renewable energy • Energy efficiency • Fuel based green energy • Emission and pollution management • Bio fuels • As well as localisation opportunities • Focus on early phase project development; • Develop specific funding interventions; • Support and development of an emerging industry at various level. • Value chain approach with an objective to develop a long term sustainable industry.

25. Thank you 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