PACIFIC RENEWABLE ENERGY FINANCING Pacific Panel Session: Connect 2015 Deva De Silva November 2015
Contents 1. Energy Access in the Pacific 2. IFC s Approach to Renewable Energy and Energy Efficiency Financing 3. IFC s Renewable Energy and Energy Efficiency Financing Regional Experience (Case Study)
Challenges with the power sector in the Pacific 350 300 250 200 150 100 50 0 37.78 Solomon Islands Country 141.34 Papua New Guinea Grid Capacity [MW] 67.03 Tariff USD/kwh Pacific Energy Mix 14.44 15.46 16.59 Fiji Tonga Vanuatu Samoa Diesel Generated [MW] Diesel Generated Power Electricity Access Solomon Islands 0.87 100% 10% PNG 0.43 33% 12% Fiji 0.24 48% 81% Tonga 0.53 49% 90% Vanuatu 0.59 81% 28% Samoa 0.45 31% 98% Source of all data: IRENA, Pacific Lighthouses-Renewable Energy Road mapping for Islands 2013 ENA, Pacific Lighthouses-Renewable Energy Road mapping for Islands, 2013. Heavily reliance on imported petroleum based fuels. Around 50% of power generated in PICs is diesel generated, leading to energy security concerns, very high electricity tariffs and price fluctuation. Economies of scale. Most PICs are small and disbursed, made up of many islands, sea locked and geographically fragmented and/or remote. This makes larger energy infrastructure projects less economically compelling. Energy intensive industry and off-grid locations. Tourism, mining and manufacturing are three of the largest contributors to GDP in many PICs; all are energy intensive. Many industries are located on the city fringe or in remote areas and are off-grid. Limited access to capital. Small or early stage private sector companies have seen opportunities to profit from addressing these issues, but have struggled to access viable financing options due to real or perceived risks, particularly for renewable energy investments. Market intelligence suggests banks have limited experience in evaluating renewable energy risk.
Result in some of the lowest rates of grid access in the world 80 Percentage of Households with Access to Electricity 60 40 20 0 7000 6000 5000 4000 3000 2000 1000 0 Laos Pacific Isand Countries Sub-Saharan Africa Source: : IRENA, Pacific Lighthouses-Renewable Energy Road mapping for Islands, 2013 GNI per capita EAP relative to Pacific Island Countries East Asia & Pacific (developing only) Papua New Guinea (2014 unavailable) Pacific island small states 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: World Bank Group The aggregated energy access rate in the PICs is lower than some of the poorest countries in the world; and one of the lowest in East Asia Pacific. This dramatically impacts their economic and social development. In Papua New Guinea, for example, the lack of grid growth has led to a widening of the gap in income per capita between PNG and its neighbors.
IFC OWN-ACCOUNT PORTFOLIO IFC IS ACTIVE IN ALL REGIONS AND ALL POWER SUBSECTORS Current Committed Power Portfolio (As of September 30, 2014) Current Committed Power Portfolio (As of September 30, 2014) Power = US$ 6.3 billion Total = US$ 51 billion 4
IFC S VALUE-ADD IN POWER TRANSACTIONS From Patient Equity to Long Term Debt Sector Expertise Country Risk Mitigation Environmental & Social Risk Management Advisory Services EQUITY Up to 20% in project or company On selective basis, startup equity/co-developer under Joint Development Agreement SUB-DEBT Terms tailored to meet project needs DEBT Long Maturities Tailored to Project Needs Fixed/Floating Rates, Local Currencies Flexible Amortization Profile Syndication/Mobilization Deep sector knowledge gained from experience In-house Engineers: can offer technical advice and consider new technologies In-house Market Expertise: Can assess and structure for Merchant Risk In-house Regulatory Expertise: Can assess and structure for Regulatory Risk Government Relations Neutral broker Role World Bank Synergies PCG MIGA Coordinated approach across WBG services MIGA PRI IDA PCG Advice on Environmental and Social Best Practices Equator Principles Modeled after IFC Standards Governance Private sector perspective to governments Introductions + matchmaking Cross-border support + Sector knowledge Access to Donor Funding/Concessionary Support Coordination/Carbon Finance Programs to assist client, including: Local Supplier Development, Corporate Governance, Community Development Funding 5
Renewable Energy Market Opportunities 1. IPPs granted by PIC Governments Samoa: number of tenders to IPPs for RE, particularly in solar. Plans to completely replace its diesel generation capacity (~30MW). Fiji: GoF/Fiji Electricity Authority has committed to reaching 80% renewable energy target in generation mix by 2020 (60% today). PNG: GoPNG/PNG Power, has called for EoIs from firms to operate renewable energy power plants. 2. Sunergise - Roof top solar solution based on 10-20 year PPAs with off takers. IFC invested US$2m equity. Installed upto 1.3MW of solar systems in Fiji and expanding across the Pacific with 5 projects underway (estimated project cost of US$7m - 4MW). 3. Qaliwana Upper Wailoa Hydro Project Fiji (44MW) (IFC Infraventures with Hawkins Infrastructure NZ development stage). 4. Tina River Hydro (15MW) Solomon Is: IFC transaction advisor (PPP advisory). 5. RE Portfolio Risk Share Facility with Commercial Banks (US$50m) with supporting technical assistance to developers/banks.
PADGO Sri Lanka IFC Investment/Advisory project from 2009-2015 Risk-sharing facility for 2 banks, up to US$55 million RE portfolio Activities: IFC signed RSF agreements with 2 commercial banks to support the expansion of their RE loan portfolios. A 50% portfolio risk guarantee was provided to encourage these banks to lend to the sector In parallel, IFC worked with the partner banks to provide advisory services to strengthen their lending capacity for RE projects in the areas of credit review, financial modelling, risk management, technical appraisal, project supervision etc. In addition, the project extended direct project development assistance on a needs basis to project sponsors/developers to prepare bankable projects As at Q4 FY14, 10 mini-hydro and 3 wind projects had been financed: Capacity of RE projects assisted: 75MW Amount of RE generated through these projects: 150,000Mwh Value of financing provided by FIs to develop these projects: US$60 million Amount of GHG emission avoided: ~100,000MT of CO2
IFC investments in Renewables 22 8