Investments in renewable energy power projects in East Africa DI Frontier Market Energy & Carbon Fund Kim Gredsted, Partner & Investment Director Seminar on Sustainable Energy Investments in Africa, June 2014 FRONTIER Investment Management
Today.what will the future look like? June 2014 Frontier Investment Management 2
The case for RE investments in Africa High demand growth SS Africa population 900m = 13% of world population Population growth at 2.5%, to reach 4bn in 2100 Electrification expansion (from 10-20% coverage) High economic growth (+6% in 1/3 of SSA countries) Rapid urbanisation Large generation deficit SS Africa generation 63GW = 0.5% of world generation Large deficits in all SS Africa = load sheading, poor quality (estimated GDP growth reduction app. 2% point) Difficult for national utilities to finance expansion of generation Abundant renewable resources Many class 1-2 wind sites (Rift Valley, SA) Large geothermal potential (Rift Valley) Large hydro power resources (tech feasible 200GW current 22GW) Big potential for growing biomass/biofuel High solar irradiation (solar PV, solar heating/cooling for industrial/aircon) Generation cost and renewable competitiveness High generation cost of fossil fuel power plants Utility and industrial heavy users off-take potential Distributed generation Donor institutions push/support for renewables New regulations and agenda Deregulation of power sector Allowing for private investors (IPPs) in power generation June 2014 Frontier Investment Management 3
Fund established on 26 AUG 2011 THE FUND DI Frontier Market Energy & Carbon Fund K/S EUR 60 million in commitments Closed-end (10 to 14 years) Frontier Investment Management manages the Fund Confederation of Danish Industries (Dansk Industri) supported the establishment of the Fund Develop Construct The Fund Finance & Structure Own, Operate & Exit GEOGRAPY The Fund s mandate is Sub-Saharan Africa. Main focus is East Africa, South Africa, and Ghana. Managed from offices in Copenhagen and Nairobi. INVESTORS Danish investors: PFA Pension Pension Danmark Tryg Insurance IFU (Danish Gov) International investors: GEEREF (German and Norwegian Gov, managed by EIB) CDC Group (UK Gov) The Fund is supported by grants from the EU and the Seed Capital Assistance Facility (SCAF) funded by GEF and the UN TECHNOLOGIES The Fund invests in greenfield medium sized renewable energy generation assets based on proven technologies within namely: Wind, Hydro, Geothermal, Solar PV Biomass, Biogas, Waste Heat Recovery June 2014 Frontier Investment Management 4
Case: Akiira Geothermal MW Total/Frontier equity Off-taker Partners Status Frontier role Frontier investment Innovation Akiira Geothermal (Kenya) 42 MW option for 140 MW 46m USD / 26m USD KPLC (utility) Marine Power, Ram Energy + equity investor Civil works commenced Drilling late Q2-Q3 2014 Lead investor and co-developer Development phase + financial close First privately financed geothermal project where investors have exposure to drilling risk. June 2014 Frontier Investment Management 5
Case: Akiira Geothermal MW Total/Frontier equity Off-taker Partners Status Frontier role Frontier investment Innovation June 2014 Akiira Geothermal (Kenya) 42 MW option for 140 MW 46m USD / 26m USD KPLC (utility) Marine Power, Ram Energy + equity investor Civil works commenced Drilling late Q2-Q3 2014 Lead investor and co-developer Development phase + financial close First privately financed geothermal project where investors have exposure to drilling risk. Frontier Investment Management 6
Case: Wind for Prosperity Kenya MW Total/Frontier equity Off-taker Partners Status Frontier role Frontier investment Innovation Wind for Prosperity (Kenya) 13 sites of 200-1000kW+ each 5-10m USD KPLC Vestas and Maara Energy Concession awarded, feasibility done for first 4 sites Co-developer and anchor investor at FC Development phase + financial close Cost reduction in off-grid sites that uses diesel generators by using wind turbines in hybrid solution. Lokitaung* (58; ~22'500) Lokichogio* (78; ~17'700) Kakuma** (93; ~36'900) Baragoi (95; ~8'000) North Horr* (98; ~8'400) Rift Valley Mandera (74; 87'700) Elwak (74; ~24'400) Wajir (83; ~82'800) Dadaab* (93; ~5'700) Liboi** (90; ~11'000) Mt Kenya Hulugho* (83; ~20'800) Masai Mara Kiunga* (97; ~3'300) Faza Island* (97; ~4'200) June 2014 Frontier Investment Management 8
Case: Lubilia Hydro Uganda MW Total/Frontier equity Off-taker Partners Status Frontier role Frontier investment Innovation Lubilia Hydro Power (Uganda) 5.4MW 4-6.5m USD / 4-6.5m USD UETCL (utility) Ugandan developer Mature project (FS & ESIA complete) Lead investor and developer Development phase + financial close Played a role in creating the first standard PPA for hydros in Uganda together with KfW The project participates in KfW s GetFITprogramme June 2014 Frontier Investment Management 9
Extract of Fund pipeline Type Country MW Development status Total investment Fund investment Geothermal Kenya 42MW Construction commenced 150m EUR 10m EUR Wind/Diesel Kenya 5MW Semi-mature 8m EUR 5m EUR Wind Kenya 60MW Semi-mature 90m EUR 10m EUR Hydro Uganda 21MW Construction Q4 2014 42m EUR 8m EUR Hydro Uganda 5MW Construction Q4 2014 10m EUR 5m EUR Hydro Uganda 5MW Construction Q4 2014 10m EUR 6m EUR Hydro Uganda 8MW Semi-mature 20m EUR 7m EUR Wind Tanzania 100MW Semi-mature 150m EUR 10m EUR Hydro Tanzania 30MW Early stage 60m EUR 10m EUR Total 276MW 540m EUR 71m EUR Current opportunities in East Africa are many and namely within geothermal, hydro and wind. Very challenging to develop projects lead times for project development can easily be 3 years or more.. requires drive, persistency, financing and a wide range of skills. but it can be done! Total Fund pipeline is very large with more than 100 project opportunities..more investment capital needed! June 2014 Frontier Investment Management 11
THANK YOU QUESTIONS? DI Frontier Market Energy & Carbon Fund Kim Gredsted, Partner & Investment Director Seminar on Sustainable Energy Investments in Africa, June 2014 FRONTIER Investment Management