Investing in the economy

Summary of operational performance

Green Industries SBU
  Performance   2012   2013  
Total value of financing approved (Rm)  5 485   3 827  
Total number of jobs expected to be created or saved   2 689   2 031  
Impairments as a % of outstanding book (at cost excluding undrawn commitments)  4%   1%  
• The Green Industries SBU was established on 1 April 2011.      
Focus areas   
Renewable non-fuel power generation – Wind, concentrated solar and photo-voltaic solar power generation  
Energy efficiency – Heat, electricity and buildings; cleaner production/industrial processes  
Fuel-based energy – Waste-to-energy; co-generation  
Bio-fuels – Bio-ethanol  
Emissions and pollution mitigation – Waste management/recycling; clean stoves  
Related services – Energy servicing companies (ESCOs)  


Highlights  

2011   2012   2013  
  • Start developing renewable energy (RE) projects
  • Develop business plan for the establishment of the Green Industries SBU
  • Establishment of the Green Industries SBU
  • Participation in COP17
  • Launch GEEF
  • Signing of Green Accord
  • Facilitated increased investment in solar water heaters
  • Financed first co-generation project
  • Signed new line of credit for small RE with Afd
  • Successful bio-gas pilots for fuel
  • Industry workshops for energy efficiency
  • Published ESCO research study
  • Successful participation in Round 2 of REIPPP programme, eight projects
  • Reach financial close on Round 1 projects
  • Established IDC as a leader in financing green projects
  • Significant progress on GEEF funding (35% committed)
  • 27 walk-through and investment grade energy audits
  • Successful launch and commissioning of first co-generation project
  • Commenced construction on first two CSP projects in South Africa
  • Various RE projects under development for Round 3 of the RE bidding process
  • Total portfolio reached R10.4bn

  
Recent performance  

Government announced its IPP programme in 2011, outlining the process to procure 4 725MW of renewable energy from IPPs through five bidding rounds. Renewable energy is seen as the major thrust for IDC investments as these are expected to create downstream and upstream development, provide critical mass to the industry, and change perceptions about risk and viability. The SBU participated in a total of 19 successful projects during Rounds 1 and 2, and reached financial close on all its round 1 projects where construction has already commenced.

The Minister of Energy signed a further determination during December 2012 to procure another 3 200MW and Round 2 projects are anticipated to start construction during the second and third quarters of 2013. IDC’s committed renewable energy portfolio increased to R7.7 billion through equity, B-BBEE/BEE and debt finance. The SBU also increased its funding towards energy efficiency projects through the Green Energy Efficiency Fund (GEEF), where key focus areas included industrial energy efficiency, refrigeration, retrofitting of energy efficient lighting and biogas. Total commitments under GEEF currently represent 35% of the total fund of R500 million, with more emphasis being placed on industrial energy efficiency in support of increased profit and cost savings. The development of fuel-based green energy projects (ie biogas, waste to energy and co-generation) remains a key priority. IDC recently successfully launched its first co-generation financed project with South African Calcium Carbide, producing 8MWs for self-use. The SBU also achieved key milestones on its bio-ethanol project in Cradock, Eastern Cape, and will proceed with implementation soon. The Green Industries SBU’s committed portfolio is shown in the diagram below.

The IDC’s renewable portfolio is based on its support and funding during Rounds 1 and 2 of the bidding process through total funding of 825MW. The bulk of its exposure currently is towards the two CSP projects under construction in Upington and Pofadder (Northern Cape). Key partnerships and joint project development with strong strategic partners remain important considerations in developing a sustainable portfolio towards long-term growth.

A significant focus has been placed on energy efficiency and the facilitation of investment through increased awareness, proactive project identification and self-use renewable energy project development.

Challenges  

The recent delays in the announcement of the small IPP and co-generation procurement process remains a concern. Various developers and large industry players remain unclear on the process in order to develop their projects further and continue facing the threat of increased electricity prices.

Relatively low electricity prices remain a key constraint in fast-tracking investment in energy efficiency. Developing waste-to-energy projects remains a key challenge due to Municipal Finance Management Act Regulations prohibiting municipalities from entering into long-term contracts. Furthermore, support is needed to create an enabling environment to develop new fuel-based energy projects.

Strategy and prospects

The SBU’s objective is to remain a leader in financing green projects in South Africa and to expand its vision into the rest of Africa.

It anticipates to participate in more RE projects leading up to a potential exposure of R14 billion over the next few years. Greater focus will be given to strategic partnerships with newly-established local producers of green components in order to maximise value chain opportunities and local upliftment.

It is anticipated that the Department of Energy will publish the request for proposals for the small IPP programme during the second quarter of 2013 and the co-generation programme during the third quarter of 2013. IDC is anticipated to play a leading role in the financing of these projects, which will be a key focus area. It is also anticipated that more focus will be given to alternative energy sources (ie waste-to-energy), which will be supported by IDC.

Opportunities in energy efficiency through the roll-out of GEEF and AfD funding lines will remain a key priority, with additional focus on industrial energy efficiency, off-grid solutions, more awareness training and project development.

Coega Dairy Holdings

The IDC has identified increased competition in the dairy value chain and import substitution in the cheese industry as key sector development goals. We also singled out the need for increased farmer (and specifically B-BBEE) participation in dairy value-adding initiatives.

Windtown Lagoon Resort 

The newly built Windtown Lagoon Resort and Spa reflects the IDC’s focus to funding community-based projects that have potential to create employment opportunities in far-flung regions.


APPROVALS
R13.1 billion
DISBURSEMENTS
R16.0 billion
JOBS FACILITATED
18 922
JOBS SAVED
3 950
© The IDC 2013. All rights not expressly allowed are reserved. P.O. Box 784055, Sandton, 2146, South Africa