Overview of the South African Renewable Energy Independent Power Producer Programme (IPP Program)

Bruce LinkeFinance and Projects

30 April 2012

Context: energy in South Africa

Energy crisis 2008 Frequent and widespread

blackouts = affect output in mining and other key industries

Recognised as significant constraint on development and investment

Further prioritisation of renewable energy development in the Integrated Resource Plan 2010 to reflect the White Paper on Renewable Energy 2003

Shift to nuclear and renewable energy under Integrated Resource Plan 2010

Energy share in 2010

Coal

Nuclear

Hydro (import)

Gas CCGT

Peak OCGT

Renewable

90%

5% 5%

0% 0% 0.1%

Energy share in 2030

Coal

Nuclear

Hydro (import)

Gas CCGT

Peak OCGT

Renewable

20%

9%

5%

1%0.1%

65%

New Capacity under the Integrated Resource Plan 2010

Coal15%

Nuclear23%

Hydro6%

Gas-CCGT5%

Peak-OCGT9%

Renewables 42%

Total additional new capacity until 2030 (GW) under IRP 2010 (excluding committed capacity)

6.3 GW

9.6 GW

17.8 GW

3.6 GW2.6 GW

2.4 GW

IPP Program: Policy context

Initial SA renewables policy (March 2009): Renewable Energy Feed-In Tariff Government to purchase output from qualifying renewable energy

generators at pre-determined prices Changed policy (Jul 2011): IPP Program

Competitive bid process based on price competition to drive value for money

Bidders bid the price which will be payable by the Buyer pursuant to the PPA between the Buyer and the Project Company of a Preferred Bidder

Price bid should not exceed the cap allocated for each technology in the RFP

IPP Program:Not to exceed prices

Technology Commercial Energy Rate (ZAR)

Commercial Energy Rate (AUD)

Onshore wind R 1,150/Mwh $140

Solar PV R 2,850/Mwh $347

Solar CSP R 2,850/Mwh $347

Biomass R 1,070/Mwh $130

Biogas R 800/Mwh $98

Landfill gas R 840/Mwh $102

Small hydro R 1,030/Mwh $126

IPP Program:Project Contractual Framework

IPP Program

IPP Program: Overview of new capacity

Technology Proposed amount to be installed

Percentage allocation of IPP Program

Onshore wind 1850MW 49.7%

Concentrated Solar Power (CSP)

200MW 5.3%

Solar Photovoltaic (PV) 1450MW 38.9%

Biomass 12,5MW 0.3%

Biogas 12,5MW 0.3%

Landfill gas 25MW 0.7%

Small hydro

(<10MW)

75MW 2%

Small Projects IPP (max 5MW installed capacity)

Total threshold of 100MW 2.7%

Total 3725 MW

IPP Program:Overview of Phases

Phase 1

Phase 2

Phase 3

Phase 4

Phrase 5

Bids close:5 March 2012 Bids announced: 14 May 2012Financial close:13 Dec 2012

Bids close:25 Nov 2011Bids announced: 7 Dec 2011Financial close:19 June 2012

Bids close:20 Aug 2012 Bids announced: TBAFinancial close:13 Dec 2012

Bids close:4 March 2013 Bids announced: TBAFinancial close:TBA

Bids close:13 Aug 2013Bids announced: TBAFinancial close:TBA

IPP Program:Phase 1

53 bids were evaluated by the DoE

28 bids, representing a total of 1,416MW were selected as preferred bidders

Key evaluation criteria: 70% price 30% meeting economic development criteria (localisation)

IPP Program:Phase 1

18 Solar PV projects, totaling 631.54MW- 43.6% of the total planned allocation of 1,450MW for solar PV.

2 Solar CSP projects, totaling 150MW of total allocation of 200MW, representing 75% of the total available capacity of 200MW for solar CSP.

8 Wind projects were selected, totaling 633.99MW, representing 34.3% of the total available capacity of 1,850MW.

A total of 2,209MW remains to be allocated in the remaining phases to all technologies to make up the total allocation of 3,625MW earmarked for the RE IPP process.

IPP Program:Capacity and technology by Phases

Technology MW allocation all Phases

MW allocated in Phase 1

Max MW proposed to be allocated in Phase 2

Onshore wind 1,850 MW 633.99 MW 650.00 MW

Solar PV 1,450 MW 631.53 MW 450.00 MW

Solar CSP 200 MW 150 MW 50.00 MW

Biomass 12.5 MW 0 12.50 MW

Biogas 12.5 MW 0 12.50 MW

Landfill gas 25 MW 0 25.00 MW

Small hydro 75 MW 0 75.00 MW

Total 3,625 MW 1,415.52 MW 1,275.00 MW

IPP Program:Phase 1 – 28 Preferred Bidders

Solar Wind

IPP Program: Challenges

Ambitious procurement and construction deadlines Project financing - Lenders taking risk across a number of

Projects Conservative approach to risk in new technologies Physical constraints – grid access and capacity Environmental and planning approvals to be in place prior to

financial close Offshore expertise to deliver projects