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SOCIO-ECONOMIC DEVELOPMENT ASPECTS OF

RENEWABLE ENERGY PROJECTS

expectations and challenges

Gerrit Kruyswijk

Green Industries SBU

February 2015

R3.9bn

R0.5bn

R1.4bn

IDC’s approach:

• Project developer/

equity

• Community funding

• BEE funding with some

operational involvement

• Debt and or/sub debt

funding with a

combination of BBBEE

and/or BEE

IDCs participation in debt provide:

• Bigger ZAR value participation for IDC per deal

• Duty of care to IDC from lender technical and legal consultants

• Appreciation by market that IDC shares risk

• Additional liquidity to the commercial lending pool

IDC Funding Instruments

Senior Debt, 53%

Sub-Debt3%

Equity, 19%

BEE, 5%

BBBEE, 20%

R7.0bn

R2.7bn

R0.6bn

R2.5bn

R0.5bn

Direct Equity

Min 10% with

minority protection

Max 30% (not

majority)

Lending to trust or BEE shareholder to invest in project

Repayment with dividend.

Tenor of 16

years post COD

Interest during

construction

capitalised

Where in the world is “Pofadder” ?

Home to first

CSP plant in

South Africa

Kaxu Project Structure

IDC

Kaxu Community Trust

Holdco (Pty) Ltd

Kaxu Solar One

(Pty) Ltd (SPV)

29%

Equity

20%

Equity

KaXu Investment

Pty (Ltd)

51% Equity

Trust funding Structure

IDC

Kaxu Community Trust Holdco (Pty) Ltd

Kaxu

Community Trust

Kaxu Solar One (Pty) Ltd

(SPV)

Equity

Pref

Shares

100% Ordinary

Shares

Kaxu Project Structure

IDCAbengoa Solar

International S.A.

Kaxu Community Trust

Holdco (Pty) Ltd

Kaxu

Community Trust

Kaxu Solar One

(Pty) Ltd (SPV)

29%

Equity

100%

Ordinary

Shares

20%

Equity

IDC Funding with Preference SharesOrdinary shareholding Debt Funding

100%

Pref

SharesLender Group

DFI: IDC, DBSA, IFC

Commercial: Nedbank, RMB

75% Debt

KaXu Investment

Pty (Ltd)

100% Equity

51% Equity

Trust funding Structure

IDC


Kaxu

Community Trust


(SPV)

Equity Dividends

Pref

Shares

100% Ordinary

Shares

20% Trickle

Dividend

Pref

Dividend 80%

Challenge: Cost and Complexity

IDC


Kaxu

Community Trust


(SPV)

Equity Dividends

Pref

Shares

100% Ordinary

Shares

20% Trickle

Dividend

Pref

Dividend 80%

Trust

• Trust Deed

• Trustees

• Training

HoldCo

• Pref Agreement

• Directors

Both

• Governance

• Bank accounts

• Accounting

• Secretarial

• Audit

• R200k/annum

Composition of Trust and Governance

• Authority of trustees are derived from the Trust Deed

• Trust must be Broad Based in order to comply with the requirements of DOE

• Income will not be distributed per household

• Income may only be applied for approved “Causes” as defined in the Deed

• Non-compliance with DOE requirements may result in the project default

• Composition of Trustees – “BBBOS” - requirements

50% independent trustees

50% trustees to be black

At least 25% black women

Chairperson must be an independent trustee

• IDC provides training to the Trustees who have been nominated by the

Community at IDC’s cost

BBBEE Holdco (Pty) Ltd

• IDC appoints a director with a casting vote for HoldCo until the

IDC preference shares have been redeemed

• The Trust has the right to nominate 1 director in HoldCo

• The Project SPV provides funding to HoldCo to pay for auditing,

accounting and secretarial costs during the period that dividends

are not earned which is ca. 5.5yrs after construction commences

(ca R1million for HoldCo & Trust))

• IDC pays for training of the Director nominated by the Trust

KAXU

Challenge: Population Density and Distance

KAXU


Population = 9 000

KAXU

90 km


Population = 11 000

Benefits to Community: SED

ZARSED = kWh GenerationA x Tariff x % SED Commitment

SED Commitment = 1% min

Tariff = Bid Price x FX adjustment at FC x Inflation factor

GenerationA = Installed capacity x capacity factor x hours

SED annual amount ~ R12million

Population of 11 000

Equates to > R1 000 per person

Benefits to Community: Dividends

ZARDIV = Dividends distributed x % Shareholding x % Trickle

% Trickle = 15% to achieve vesting in 17 Years (P90)

% Shareholding = 20%

Dividends distributed = function of performance, ~ 12% IRR

Kaxu SED annual amount ~ R12million

Population of 11 000

Equates to > R1000 per person per annum

Community dividends and SED Cash flows

2010 2011 2012 2013 2014 2015 2016 2017

Final Compl.CODFC & NTPBid Submit

1st DividendAwardDev Agr.

SED Assess Special DistributionFunding 1st Dividend

1st AGM & Register 2nd AGM 3rd AGM

TRUST ACTIVITIES

PROJECT ACTIVITIES

Challenge: Timeline

Challenge: Co-ordination

4 Projects Konkoonsies 10MW PV

KaXu 100MW & Xina 100MW

Gamsberg Mining

Social and Labour Plans (SLP)

SED & ED Plans

5 CommunitiesPofadder; Pella; Onseepkans

Witbank; Aggeneys

Community Development Plan (CDP)

Khai Ma MunicipalityBasic Service Delivery (BSD)

Integrated Development Plans (IDP)

Spatial Development Framework (SDF)

Local Economic Development (LED)

DoEProcurement rules

Reporting & Penalties

Khai Ma Business Forum

STAKEHOLDERS




Gamsberg Mining


SED & ED Plans


Witbank; Aggeneys








Development

Co-ordinating Forum

DCF


Funding

Consultation

Advising

Monitoring

Reporting

STAKEHOLDERS PROCESS

Communication




Gamsberg Mining


SED & ED Plans


Witbank; Aggeneys








Development

Co-ordinating Forum

DCF


Social

Investments

Business

Investments

Enterprise

Development

Infrastructure

Investment

Education & Skills

Development

Funding

Consultation

Advising

Basic Service

Delivery

Monitoring

Reporting

STAKEHOLDERS PROCESS OUTCOMES

Communication

Challenge: Concentration risk & saturation

Courtesy: Technoserve

>50% in NC

Observations

• Shareholding and co-ownership is an emotive topic because of historical injustice

• But is a minority and “passive” ownership of a huge CSP facility really what communities expect?

• Or do citizens need jobs, infrastructure and development of the small and medium enterprises where the community has a majority stake and meaningful contribution.

• It was illustrated that the dividends of a 20% stake equates to a 1% SEDcash flow.

• “Intention is to provide a mechanism for the community to have control of its future, to make decisions about its needs and to have resources to implement the decisions.”

• Ownership in the project SPV may not be the ideal mechanism.

• SED obligations provide a more secure flow of income to achieve community development, because it is calculated on revenue, not profit distribution.

Closing

Considerations

• Trusts only be formed and registered after bid award

• Already established Trusts be used for “multiple” projects in the same area

• Community ownership requirement be replace with SED obligations and “standardised” for all projects

• A Model be developed and implemented for “Community Development Forums”

The success and impact of socio economicdevelopment will ensure the continued supportand favour from government and the public.

We cannot allow this opportunity to fail.

Community Development Plans

Health

• HIV/AIDS awareness Programme;

• Drugs & Alcohol abuse

• Rehab centres

• Home Based Care

Education

• Bursary Scheme

• Upgrading of Schools

• Building Libraries

• Sponsoring extra Lessons

• Pre-school centres

•

Social & Welfare

• Moral Degeneration

• Food Gardens & Parcels

• . Drop-in Centres

• Bursaries & salaries for social workers

Environment

• Environmental Awareness

• Soil erosion and flood management

• Waste Management

Arts, Crafts, Sports & Culture

• Build arts & craft centres

• Build recreational centres / facilities

• Build sports ground for various sports codes

• Provide sponsorship for various sports codes

Infrastructure

• Build storm water drainage

• Maintaining of access and street roads

• Soil erosion & flood management control

• Water & Sanitation Projects

Tourism

• Outline tourism opportunities that may be identified and carried out in the area if such opportunities exist.

Agricultural Projects

• Outline agricultural opportunities that may be identified and carried out in the area if such opportunities exist.

The Industrial Development Corporation

19 Fredman Drive, Sandown

Telephone (011) 269 3000

Facsimile (011) 269 2116

E-mail [email protected]

Thank You

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