German financing of energy projects in the region: The role of Renewables and

CCS

Harald GerdingDirector KfW – German Development Bank

Office Pretoria

244

60 years of KfWFinancing with a public mission

• Promotional bank of the Federal Republic of Germany

• Founded in 1948 • Shareholders: 80% Federal Republic,

20% federal states• Headquarters: Frankfurt am Main

Branches: Berlin and Bonn• Representative offices: more than 70

worldwide• Balance sheet 2010: EUR 441.8 billion• Financing volume 2010: EUR 81.4 billion• Around 4,530 employees (2010)• Best rating: AAA/Aaa/AAA

322

A bank with a wide array of functions

International business

Promotion construction

of new housingand modernisation

as well as education

Promotion SMEs, business founders,

start-ups

Financing municipal infrastructure projects and global loans

Germany/Europe agency business for Federal Government

We promote Germany We ensureinternationalisation

We promotedevelopment

Promotion of environmental and climate protection

Business AreaMittelstandsbank

Business AreaPrivatkundenbank

Business AreaKommunalbank

Business AreaInternational Export and

Project Finance

Business Area Promotion of

Developing and Transition Countries

Domestic promotion

Some Key Figures: KfW ´s Development Cooperation Activities

Portfolio 2010 EUR 25.5 billion1,800 projectsin over 100 countries

EUR 5.2 billionprojects with527 enterprises in85 countries

Commitments 2010 EUR 4.5 billion* EUR 1.2 billion

Origin of funds Budget and marketfunds

Market funds

Number of employees

577 436

*of which EUR 2.8 billion KfW funds

Budget funds (2010: EUR 1,430 million)

Financial Cooperation (FC)

2. FC development loans

2.1 Mixed financing

2.2. Composite finance

2.3. Reduced-interest loans

Budget funds: EUR 215million

KfW funds: EUR 1,927million

3. FC promotional loans

3.1 Investment loans

3.2 Project finance

EUR 913 million

KfW funds (2010: EUR 2,840 million )

1. Budget funds only

1.1. Grants: EUR 1,036 million

1.2 Loans at IDA conditions:EUR 152 million

1.3 Loans at FC standardconditions: EUR 27 million

Concessional finance

Financing Instruments of KfW Entwicklungsbank

FC commitments in 2010 by origin of funds and sector

Financialsector18%

Socialinfrastructure

21%

Economicinfrastructure

47%

417

643

153

95

112

602

147

756

306

291

95

13

58

3

13

Asia andOceania

Sub-Saharan

Africa

Europe andCaucasus

North Africa/ Middle

East

LatinAmerica

Budget funds KfW funds Mandates (*)

(*) Excluding intermediary funds in 2010 (EUR 10 million)

1. Poverty Reduction, particularly in Subsahara-Africa

- Basic Social Security, food security (population growth!)

- Major potential through use of ressources: land/agriculture, renewable energies (water, geothermal, solar, wind), energy and industrial commodities

2. Climate Change

- Mitigation, Adaptation and Management of climate risks

- intelligent, responsible use of different financing instruments

3. Privat Sector Promotion

- Significance of SME

- Benefiting from the synergies of KfW Bankengruppe: internationally unique spectrum of intertwined special financinginstruments.* FC: financial system development, part. microfinance and local

currency financing;

* DEG: SME promotion, local currency financing, technology transfer

OutlookGlobal Challenges and Developmental Trends

Trends / global challenges

Facts and Basics –Climate Issues / CO2 Emissions in SA

� 12th biggest CO2 Emitter in absolute terms, with 9,2 t per capita SA is top of developing countries(Germany 10 t, China 4,5 t, Brasil 1,8 t)

� Low energy prices have attracted energy intensive industries (Steel, Mining, Sasol etc)(45 % of electricity production for Industrial purposes)

� Old technologies (Demothballing of old power plants)

� 75% of primary energy need in SA coal based, more that 90% of electricity production

� 40 % of Africa's electricity production is consumed in South Africa

The new area of cooperationFocal Area on Energy and Climate

• In 2008, the German and South African Governmentsdecided to establish a new Focal Area on Energy and Climate in their bilateral cooperation.

• The Focal Area consists of 4 major components :

• Renewable Energy • Energy Efficiency• Mitigation and Adaptation• Green Jobs as a single component and cross cutting issue

• On a Regional Level , global public goods (Climate change, Clean Energy) is the main focus

LOHEPS

Caprivi Link Interconnector

SHS Rural Electrification Eastern Cape

Walvis Bay

MavuziChicamba

LunsemfwaItezhiTezhi

Kariba North BankRuacana

Inga

Ohorongo

Study Zambezi

Eskom CSP Plant Upington

Van Eck

Lesotho Highlands

Windpower

Hydropower

Geothermal

Solar (PV/CSP)

Transmission

LEGEND

Biomass

In preparation

< 200 MW

200 -1.000 MW

>1.000 MW

Energy Efficiency

Regional Projects

- NEPAD IPPF

- SADC PPDF

- Creditlines: DBSA, IDC

- Waterfacility SADC

Our activities in Southern Africa:Focus on Renewables

CCS - The Route to MaturityQuestions

Coal Dependency (in SA) will prevail, therefore CCS is definitely an option to explore

●What does it cost (financial risks)

● How sustainable is it (technical risks)

● How fast is it available (timing risks)

● How does the public feel about it (social risk)

● Where is it applicable? (geological limits)

CCS – The Route to MaturityImpact on Power Plant Efficiency

35

40

45

50

55

46%

53%

32- 34%

39- 43%

Efficieny Loss

through

CO2-Capture

today 2020

Efficieny Loss

through

CO2-Capture

Source: VGB PowerTech, Cooretec Documentation

Source: CCS: Assessing the Economics, McKinsey 9/2008

CCS - The Route to MaturityCosts

CCS - The Route to MaturityDownsides vs upsides

Upsides: ● 61% of SA emissions capturable● 150 gigatons of storage capacity identified in SA● Solution for a coal-based economy such as SA● Highest leverage options for CO2 avoidance

Downsides: ● Higher plant costs ● Power plants less efficient● Higher CO2 emissions (if CCS compatibility shall given)● Only makes sens as an joint international initiative due

compatibility issues

Renewables vs. CCS ??

● Coal Dependency (in SA) will prevail, therefore CCS is definitely an option to explore

● (Important) technical questions have to be answered, and the public opinion needs to be taken into account (nuclear energy debate!)

● Then CCS might be a medium term answer, but as a transitional technology

● Parallelwise still invest in the development of the Renewables, they will be the long term answer to CO2 emissions

=> So it is CCS and Renewables

German financing of energy projects in the region: The role of Renewables and

CCS

Thank youHarald GerdingDirector KfW – German Development Bank

Office Pretoria

Backup: KfW ´s Portfolio in SA

What we do in RSA. KfW - Project overview (1)

� Rural electrification in Eastern Cape (Solar Home Syst ems)� RSA Partner: DME, Commitment: approx. 25 m EURO (grant)

� Solid Waste Management Systems with municipalities(Rustenburg, Mangaung/Bloemfontein, uMgungundlovu, Cape Town) � RSA Partner: CoGTA, Commitment: 6 m EUR (grant)

� Energy efficiency: Financing of SWH program and other activities in Municipalities� RSA Partner: DBSA, Commitment: 50 m EURO (loan) – funds

from the BMU (German ministry of environment)

What we do in RSA. KfW - Project overview (2)

� Private Sector Development through IDC: Financing of Renewable Energy and Energy Efficiency in SME � RSA Partner: IDC, Commitment: 48 m EURO (loan) and 2.2 m

EURO (grant)

� CSP Financing, co-financing of Clean Technology Fun d� RSA Partner: Eskom, Commitment: approx. 100 m EUR (loan)� ESKOM CSP Plant in Upington (with EIB, AFD)

� SAPP Financing through DBSA into the SADC region� RSA Partner: DBSA, Commitment 65 m EURO (loan)� Projects financed in Namibia, Zambia and Tansania

What we do in RSA. KfW - Project overview (3)

� Public Transport – Bus Rapid Transit System� RSA Partner: BRT Johannesburg, Implementing agency:

City of Joburg and GTZ, Commitment: 2,0 m EURO (grant)

� Non-Motorised Transport� RSA Partner: DEA and cities of JoBurg, Cape Town and

Polokwane, Commitment: 5,0 m EURO (grant)

� Mooi - Mgeni Transfer scheme II / Umgeni Water � RSA Partner: TCTA, Financing to secure the water

supply of greater Durban / eThikweni area; Commitment: 45 m EURO (loan)

What we do in RSA. KfW - Project overview (4)

� Regional Project: Financing of Renewable Energy and Energy Efficiency in SAPP (Southern African Power Pool) � RSA Partner: DBSA, Commitment: 65 m EURO (loan)� Projects financed in Namibia, Zambia and Tansania

� Regional Water Infrastructure Fund / SADC� Partner: SADC with DBSA as Agent, Commitment 10 m EUR� Projects with regional impact / transboundary cooperation

� SADC PPDF / Project Preparation and Development Fund� Partner: SADC with DBSA as Agent, Commitment 4.8 m EUR� Project Preparation in Infrastructure (energy, transport, water etc)

KfW - Cooperation with the European DFI ´s AFD and EIB

� MRI – Mutual Reliance Initiative as the umbrella

� TCTA / Mooi Mgenei Water Scheme � Total Volume 200 m EUR shared amongst EIB, AFD, KfW

� ESKOM Financing through CTF� Wind and CSP Technology Roll Out� Total volume 1 bn USD

� SAIF – South African Investment Facility � Discussions with NT� EU grant funding as incubator

German Technical Cooperation GIZ in the Focal Area

� Promotion of Renewable Energy � IPP Unit in DoE� Grid and System Integration of RE � Technology cooperation / Green Jobs

� Promotion of EE� Capacity Building for policy implementation � Development of ESCO markets� EE in buildings / energy auditor training

� Mitigation and adaptation� DEA Climate support programme� MRV pilot programme� Efficient refrigeration and cooling systems in industry

giz