IFC - ENERGY · 2018. 2. 12. · 2 A Leading Investor in the Emerging Markets Power Sector 1...

Helsinki

December 14th, 2017

IFC - ENERGY

1

1. Overview of IFC’s Energy business

2. Power Sector Trends

3. IFC's Energy Strategy

4. Example 1: A WBG approach to Scaling up Solar

5. Example 2: Intervening Early to Help Create Market IFC - InfraVentures

6. Example 3: Disruptive Opportunities – Offgrid Solar

TABLE OF CONTENTS

2

A Leading Investor in the Emerging Markets Power Sector

Overview of IFC’s Energy Business1

• IFC’s FY2017 Power gross commitments amounted to US$2.5 bn (12.4% CAGR since 2012)

• IFC’s FY2017 Renewable Energy* gross commitments amounted to US$1.2 bn (48% of IFC Power)

IFC Invests in:

• Generation – 43,000+ MWs to date

• Transmission – 13 investments to date, including financing of greenfield private transmission assets

• Distribution – 37 investments to date, reaching > 164 million customers

• Early stage start ups in renewable energy, distributed generation and battery storage

• Financial intermediaries (banks, PE funds) who reach smaller assets/companies

• Platforms, HoldCos and sub-sovereign entities with regional or global footprint

3

IFC has Reoriented its Strategy Towards Renewables


Note: IFC year-end is

June 30th

IFC Power sector portfolio shares by subsector and region

(FY07 to FY16), % portfolio share

Gas

Generation

T&D

Other

20162007

Renewable

Generation

Other Fossil

Fuel Generation

$5.8bn$1.8bn

2007

$1.8bn $5.8bn

2016

Power is the largest

real sector

component of IFC’s

portfolio, averaging

$2.2bn in

Commitments +

Mobilization from

FY12-FY16

4%

12%

8%

56%

26%

16%

28%

14%

12%

9%

20%

21%

21%

35%

19%16%

17%

14%

15%

20%

8%12%

Expected change

in portfolio share

Sub-Saharan

Africa

South Asia

Middle East and

North Africa

East Asia and

the Pacific

Europe and

Central Asia

Latin America and

the Caribbean

4

Diverse Set of Companies Trust IFC as a Global Partner with Local Presence


Note: IFC year-end is June 30th

• Multinational companies comprise half of IFC power

business, such as:

Long-term partnerships with key strategic players

Work closely with renewable energy companies

expanding into emerging markets

Help companies access capital at project, holdco and

corporate levels

• “Local” companies are becoming regional / global and a

larger share of IFC business on the back of market reform.

IFC engages in the following ways:

Power companies investing in the ‘home’ country or

expanding into other emerging markets

Local industrials expanding into the power sector

• IFC also works with emerging renewable energy

companies

Supporting newly started local renewable energy firms,

as they begin to build their first projects

Players that are innovating in distributed energy,

storage, and other offgrid solutions

• IFC works with sub-sovereign entities and governments

to create vehicles for private participation

55

IFC’s Value-Add in Power Transactions


From Patient Equity to

Long Term Debt Sector Expertise

Country Risk

Mitigation

Environmental

& Social Risk

Management

Advisory Services

EQUITY

Up to 20% in project or

company

Start-up equity / co-

developer (IFC

InfraVentures)

SUB-DEBT

Terms tailored to meet

project needs

DEBT

Long Maturities Tailored

to Project Needs

Fixed/Floating Rates,

Local Currencies

Flexible Amortization

Profile

Syndication/Mobilization

from commercial banks

and DFIs

Deep sector

knowledge gained

from experience

In-house

Engineers:

In-house Market

Expertise

In-house

Regulatory

Expertise

Government

Relations

Neutral broker

Role

World Bank

Synergies

World Bank

Guarantees

MIGA

Coordinated

approach

across WBG

services

• MIGA

Political

Risk

Insurance

(PRI)

• IDA Bank

Guarante

e

Environmental

and Social Best

Practices

Equator

Principles

Modeled after

IFC Standards

Governance

Private sector

perspective to

governments

Introductions +

matchmaking

Cross-border support

+ Sector knowledge

Access to Donor

Funding/Con-

cessionary Support

Coordination/Carbon

Finance

Programs to assist

client, including:

Local Supplier

Development,

Corporate

Governance,

Community

Development

Funding

66

IFC is intervening with different tools and engaging in projects very early on


1 As reported by the World Economic Forum in Dec 2016

Sector wide engagements across the value chain

Partnerships with key stakeholders including Goverments

Close cooperation with the World Bank

Multiple products offered and processed in parallel:

• for IFC’s own account: senior debt, mezzanine financing, equity, hedging instruments

• mobilization products: underwriting, B loans, parallel loans and co-investment funds

• obtaining concessional financing from multi-donor sources, including soft loans, guarantees, equity and grants

US$150 million fund for early stage development risk in infrastructure projects

Up to $8 million of contributions to development costs per project

Conversion of development costs into equity at Financial Close

Upstream engagements Early stage equity (InfraVentures) Debt, Mezz. and Equity Financing

Improving the enabling environment

Developing Projects Closing Projects

Upstream structuring of

transformational projects (e.g.

sector reform in Nigeria)

IFC is co-developing a landmark

hydropower project in Cameroon

with EDF

Circa US$2.5 billion of financing

committed in the power sector in

FY17

77

IFC is at the Forefront of Market Creation in the Power Sector


IFC has developed market creation capabilities that it will further leverage

Procurement

advisory

Solar PV

aggregation

InfraVentures

Transmission

&

Distribution

▪ Continued close coordination

with World Bank, government

and other actors is necessary in

upstream interventions

▪ Market creation requires

sustained efforts over extended

periods of time with uncertain

outcomes

Energy storage

▪ Jordan’s Seven Sisters project aggregates

7 small solar power projects into a

single, standardized financing structure

▪ Scaling Solar in Zambia aligns a “one-stop-

shop” aimed at creating bankable utility-

scale solar power projects

▪ Provides project development support

and financing to 24 projects, mainly wind

and hydro

▪ Established a bankable PPA regime and

energy auction process in Argentina

▪ Multiple investments in private

distribution; supported distribution

privatization; project financed private

transmission

▪ Building up capabilities in new market

segment through venture capital

investments


▪ Enables renewables penetration and

access

8




4. Example 1: Scaling Solar



TABLE OF CONTENTS

99

The Power Sector is Experiencing a Profound Transformation, driven by shifts in

technology and business models

Power Sector Trends2


Shift in generation

away from fossil

fuels to

renewables

▪ Power generation is shifting away from fossil fuels to renewables, as solar PV and wind have reached price parity with new fossil fuel capacity in more than 30 countries1

– Renewables made up more than half of cumulative planned capacity additions by end of 2016

Increasing

importance of grid

flexibility and

resiliency

▪ Grids must be made more flexible and resilient via new investments and technologies to accommodate new renewables and increase efficiency

– Global smart grid market is expected to surpass $60bn in 2020; although majority is expected to be in OECD, investments in emerging markets are expected to follow

Rapid growth of

distributed

generation

▪ In regions where the grid is unavailable, unreliable or the cost of connection

and power is high, there will be continued growth in distributed generation

– Distributed generation accounted for $46bn of investment in 2015

Increase in new

business model

innovations

▪ Innovative businesses that deliver power as a service directly to consumers

are growing (e.g., Mobisol which provides solar home systems via a PAYGO

model) and are increasing their market share of consumer spend on power

at the expense of traditional utilities.

Shift in capital

flows to key sub-

sectors and

emerging markets

▪ Capital flows are shifting to renewables, distributed generation and to select emerging markets, creating more competitive capital markets

– Lower cost capital for power sector investments is increasingly being provided by local and international commercial banks, regional development banks, export credit agencies, and bilateral financing agencies – often via auctions

SOURCE: EIA, GTM research, WEF, World Energy Investment, UNEP's 10th Global Trends in Renewable Energy Investment,

Bloomberg New Energy Finance

10







TABLE OF CONTENTS

1111

IFC’s Energy Strategy for the Next 3 Years in this Changing Landscape

IFC’s Energy Strategy3

Our objective is to…

Increase access to affordable, reliable and modern energy services by being the preferred provider of capital

and expertise to investors and countries seeking to capitalize on the expected benefits of the technological

improvements and regulatory best practice

Short- to medium-term

investments and market

enablement in key sub-

sectors:

a. Gas

b. Utility-scale

renewables

c. T&D investments

1

1a

1b

1c

Disruptive opportunities to

help investee countries and

corporate clients adjust to

technological change

a. Storage

b. Distributed generation

c. IT innovations in utilities

3

3a

3b

3c

Longer-term market creation that

opens up the power sector for

private investment and develop a

longer term pipeline through:

a. Country-level transformation

b. Procurement advisory

c. Financial intermediation

d. Project preparation at scale

2

2a

2b

2c

2d

To achieve this, we will develop a portfolio-approach that incorporates…

IFC 1.0 / 2.0IFC 3.0

Responding to Technological Changes Through Investments, Market Creation and Innovation

▪ Investment officers

▪ C3P

▪ WBG


▪ Advisory services

▪ FIG

▪ WBG


▪ Advisory services

▪ Venture Capital

▪ WBG

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TABLE OF CONTENTS

13

• Scaling Solar is a “one-stop-shop” for Governments to rapidly mobilize competitive

privately funded grid connected solar projects within 2 years.

• It brings together several World Bank Group services under one engagement:

Advice to assess the right size and location for power plants.

Simple and rapid tendering to ensure strong competition.

Standardized, balanced project documents to speed up procurement.

Competitive financing and insurance available to all bidders.

Risk management and credit enhancement products to deliver lower tariffs.

The Opportunity

The Product

Creating Markets: Scaling Solar

• Utility-scale solar PV can now be built at or below grid parity in Africa

• Africa benefits from excellent irradiation levels, yet many countries depend on fossil fuels

• Solar can be built in as little as 6 months

The Innovation

• One packaged solution for Governments and Developers

• One standardized suite of documents creating a large scale market

• Coordinated delivery by the WBG

The Results

Financing signed for Bangweulu project in Zambia (Oct 2017), Scaling Solar’s first implementation

globally. Record low tariff of USc6.02/kWh (flat, over 25 years) => cheapest solar power in Africa

Underway in 4 countries: Zambia, Senegal, Ethiopia and Madagascar

Scaling Solar4

14

The Bangweulu project (54 MWp) is the first project to be financed via the Scaling Solar program,

an innovative WBG approach to rapidly mobilize competitive privately funded grid connected solar

projects through a “one-stop-shop” approach.

Auction process produced a winning tariff bid of USc6.0/kWh, flat for 25 years, the lowest utility-

scale solar PV tariff seen in Sub-Saharan Africa to date.

Winning consortium (Sponsors) are: Neoen (55%), First Solar (25%) and Industrial Development

Corporation of Zambia (20%).

Case Study: Zambia – a record low tariff for solar power in Africa

4 Scaling Solar

MLAOctober 2017

A Loan: $13m

Blended Finance: $13m

Parallel Loan: $13m

Swap: $3m

Zambia

Scaling Solar Zambia

Bangweulu Project

WBG Role (IFC Investment, IFC Advisory, World Bank)

Providing advice to assess the right size and location for

power plants.

Designing simple and rapid tendering to ensure strong

competition.

Developing standardized, balanced project documents to

speed up procurement.

Competitive financing available to all bidders (IFC MLA)

Providing risk management and credit enhancement products

(WB PRG) to deliver lower tariffs.

Results

The project is the first Scaling Solar project to be

committed, with commissioning expected in

September 2018.

Further Scaling Solar projects / tenders coming

down the track:

Zambia: Enel (34 MWp) + 300 MW (Round 2)

Senegal: 60 MWp

Madagascar: 25 MWp

Ethiopia: 2 x 125 MWp

15





5. Example 2: Intervening Early to Help Create Markets - IFC InfraVentures


TABLE OF CONTENTS

16

Creating Markets: IFC InfraVentures

Intervening Early to Help Create Markets - IFC InfraVentures5

Scatec Mali - Renewable Energy Promotion in

a Fragile and Conflict-Affected Country

Co-development of grid-connected renewable

energy source with Scatec Solar. IFC holds 30%

of the equity

US$52.6 million - 33MW Solar PV in Segou,

Mali

Increase access to much needed power in

fragile and conflict-affected state

The plant will reduce dependence on

expensive diesel and inefficient HFO plants,

while providing affordable energy during the day

First renewable IPP since the 2012 coup d’etat,

paving the way for further private investments in

the power sector

Help redirect energy subsidies to be utilized for

other social programs in need of funds

17





5. Example 2: Intervening Early to Help Create Markets - IFC InfraVentures


TABLE OF CONTENTS

18

Mobisol

Disruptive Opportunities – Offgrid Solar6

A Leading Offgrid Player in East Africa

A market leading pay as you go solar energy service

(“Paygo Solar”) company operating in East Africa

(Tanzania, Rwanda, Kenya), providing solar home systems

that are a clean alternative to unhealthy,

environmentally harmful and expensive fossil fuels.

Business model: combines solar energy with an affordable

36 month payment plan via mobile phone, comprehensive

customer service and innovative remote monitoring

technology.

Mobisol solar home systems provide enough electricity to

power bright efficient LED lights, radios, mobile phones,

TVs, DC fridges etc. The systems are powerful enough to

run small businesses enabling entrepreneurial customers

to create incremental income.

So far, Mobisol has installed over 70,000 solar home

systems on households and businesses in East Africa, thus

enabling approximately 350,000 beneficiaries to access

clean, affordable and reliable solar energy.

This innovative payment approach keeps the cost of an

entry-level Mobisol system similar to what the typical

customer spends on kerosene, candles, batteries, and

mobile phone charging while offering superior value.

IFC Invesment

Along with FMO, IFC co-invested with its GP

Investec Africa Private Equity Fund in a EUR45M

Series C growth round in convertible preferred

equity. IFC and FMO contributed EUR5.4M and

EUR9M respectively to the round.

The financing will help accelerate Mobisol’s growth

in existing markets in Rwanda and Tanzania, and

to support its expansion into Kenya.

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