IFC helping the cement industry to implement green initiatives
Sushil Anand February 2015
Senior Investment Officer
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Supporting regional/global players’ investment primarily in high-risk countries and partnering with
emerging players developing regionally
Focusing on frontier markets which are sufficiently large and are underserved
50% of IFC’s portfolio is in frontier countries
Promoting high Environmental and Social Standards
Improving Energy Efficiency and Reducing CO2 Emissions
Off Balance Sheet solutions available
Deal selection based on project competitiveness
Lowest delivered cost producer
IFC sector and regional exposure and IFC additionality
Favoring equity and quasi-equity in cement investments –
Entry price is important
IFC’s Strategies and Priorities in the Cement Sector
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IFC is a Key Partner and Financier in the Cement Sector
FY 2013 Cement Portfolio By Region
Cement Track Record:
Cumulative Investment: $4.0Bn
Outstanding Amount: $1.0Bn
32 projects in 26 countries
In-house industry expertise
Advice sought by key industry stakeholders
Long experience financing cement projects
worldwide
Leader in advocating more climate friendly
production processes (including blended
cement)
FY 2013 Cement Portfolio by Clients
Local, 47Global,
53
SS Africa, 18%
S Asia, 14%
MENA, 26%
LAC, 4%
ECA, 22%
E Asia, 16%
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Selected Cement Transactions
Turkey
Sanko Cement
$175 million
A/B Loan
Global
Italcementi
$200 million
Loan, Equity
Ethiopia
Midroc
$55 million
Loan
Kazakhstan
Vicat/Jambyl Cement
$185 million
A/B Loan, Equity
Africa (7 countries)
HeidelbergCement-
Algeria
ACC Cement
$45 million
Loan
Yemen
AYCC
$125 million
A/B Loan
Albania
Fushe Kruje / Seament
$30 million
Loan
Bosnia and Herzegovina
Lukavec/ FCL
$12 million
Loan
Egypt
Titan
$120 million
Equity
Ghana
DiamondCement
$6 million
Loan, Equity
Dominican Republic
Domicem
$56 millionLoan
Trinidad and Tobago
TCL Group
$37 millionLoan, Risk Management
Bangladesh
Lafarge Surma
$60 million
A/B Loan, Equity
China
Shanshui Cement
$58 millionLoan, Equity
China
TianruiCement
$71 millionLoan, Equity
India
OCL India Ltd.
$50 million
Loan
Philippines
Holcim
$27 million
Loan, Equity
Vietnam
Nghi Son Cement (Taiheyo)
$56 millionA/B Loan
China
Anhui Conch
$86 millionLoan
$250 millionLoan, Equity
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IFC Climate Approach to Cement
IFC is willing to support sustainability agenda and specifically the minimization of its environmental
footprint
With financial crisis and economic slowdown putting a strain on spending, and IFC proposes off-
balance sheet structures to limit financial impact while accelerating sustainable programs
“Green” Investments are often based on solid business rational with good paybacks – e.g., 3 to 7 years
(depending on technologies)
Four specific technologies are considered:
• Waste heat recovery: Uses hot gases from the clinker cooler or pre-heater to heat a liquid and
generate steam, to generate in turn electricity for powering the cement plant.
• Alternative Fuel: Uses waste from municipality, from agro-industry, tires… to generate derived fuel
to be burned in the kiln or pre-calciner instead of fossil fuel.
• Solar: Uses solar solutions (photovoltaic or others) to generate electricity to power cement plants.
• Wind: Use wind turbines to generate electricity and power cement plants.
Waste Heat Recovery
Rotary Kiln
PH Boiler
AQC Boiler
Steam Turbine Generator
Condenser
NSP -Preheater
High Pressure Steam
FeedwaterKiln Exhaust
Clinker
Cooler Air
AQC
Clinker
Kiln Exhaust
Cooling Tower
Potential to generate 20% to 30% of plant power requirements (reducing purchased/captive
power needs)
Reduces operating costs
Protects against rising
electricity prices
Enhances power
reliability
Improves competitive
position
Lowers specific energy
consumption, reducing
overall greenhouse gas emissions
IFC provides consultant for pre-investment audit
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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Country WHR Market Analysis
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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WHR Investment Potential
0 100 200 300 400 500 600 700 800 900 1000
South Africa
Nigeria
Philippines
Pakistan
Brazil
Thailand
Egypt
Mexico
Vietnam
Turkey
India
MWe
Existing WHR Capacity WHR Capacity Potential
Estimated investment
potential, $ mln
$1,400
$400
$480
$490
$490
$90
$430
$160
$170
$200
$170
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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WHR Project Examples
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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IFC Client: Holcim (Apasco, Mexico)
Advisory Services: Pre-feasibility Study,
2011
Assessment of WHR potential;
identification of energy efficiency
investment opportunities
WHR Type: conventional Rankine
cycle system with a direct contact
condenser and cooling tower
2.5-3.8 MW of WHR capacity
Total cost ~$10-15 million (2011
numbers, currently lower)
IRR 14.2-17.5%
WHR Project Examples
IFC Client (China) – Financing Through FI Model
7.5 MW of WHR capacity
Total cost $7.9 million; ROI 25.2%
Electricity generation
cost US ¢ 2/kWh
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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Cement Plant
Commercial Bank
Design &
engineering
Equipment
WHR Design
Boiler Supplier
Turbine Supplier
IFC
WHR Project
Construction
and
InstallationConstruction Co
Loss
Sharing
Facility
Advisory
Services
Build,
Own,
Operate
5 year
loan
Monthly
loan/
Interest
repayment
Equipment
WHR Project Examples
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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Cement Plant
Design &
engineering
Equipment
WHR Design
Boiler Supplier
Turbine Supplier
IFC
Construction
and
InstallationConstruction Co
Equipment
IFC Client: Cimko (Turkey) – Direct IFC Financing
FY 2014
5.5 MW of WHR capacity
Total cost $12.5 million
Annual savings ~$3.1 million
Simple Payback ~4 years
Part of a larger cement resource efficiency project
- IFC total financing $40million
Financing
WHR ProjectBuild,
Own,
Operate
Off Balance Sheet Financing for Waste Heat Recovery/RDF
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
IFC and another co-investor form SPV, with or without cement plant owner’s participation. Holcim
could consider appointing right people to run operations
SPV can own 100% of other SPVs for individual projects
• IFC exit through motivated call to be considered – securitization possible for large program
SPV can finance waste heat recovery, e.g. output price set as a discount to market prices, guarantee on
heat supply to be discussed
SPV can provide RDF (need comfort on supply) – again, RDF price set as a discount to primary fuel
• RDF price related to amount of tipping fee and scope/quality of the waste stream to provide
adequate risk adjusted returns
• Can also create and operate a EU compliant municipal waste landfilling site but not recommended
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WHR Potential Structure
Off-Balance Sheet Finance Model for WHR Heat supply agreement: Cement Plant supplies heat to Power Co (at a cost to be defined).
This contract can include liquidation damages in case of significant drop of heat supplied
Off-take agreement: Cement Plant purchases power from Project Co at a discount to market
Project Co
Cement Plant
Strategic partnersInvestors
Design &
engineering
Equipment
Heat Supply
Agreement
Off-take
agreement
Operations
Services
Financing
#1
#2
#3
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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Waste-Derived Alternative Fuel
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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Waste derived alternative fuels (WDF) sources
Solid waste streams – to make Refuse Derived Fuel (“RDF”) or Solid Recovered Fuel (“SRF”)
RDF is a generic term; SRF higher quality, meets a specification
MSW
Industrial waste
Construction and Demolition (C&D) debris
Auto shredder fluff
Agriculture and Forestry Residues
Other alternative fuel include: End of life tires and Sewage sludge
RDF has been utilized in the cement industry for many years - Challenges
Inconsistent fuel quality
Low calorific value
Contain excessive pollutants such as chlorine
Waste-Derived Alternative Fuel
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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IFC has committed over $135 million in 10 transactions in Solid Waste over the last 10 years
7 transactions at project level for a total project cost of $283 million
4 transactions at corporate level, supporting company growth and expansion (e.g. ~10% revenue
growth for Estre Ambiental)
Additionally, IFC’s Advisory Services has conducted various PPP processes in Solid Waste for a total of
$61 million in project cost
IFC’s experience cuts across all subsectors, from tradition Solid Waste Management to Recycling & Waste-
to-Energy
The focus has been on middle-income countries due to evolved markets, regulatory framework and higher
private sector participation
China, Turkey, Brazil, Mexico, Romania
Others currently being targeted include Indonesia, Philippines.
Waste-Derived Alternative Fuel
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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RDF – processing MSW into higher calorific value (CV) fuel for use in cement kilns, EfW, etc.
Segregate high calorific fraction of waste, consisting largely of paper/cardboard., plastics, wood, and
organics
Cement kilns can substitute up to ~20% without too much concern regarding RDF CV and moisture;
> 20% becomes an issue.
Usually need to dry RDF if using the organic fraction and you need high CV, low moisture
Bio Drying
Solar drying
Thermal Drying
Sludge Derived Fuel – Sewage sludge is acceptable in calorific value if moisture can be removed
Alternative Fuel Structure
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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Project Co Cement Plant
Strategic partnersInvestors
Concession with
municipality or
simply supply
agreement
Financing
Municipality
Waste Collection
Cos
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Rest of waste to landfield
Sale of RDF
Off-take
agreement
Alternative Fuel Project Structure Waste supply arrangement: SPV enters into concession with municipality or simply enters into
waste supply agreements with either municipality directly or private waste collection companies
Sale of RDF - Off-take agreement: Cement Plant purchases RDF from Project Co at a discount to
market
$900m invested - 60 deals across the entire Solar value chain (2007-2014)
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
Solar PV Sector knowledge and a track record of more than 60
investments across the whole solar value chain
• More than $660m committed in solar energy assets
• Close to 1GWp in generating capacity
• Close to $230m committed in manufacturing projects
• Financing of first-of-a-kind captive power projects
Established relationships to industry’s top tier suppliers,
developers, operators, service providers
Leading financial institution in emerging markets
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44
12
60deals
Renewable Captive Use
Power Generation
Components & Systems
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Captive Solar PV Solutions
Commercial and Industrial installations include photovoltaic (PV) power plants ranging from a few hundreds kilowatts to a few megawatts
Have a predominant self-consumption character
Can be rooftop or ground mounted
Take no longer than 6 months to build and operate
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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10 MWp PV Plant example
Generic cement plant, 2 million tons p.a. facility
Power needs 25-30 MW, power consumption 198 GWh
Land requirements: 20-30 ha
Electricity production: 18-24 GWh/year or 9-12% of
total power needs
Avoided emissions 15,000-20,000 tCO2e p.a.
SPV CAPEX ~$15 m; Unlevered project IRR 13-15%
Cement company savings ~$1.2 m pa (off-balance sheet)
Solar PV Potential Structure
On-balance financing yields lower cost of electricity but requires initial capital expenditure ($1.5m/MW)
Off-taker may prefer Power Purchase Agreements (PPA) sometimes with slightly higher price
Off-balance sheet financing offers a flexible solution to transform CAPEX in OPEX
IFC can offer to structure off-balance sheet financing of renewable energy assets by leveraging existing partnerships with leading IPPs and bankable top tier system suppliers. Holcim financial contribution to the Project Co is not a requirement
Strategic partnersIFC/Investors
Off-take
agreement
Financing
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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Project Co
Cement Plant
$1.2B invested - 38 deals across the entire Wind industry value chain (2007-2014)
Wind PowerIFC Experience:
36 downstream investments, 2,600+ MW of capacity
2 upstream investments in wind turbine manufacturing
Key transactions in Brazil, Mexico, Bulgaria, Turkey, Romania,
Croatia, China, Sri Lanka, and India
Projects in new markets/regulatory regimes
Experience with both equity and debt financing
IFC Approach:
Products that optimize leverage (e.g. deferrable subordinated
debt) that take more wind risk layered on top of senior debt
Can mobilize concessional financing where appropriate
We understand new regulatory support mechanisms
We can assess and structure for regulatory support risk
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2
38deals
Power Generation
Components & Systems
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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Captive Use of Wind: Solutions
Wind-Diesel for Diavik Mine, Canada High power costs at a Rio Tinto diamond mine
Site 300 km north of grid; accessible by
seasonal winter road two months of the year
Electricity from diesel generation was
expensive ($60m/yr) and subject to supply
disruptions with warm winters
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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9.2MW Wind Power Plant
4 Enercom 2.3 MW wind turbines
Electricity production: 10% of total power needs
CAPEX ~$30 m
Annual savings ~$5 million
Payback time ~6 years
World’s first large scale wind-diesel for a
mine; built, owned and operated by Diavik
Use of Wind Energy - constraints
Wheeling through grid
• Most common approach for wind procurement by
private entities
• Wind farm is located in an area of high wind (usually
at a distance to manufacturing facility) with power
“wheeled” through national transmission grid
• IFC can advise on favourable regulatory
environments, including financial incentives for
renewable energy, wheeling status, etc.
• IFC can implement similar structure as for solar
(offtake agreement and off-balance sheet structure),
mostly in Central and South America due to
regulatory constrains (wheeling)
Waste Heat Recovery
And Waste to Alternative FuelSolar and Wind energy
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IFC Investment and Advisory Support
Financial Services• Direct loans and equity investments
• Credit facilities to banks
• Support in structuring and attracting off-balance
sheet financing
Advisory Services• Assessment, pre-feasibility studies and
implementation support for Waste Heat Recovery,
Alternative Fuels, Solar PV and Wind captive
power solutions
• Market intelligence
Disclaimer: This summary has been prepared to facilitate discussion of broad
parameters of financing options offered by IFC. All figures, terms, and
conditions are subject to change. Only the legal documents as finally executed
will contain binding terms and conditions. The summary of indicative terms
does not constitute a contract or an offer or a commitment by IFC. IFC’s
decision to invest in any project is contingent on approval by IFC’s management
and Board of Directors and execution of final documentation in form and
substance satisfactory to IFC.
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