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SOCIO-ECONOMIC DEVELOPMENT ASPECTS OF
RENEWABLE ENERGY PROJECTS
expectations and challenges
Gerrit Kruyswijk
Green Industries SBU
February 2015
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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
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Where in the world is “Pofadder” ?
Home to first
CSP plant in
South Africa
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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
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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
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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
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Trust funding Structure
IDC
Kaxu Community Trust Holdco (Pty) Ltd
Kaxu
Community Trust
Kaxu Solar One (Pty) Ltd
(SPV)
Equity Dividends
Pref
Shares
100% Ordinary
Shares
20% Trickle
Dividend
Pref
Dividend 80%
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Challenge: Cost and Complexity
IDC
Kaxu Community Trust Holdco (Pty) Ltd
Kaxu
Community Trust
Kaxu Solar One (Pty) Ltd
(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
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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
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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
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KAXU
Challenge: Population Density and Distance
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KAXU
Challenge: Population Density and Distance
Population = 9 000
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KAXU
90 km
Challenge: Population Density and Distance
Population = 11 000
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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
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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
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Community dividends and SED Cash flows
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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
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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
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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
Development
Co-ordinating Forum
DCF
Khai Ma Business Forum
Funding
Consultation
Advising
Monitoring
Reporting
STAKEHOLDERS PROCESS
Communication
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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
Development
Co-ordinating Forum
DCF
Khai Ma Business Forum
Social
Investments
Business
Investments
Enterprise
Development
Infrastructure
Investment
Education & Skills
Development
Funding
Consultation
Advising
Basic Service
Delivery
Monitoring
Reporting
STAKEHOLDERS PROCESS OUTCOMES
Communication
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Challenge: Concentration risk & saturation
Courtesy: Technoserve
>50% in NC
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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.
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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.
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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.
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The Industrial Development Corporation
19 Fredman Drive, Sandown
Telephone (011) 269 3000
Facsimile (011) 269 2116
E-mail [email protected]
Thank You