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Intermediation of Small-Scale Carbon-Financed Clean Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects. Rob Short Environmental Specialist DBSA 19 th November 2003. Presentation Contents. Introduction to the DBSA Background Experiences Barriers

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Rob short environmental specialist dbsa 19 th november 2003

Intermediation of Small-Scale Carbon-Financed Clean Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

Rob Short

Environmental Specialist

DBSA

19th November 2003


Presentation contents
Presentation Contents Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Introduction to the DBSA

  • Background

  • Experiences

  • Barriers

  • Prospects

  • Next Steps


The dbsa
The DBSA Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Infrastructure DFI.

  • Owned by the South African Government.

  • Mandate to operate in the Southern African Development Community (SADC).

  • Self-capitalised.

  • Key operational units: International Finance Unit, Project Finance Unit (SA) and SA public sector units.


Background
Background Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Signed agreement at the WSSD in 2002.

  • Assist our clients in accessing an additional finance source for their sustainable development objectives.

  • To assist the DBSA in promoting and developing new markets.

  • To enhance our developmental impact.

  • Develop our relationship with the World Bank.


Experience to date energy
Experience to date…….Energy Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Main area of success.

  • Use of biomass to generate energy through the installation of a wood fired boiler (SA – Private).

  • 5MW and 3.9 MW micro-hydro plants (SA – Private).

  • Micro-hydro in Zambia (Private).

  • Financing opportunity for a combined wind and hydro.

  • Discussions around solar water heating.


Experience to date waste management
Experience to date…….Waste Management Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Enormous interest in landfill capture and use.

  • DBSA is currently supporting two feasibility studies with local authorities.

  • Been interest in bagasse but no real progress.

  • The cost of land filling is becoming a significant issue.

  • Discussions with rural local authorities re agricultural residues.

  • Significant interest in composting as part of resource recovery initiatives.


Experience to date fuel switching
Experience to date……Fuel Switching Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Approached re biodiesel (including a sink element).

  • Conversion of diesel generators to natural gas.


Experience to date general points
Experience to date…….General Points Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • No energy efficiency projects, though are working with donors in this area.

  • No transport, but is emerging awareness of the opportunity.

  • Have not turned away any CF projects for financing yet…..is early days though.

  • Issue of amount of financing required is a potential problem (tends to be too small).

  • No bundled projects to date.


Barriers
Barriers Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Barriers are more broadly about project development, than just around the supply of financing.

  • ER Price (concerns about losing out on the upside). Wait and see approach.

  • Lack of project development funds for small-scale start-ups, specifically with regard to CF element.

  • Lack of regulatory certainty in terms of CF and also the restructuring of the energy sector.


Barriers cont
Barriers (Cont.) Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Lack of knowledge and capacity (in many areas including the financial sector).

  • Grant mind set.

  • Lack of entrepreneurs (with financial experience) in this sector because of historical and existing institutional set-ups.

  • Need for upfront payments (unrealistic expectations).

  • Energy prices (low income generating ability)

  • Development of PPAs.

  • Perceived lack of support from Government.


Addressing the barriers
Addressing the Barriers…… Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Have the benefits of intermediation been proven?

  • Buying down the risk through the provision of project feasibility support.

  • Providing comfort to other financiers through our involvement (depth of due diligence and expertise available in house).

  • Other financiers do not want to take whole risk.

  • Shown opportunities in and support for this area which has stimulated activity.


Addressing the barriers1
Addressing the Barriers…… Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Internal advocacy for CF (lack of internal familiarity re these projects – risk and project leaders).

  • Building understanding of what should be considered in a contract.

  • Assisting project developers in identifying and mitigating risks upfront (value of local knowledge).

  • Better understanding of potential currency fluctuations and hedging opportunities.

  • In at the beginning of the process.


Prospects
Prospects…… Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Confident for a number of reasons.

  • Enabling environment for these projects in SA and the region is about to change for the better.

  • DNA being set up in South Africa. Process beginning in other SADC countries e.g. Mozambique and Zambia.

  • South Africa in the process of finalizing its renewables\clean energy policy (includes a target).


Prospects1
Prospects….. Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Number of key grant processes that will change perceptions of the opportunities that exist i.e. REMT (WB – GEF), SAWEP (UNDP – GEF) and other EU initiatives.

  • South Africa’s (and therefore the region’s) up coming energy “problem” offers opportunities e.g. DSM and energy efficiency.

  • Problems with quality of supply in some areas (promoting idea of “shared benefits”).


Prospects2
Prospects……. Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Support for natural gas in the region offers fuel switching opportunities.

  • The cost of developing and managing landfill space is increasing. Waste minimization is therefore looking more attractive.

  • Opportunities for bundling solar water and energy efficiency projects.

  • Need the first examples.


Next steps
Next Steps……. Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

  • Identifying possibilities in the different categories of small-scale projects to be taken through to implementation. To show their potential and to test different methods of financial structuring.

  • Need to identify bundling opportunities (housing sector?).

  • Work with other funds and banks in the region.

  • Mobilize more project development support internally and externally.


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