IFCs Project Financing of - PDF document

1 IFC’s Project Financing of Concentrate
IFC’s Project Financing of Concentrated Solar Power Plants Workshop on CSP for Tunisia Presented by Stratos Tavoulareas Principal Energy Advisor Tunis, Tunisia July 18, 2018 1 IFC’s CSP Project Investments ABENGOA CSP PROJECTS IN SOUTH AFRICA 2 Spanish energy developer Abengoa Solar has developed the first 3 CSP projects in RSA Project MW Technology Storage Stage Round KaXu Solar One 100 Parabolic trough 2.5 hours Operational 1 Khi Solar One 50 Thermal tower 2.0 hours Operational 1 Xina Solar One 100 Parabolic trough 5.0 hours Construction 3 SA CSP Procurement : Left: Khi Solar One Below: Xina Solar One Left: KaXu Solar One ICC’s Cinancing wole in Kaxu and Khi CSP Projects • Total p

2 roject costs: ~US$1.3 billion fully comm
roject costs: ~US$1.3 billion fully committed; plants in operation since 2015/2016 • US$145 million in ICC senior “A” loans at market interest rates and long tenors (18 yrs ) • Mobilized US$224 million -- “B” loans from other lenders • Mobilized US$41.5 million in concessional loan funds from CTF subordinated loan with concessional pricing to improve project leverage, reduce cost of debt and lower tariffs paid by power consumers 3 Kaxu was awarded a UNFCCC Lighthouse Activity of the Year award in 2017 4 WHAT IS BLENDED FINANCE? Blended Finance Concessional Co - investment IFC Investment Grants Early stage equity at submarket price Guarantee (e.g., first loss) Senior or

3 mezzanine debt Market - based Financi
mezzanine debt Market - based Financing Concessional co - investment = Financing at softer terms through price, tenor, rank, security or a combination to reduce project risk Concessional funds can take higher risk and/or lower returns to enable high - impact projects CSP FINANCING CONSIDERATIONS 5 ▪ CSP can not be evaluated based on levelized cost of electricity ; it offers firm capacity during peak demand, as well as ancillary services, and deserves to be compensated accordingly ; however, the regulatory framework and power market design in most countries are not set up to provide such revenue streams ▪ An experienced EPC contractor with a strong balance sheet is vital, together with

4 local support, strong supervision and wa
local support, strong supervision and watertight contracts ▪ Concessional financing may be needed, even though CSP costs are declining rapidly Completion Risks : ▪ Mitigants include : Awareness - raising on the technology, EPC performance LDs, extended performance measuring period ( 2 - 3 years), performance ramp - up, experienced & solid EPC contractor, sponsor completion support, stringent performance testing protocol for provisional & final acceptance under EPC ▪ Mitigants include : Fully wrapped all - in EPC contracts, fully back to back with the PPA, adequate contingencies, stringent construction supervision & progress reporting ▪ Mitigants include : EPC delay LDs, a strong insurance

5 package, stringent construction supervi
package, stringent construction supervision & progress reporting, EPC contractor with experience including local experience Delay Performance / Technology Cost Over - run THANK YOU! ETavoulareas@ifc.org Concessional financing is available for Tunisia Options: Canada and Finland Funds; GCF But, proper structuring of the project is needed anyway; appropriate legal and contractual framework; bankable PPA; appropriate risk allocation including guarantees INTRODUCTION TO IFC 7 Role To promote institutional, legal and regulatory reform To promote institutional, legal and regulatory reform To promote private sector development To reduce political investment risk Clients Governments of middle -

6 income and creditworthy low - income c
income and creditworthy low - income countries Governments of poorest countries Private companies in member countries Foreign investors in member countries Products • Technical Assistance • Loans • Policy Advice • Technical Assistance • Interest Free Loans • Policy Advice • Early stage Equity • Equity / Loans • Risk Management • Advice • Political Risk Insurance IFC: A member of the World Bank Group with a private sector focus ✓ Unparalleled access to governments, parliaments, consultants and other stakeholders; ✓ A broad range of products available to our clients (Partial Risk Guarantees, political risk coverage); ✓ Cooperation between public and private counterp

7 arties which is crucial to moving transa
arties which is crucial to moving transactions forward. IBRD International Bank for Reconstruction and Development IDA International Development Association IFC International Finance Corporation MIGA Multilateral Investment and Guarantee Agency IFC IN INFRASTRUCTURE 8 Regulatory reform Concession structuring Project Development Investment Monitoring ▪ Working with the World Bank and others to introduce sector reform and achieve sector sustainability ▪ Strengthening utilities’ performance through private management contracts ▪ Setting the conditions to attract private investment ▪ Advising governments on PPPs ▪ Negotiating key contracts ▪ The $150m IFC In

8 fraVentures fund helps cover essential
fraVentures fund helps cover essential early - stage costs of frontier market projects we may later finance ▪ Financing projects through debt, equity and mobilization of resources from other sources, ▪ Obtaining concessional financing from multi - donor sources, including soft loans, guarantees, equity and grants ▪ Assessing projects’ consistency with IFC’s Performance Standards on environmental and social issues ▪ Tracking projects’ results and sharing the lessons for wider replication and impact IFC Advice IFC Investment ✓ IFC can effectively support projects through its multiple capabilities IFC intervenes along the entire project cycle and has a

9 range of tools at its disposal IFC’S A
range of tools at its disposal IFC’S APPROACH TO FINANCING 9 Up to 25% (Greenfield) or 50% (Expansion) of Total Project Cost through a combination of : ▪ Typically up to 20 % stake for IFC’s account ; more if needed through IFC Asset Management Company ▪ Usually Long - term investor with no Board seat . Exit strategy to be agreed with key stakeholders ▪ Subordinated loans, Income participating loans ▪ Convertibles and other hybrid instruments ▪ Senior Debt and Guarantees ▪ Fixed or floating rates (US $ or Euro) ; can also finance in some local currencies ▪ Commercial rates, structured loans ▪ Long maturities (up to 20 years), grace periods and repayments commensurate with pr

10 oject cash flows ▪ Swaps and risk mana
oject cash flows ▪ Swaps and risk management products ▪ Tenor extension solutions for local commercial banks ▪ Up to $ 8 million or 50 % of development budget through IFC InfraVentures (IV) ▪ IFC InfraVentures can act as co - developer : assist in negotiation of agreements, feasibility study evaluation, financial modeling Overview of IFC’s financing products: development equity to long term debt ✓ IFC can play multiple roles and can invest at a very early stage Development Equity Project Equity Mezzanine Senior Debt and Structured Products IFC’S APPROACH TO FINANCING 10 ▪ Extensive knowledge gained from long - term sector engagement ▪ In - house Engineers offer technical adv

11 ice ▪ In - house Market Experts asses
ice ▪ In - house Market Experts assess and structure for merchant r isk ▪ In - house Regulatory Expertise: can assess and structure for regulatory r isk ▪ Government Relations ▪ Honest Broker Role ▪ World Bank Group Synergies ▪ Advice on Environmental and Social Best Practices ▪ Equator Principles modeled after IFC Standards ▪ Access to Donor Funding/Concessionary Support Coordination ▪ Assistance programs, including Local Supplier Development, Corporate Governance, Community Development Funding ▪ Carbon Finance and/or Renewable Energy Credits More than just a lender: IFC’s value add Sector Expertise Country Risk Mitigation Environmental and Social Risk Management Advi