In partnership with: 7/8/2020 - PowerPoint Presentation

1. In partnership with:7/8/2020ENVIRONMENT OFFICERS CONFERENCE1BEST PRACTICE FOR COMMUNICATIONJOHN TAYLOR, FIELDSTONE, JOHANNESBURGARUSHA WORKSHOP, OCTOBER 2019

2. Fieldstone involvement in African renewable tendersProcurement ProgrammeFieldstone InvolvementSouth Africa⇨Renewable Energy Independent Power Producer Programme (REIPPP)Financial advisory on various projectsEarly advisory to the government on designing programmeUganda⇨ Uganda GETFiT programmeDevelopment advisory on projects, project sponsor on a GetFit projectZambia⇨Zambia GETFiT programmeAdvising KfW in designing programmeFinancial advisory on projectsZambia⇨Zambia Scaling Solar programmeFinancial advisory on projectsNamibia⇨Feed in Tariff programmeFinancial advisory on projectsBotswana⇨100MW solar tenderFinancial advisory on projectsNigeria⇨Nigeria renewable energy auctionNBET privatisation programmesFinancial advisory on projectsFinancial advisory to bidders

3. Perspective and risks faced Developer / Sponsor⇨Want certainty that competition is fair and process is reliableAbove all value consistency in approachLong-term pipeline vs one-off projectsBe seen as part of solution not problemGovernment⇨Communicate alignment to policy and objectiveCredible process – avoid legal challengesAvoid failure or perceived failureKeep private sector “honest”Lenders / DFIs⇨Key that process is consistent with international standards – environmental, social aspects managed and communicated adequatelyAssured of reliable access to key Government parties during process Transparency and process to avoid any suggestion of improper procurement Other stakeholders⇨Community engagement strategy is essential, especially with respect to land and employmentEnsure that expectations are managed and realistic – nuance of tenders not appreciated especially if developer is taking riskPublic and business⇨Perception around transparency and corruptionUnderstand need for procurement and choice as to why a particular path was chosen – effect on BI and individual costsPerspectives on communication

4. Tender ProgrammeDescriptionPricingProgress / TrendsKey communication issues South Africa⇨REIPPPReverse auctionVarious technologiesZAR0.619/kWh (wind)ZAR0.786/kWh (solar PV)4 rounds completed (6.2GW)Round 4.5 stalledUncertainty and major delay in closing Round 4Uncertainty of future roundsZambia⇨GETFiTFeed-in-Tariff scheme small hydro and PV Max capacity 20MW$0.0399/kWh lowest bid6 bidders awarded in 2019RfQ for round 2 to be issued in Q4 2019Zambia⇨Scaling SolarIFC Scaling Solar programmepackage includes advisory services, contracts, financing, guarantees and insurance $0.060/kWh (NEOEN/First Solar)$0.078/kWh (Enel)First two projects reached FCRound 2 bidders prequalifiedTiming - delay in closingUganda⇨GETFiTProgramme launched to help existing REFiT programmeProjects paid a premium over and above REFiT tariffWorld Bank $160m support $0.166/kWh (solar auction)$0.085/kWh + $0.014/kWh premium (hydro) 10 hydropower projects and one solar project awardedTiming - delay in closingProgramme effectively completed, low prospect for future roundsSenegal⇨Scaling SolarIFC Scaling Solar programme (100MW initially)€0.038/kWh and€0.040/kWh60MW awarded of proposed 100MWThird project withdrawnTiming - delay in closingEthiopia⇨Scaling SolarIFC Scaling Solar programme500MW of solar capacityN/APrequalification for round 1 completed in 2018Timing -delay in closingTrends across the continent

5. Tender ProgrammeDescriptionPricingProgress / TrendsKey communication issues Rwanda⇨Tender programme73MW small-hydro and 30MW solar proposed for 201818.5MW solar awarded in 2014N/AGigawatt Global's 8.5MW operational since 2014Goldsol II 10MW cancelled in 2016Malawi⇨Solar tender programme – FIT proposed70MW solar launched in 2017 4 sites targetedFiT programme proposed since 2012$0.200/kWh (solar FIT)$0.100/kWh (hydro FIT)EoI issued in 2017, tender Programme delayedFiT programme under reviewProgramme under review, long-term certaintyMozambique⇨Feed in tariffLaunched in 2014Applies to biomass, wind, small hydro and solar MZN 7.9/kWh (solar)MZN 4.1/kWh (wind)MZN 2.3/kWh (small hydro)Went under review in 2017Further regulation pending on price premiumInitial programme under reviewEgypt⇨Feed in tariff or competitive tender2GW of PV2GW of wind$0.084/kWh (solar)$0.040/kWh (wind)30 solar closed in 2018 (1.5GW)3 projects closed in 2016Cote d’Ivoire⇨Competitive tender2 biomass and one solar project20-25MW eachCFA65/kWh (biomass)CFA70/kWh (solar)3 companies preselectedProject delayed Recent EoI cancelledTender effectively cancelledGhana⇨Feed-in tariff Launched 2016Tariff fixed for 10 yearsGHS0.598/kWh (solar)GHS0.565/kWh (hydro)GHS 0.654/kWh (wind)one utility-scale project operational No progress since launch in 2011Trends across the continent

6. Tender ProgrammeDescriptionPricingProgress / TrendsKey communication issues Nigeria⇨Renewable AuctionUnsolicited auction for solar 1.4GW$0.115/kWhGovernment requested reduction of tariff to $0.075/kWhSome bidders willing to proceed with lower tariffConsistency – attempt to change tariffs post offerBotswana⇨Botswana solar tendersBid for 100MW solar power plantBid for small scale hybrid projectsN/APrequalified bidders selectedCapacity and credibility of the tender – effectively cancelledNamibia⇨Feed-in Tariff then switched to Tender programmeREFiT programme from 2015Switched to tender programme in 2017 $0.226/kWh (solar REFIT)$0.106/kWh (wind REFIT)N$0.807/kWh (tender)PPAs for 14 projects in REFiTLegality of initial tender challengedKenya⇨Feed-in TariffFiT policy introduced in March 2008 and reviewed in 2012$0.120/kWh (solar)$0.083/kWh (hydro)$0.110/kWh (wind)No tariff review since 2012Few projects have moved forward in the past few yearsConsistency – attempt to change agreed tariffs Community engagement and landMorocco⇨Masen renewable power tendersTargets of 2GW of wind and 2GW of solar by 2020€0.045/kWh160MW Ouarzazate began generating in 2016200MW and 150MW NOOR programme began in 2015Trends across the continentNo renewable energy procurement process has been perfect but lessons can be extracted from other processes

7. Elements of best practicePrinciples are extracted from our view of what has worked in processes across AfricaNot a one-size fits all approach but intended to act as a description of ideas which assist in realising stakeholder objectives

8. Ownership of the processIdeal: dedicated, separated and empowered teamUse experienced advisersto build capacityKey is to have a group which is empowered by all Government stakeholders to run the procurement programme and has an explicit mandate and authority to Coordinate the activities of all Government stakeholders to the processProvide a single source of access to project developers and Government stakeholders alikeCan be funded by the programme if there is sufficient volume (fees e.g. SA) otherwise look to DFIs and agenciesAs far as possible provide additional capacity to this team through the use of experienced advisers (legal, technical, financial and environmental) Disintermediate misunderstandings – avoid direct conflict between procuring agency and market participantsProvide meaningful and material answers to market queriesUse external procurement agent? Scaling SolarTaking ownership meansLimiting conflicting messages being sent out to stakeholdersProviding comfort and assurance to the market that there is a dedicated party or parties which can take responsibility for resolving blockages in the processIn setting up procurement programmes it should be clearly set out who is in charge of the process as well as what capacity they have to enforce the programme objectives

9. Planning3 stages: pre-bid launch, during bid, closing period and beyondPre-bid: Before launching the processKey principle: make sure process is bankable before launchRetain high quality advisers who can assist with:Delivering a bankable approachIdentifying points of interaction to consult with the power marketProviding meaningful and material answers to queriesConsult widely, develop risk allocation matrix and key documentsPresent prospective programme and key principles to the market informallyProspective lendersDevelopersGovernment stakeholdersRevise approach and documents based on market feedback to ensure buy in at formal launch

10. PlanningBid periodTender documentationPublicly available or paid for? One stage bids? two stage?Depends on how clear procurement parameters areBidders conference – very useful approach to allowing parties to air questions publicly Success depends on being able to provide material answers to questionsAlso allows for other stakeholders to appreciate the aims processes of the programmeApply a single written channel of communication for queriesFormal written Q&A – central collection of questions, process and provide one set of answers to all participants, may require more than one round

11. PlanningBid period (cont)Bid bonds From a communication point of view these communicate the need from the procuring agency for credible bids and deter virtual bidders however if there are doubts about bankability or these are excessive this mayDeter otherwise credible bidders who want to avoid costs of failed processMisrepresent interest in programme – nature and number of partiesDiscourage local sponsor participation in the programmeEncourage bid prospectingFinancial close periodKey is to have regular, continuous and open channels of communication with procuring agency, continue to offer Q&A process and distribute information

12. Timing Map out a realistic timeline Develop a reasoned response plan for delays in closingMap out a realistic timeline considering procuring agency’s capacity to transact and the structure of the programmeThe market hates delay more than anything else as this drives up costs which may not be recoverable Communicate potential process delay risks as part of the initial and ongoing process with the market – allow developers to budget more effectively e.g. if treasury, legislative or board approval is required build this into the initial timeline and communicationDifferentiate between procurement issues (e.g. government approvals) and project issuesBest programmes have been very lenient in accommodating sponsor delays for good reasons and where there is no absolute threat to close – again using advisers can be beneficial hereSo far every process in African power procurement has experienced a delay in reaching financial close Stick to response timesOffer defined response times for queries and feedback and stick to these

13. Materiality and availabilityMaterialityAvailabilityMateriality in the context of procurement processes is the idea that the procuring agency should give answers which:Provide clarity about the process and points of misunderstanding rather than simply directing parties back to what has already been presented or deferring until a later dateReduce bid and close risk by outlining positions with rigour Availability is the idea that the procuring agency should not be overly rigid in its approachabilityWhile there should ideally be a single point of communication this should be an open channel for queries especially in the financial close stage

14. Transparency and consistencyTransparency ConsistencyTransparency means that people understand why decisions were madePrinciple: provide clear and substantive basis for decisions and structure rather than referring back to policy, precedent or confidentialityEssential for financing community to back projectsEssential for public trust in the process Consistency means that the communicationprocess is reliable and predictableVariability in timing of expected communication, especially around key decisions – bid award, PPA IA signing, approvals – can be the death of otherwise good processesChanges in messaging especially around critical risk allocation issues tends to erode market confidence which at best drives up risk perception and tariffs and at worst kills processes

15. Questions?