The Energy And Power Landscape in SADC 29 September 2015 On the - - PowerPoint PPT Presentation

The Energy And Power Landscape in SADC

29 September 2015

On the Agenda

• Who is Frost & Sullivan
• Southern Africa’s Energy Landscape
• ESKOM, the utility
• Department of Energy’s REIPPPP

3

Who is Frost & Sullivan?

The Growth Consulting Company

• Founded in 1961
• Over 2,000 Consultants / Analysts across 42 international

locations

• 10,000+ clients worldwide including emerging companies,

the global 1000, and the investment community

• Close relationships with: Industry Suppliers, End User

Groups, Local Associations and Regulatory Bodies

• Offer the exclusive Growth System including:
• Growth Partnership Services & Growth Consulting
• Provide comprehensive insights and services to companies

that have the desire to grow

• Global footprint with a presence in over 240 countries
• A history of innovative and effective growth facilitation

Frost & Sullivan is a leading international research and consulting company that facilitates growth around the world

4

Country mining profiles Country resource profiles

• current reserves
• production levels

Mining company profiles

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Sensors Transmitters Valves Actuators Pumps Heat Exchangers Coolers Mixers MES DCS SCADA HMI PLCs PC Controls Asset Management Supply chain Robotics HVAC&R Fire & Life Safety Building Automation Systems (BAS) Lighting Controls & Products Performance Contracting Facility Management (I-FM) Services Security Controls Home Automation

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Healthcare

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Our Global Research Groups

Frost & Sullivan Understands Markets from Multiple Perspectives

5

Energy & Power Supplies

• Trans. & Distr.

Centralised Power Gen Distributed Power Gen

• Coal
• Gas
• Nuclear
• Critical power

Equipment (boilers, turbines etc.)

• Power plant services
• etc.
• Gen-sets
• Cogeneration/CHP
• On-site power
• Power rentals
• Energy services
• MRO
• etc.
• Cables
• Switchgear
• Transformers
• Meters
• T&D Services
• Smart Grids
• Energy trading
• etc.

Green Energy

• Wind
• Solar
• Marine
• Hydro
• Bioenergy
• Emission Reduction
• Energy Efficiency

Power Supplies & Batteries

• Power Quality
• Conventional and

Emerging Batteries

• Alternative Energy

Storage

• Services
• etc.

Global Energy Demand Environment Energy Supply and Costs Construction Activity Connectivity & Integration Systems Intelligence Relevant regulatory, policy and economic analyses Carbon Reduction & Renewables Power Generation Market Globalisation

Energy & Power Sector

Key Focus Groups

6

Southern Africa’s (SADC) Energy Landscape

7

• Initial investments in

distributed power gas solutions

• Followed by extensive gas

pipeline infrastructure development

• Gradual move away from

coal as primary source

• Investment in more viable

solutions with lighter footprint

Infrastructure Investment

• Strong GDP growth relative

to global markets

• Relocation of

manufacturing capacity

Climate Change and Carbon Neutral Investment

• Export at first
• Gradually move to local

consumption

Gas Finds

• Privatisation and

deregulation across the continent

• Resultant increase in IPP

activity

IPP Licensing and Market Reforms Global Economic Shifts

Southern Africa’s Energy Landscape

Trends shaping Southern Africa’s Power Sector

8

• As per the availability of fuel, the distribution of electricity generation varies from country to country.

The equipment suppliers will need to understand the distribution to the needs of the market accordingly

Southern Africa’s Energy Landscape

Distribution and Energy mix in Sub Saharan Africa

Source: Frost & Sullivan analysis.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% South Africa Mozambique Tanzania Kenya Nigeria Ghana South Africa Mozambique Tanzania Kenya Nigeria Ghana Fossil Fuels 90,4% 5,0% 37,0% 37,8% 82,0% 44,1% Nuclear Fuels 4,0% 0,0% 0,0% 0,0% 0,0% 0,0% Hydroelectric Plants 5,0% 95,0% 63,0% 46,2% 18,0% 55,8% Other renewable sources 0,6% 0,0% 0,0% 16,0% 0,0% 0,1%

Distribution of generation of electricity among the major countries, 2014

9

Southern Africa’s Energy Landscape

Southern Africa Power Outlook - Energy Mix

Coal, 12% Oil, 18% Gas, 9% Hydro, 40% Bioenergy, 3% Solar PV, 6% Other Renewables, 12%

Power Capacity Mix, East Africa, 2030 Total = 33 GW

Coal, 45% Oil, 7% Gas, 10% Nuclear, 3% Hydro, 16% Bioenergy, 3% Solar PV, 9% Other Renewables, 7%

Power Capacity Mix, Southern Africa, 2030 Total = 132 GW

RE* = 21% or 6.93 GW RE* = 19% or 25.08 GW

Note:* Excluding large hydro. Source: IEA (2014); Frost & Sullivan

Oil, 50% Hydro, 50%

Power Capacity Mix, East Africa, 2012 Total = 8 GW

Coal, 69% Oil, 10% Gas, 2% Nuclear, 3% Hydro, 16%

Power Capacity Mix, Southern Africa, 2012 Total = 58 GW

10 Southern Africa’s Energy Landscape

Southern Africa Power - Primary Energy Demand

Primary Energy Demand, Sub-Saharan Africa, 2000

Source: IEA, Frost & Sullivan

Coal, 22% Oil, 11% Gas, 2% Nuclear, 1% Hydro, 1% Bioenergy, 63% Other Renewables, 0% Primary Energy Demand, Sub-Saharan Africa, 2012 Coal, 18% Oil, 15% Gas, 4% Nuclear, 1% Hydro, 1% Bioenergy, 61% Other Renewables, 0%

As a reflection of the poverty crippling the region, bioenergy use remains the main component of sub- Saharan African primary energy demand. Coal is the second largest, but has recently lost some percentage share to the benefit of oil and gas. According to the IEA, four out of five people in sub-Saharan Africa rely on the traditional use of solid biomass for cooking.

Note: Bioenergy is composed of biomass, biofuels and biogas. Solid biomass includes fuelwood and charcoal.

11

Southern Africa’s (SADC) Energy Landscape

• Tanzania & Mozambique

12

Source: World Bank, Frost & Sullivan analysis.

• The GDP of Tanzania for the year 2014 was 49.2 billion US dollar. The economy has seen a good

positive growth over the period of time and is close to achieving middle income status

• The GDP growth rate fluctuated from 8% in 2011 to 5% in 2012

Southern Africa’s Energy Landscape

Economic Overview – Tanzania

2010 2011 2012 2013 2014 GDP 30,92 33,32 38,73 43,65 49,18 Growth Rate 6,4% 7,9% 5,1% 7,3% 7,0% 0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 6,0% 7,0% 8,0% 9,0% 0,00 10,00 20,00 30,00 40,00 50,00 60,00 GDP Growth Rate (In %) GDP (in Billion USD)

GDP & Growth rate, Tanzania, 2010-2014

13

• The access to electricity in Tanzania over the years has increased. For the year 1990, it was 6.8% & for

the year 2010, it was 14.8%. Although the numbers are not very high, a good growth is anticipated in near future

• With the recently discovered resources of natural gas, Tanzania is set to have a boom in exporting it

to other countries eventually boosting its economy and electricity sector status, but it will take time to commercially generate anything out of it.

• The access of electricity in urban population increased from 33.5% in 2000 to 46.4% in 2012. The status
• f electricity in rural areas is very poor. Only 1.7% people had access to electricity in the year 2000 which

increased to 3.6% in 2012 of the total rural population.

• The electricity consumption is increasing slowly with 76.5 kWh per capita of electricity consumption in the

year 2013. The slow pace is due to the weaker economy and less infrastructure to provide electricity services

Source: World Bank, Frost & Sullivan analysis.

1990 2000 2010 2012 2014 % 6,80% 8,80% 14,80% 15,30% 24% 0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% % of Population

Access to electricity, Tanzania, 2014

2009 2010 2011 2012 2013 In kwh/capita 81,35 91,48 92,16 83,34 76,50 0,00 20,00 40,00 60,00 80,00 100,00 In KWh/Capita

Electricity Consumption, Tanzania, 2009-2013

Southern Africa’s Energy Landscape

Power Sector Overview – Tanzania

14

Electricity Supplier Installed Capacity(MW) in 2014

TANESCO 884.2 IPP 404 EPP 205 SPP 23.5 Imports 14 Total Installed Capacity 1,530.70

• TANESCO is the vertically integrated public utility handling power generation, transmission & distribution

in Tanzania.

• TANESCO is supplying 884.2 MW of electricity to the domestic demand of electricity & importing from

countries like Uganda, Zambia & Kenya.

• Tanzania is endowed with diverse forms of energy resources including natural gas, hydro, coal, biomass,

geothermal, solar, wind and uranium which have not been optimally utilised. The generation mix of Tanzania consists of hydroelectric, natural gas & liquid fuel power plants.

• Due to overdependence of Tanzania on hydropower along with droughts that occurred in 2010 resulted in

power supply shortages in the country. TANESCO contracted Emergency Power Producers (EPP) which is relatively expensive, to make up for the shortage. Today EPP is producing around 205 MW of electricity which is 13% of total generation. Also TANESCO is buying electricity from some small power producers like TPC, TANWAT & Mwenga whose plants are mainly based out of renewable energy sources

Source: Ministry Of Energy And Minerals, TANESCO, EWURA, Frost & Sullivan Analysis

Southern Africa’s Energy Landscape

Electricity Supply Industry– Tanzania

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• The total installed capacity in the Main Grid System is 1530.7 MW. The system is hydro-thermal mix,

constituting hydro 551 MW (36%), natural gas power plants of 505 MW (33%) and liquid fuel power plants

• f 475 MW (31%). A very small part (1.5%) of renewable resources like biomass and hydro power based

generators are also being contributed mainly from SPPs

• The transmission and distribution network for electricity is solely handled by TANESCO

Source: Government of Tanzania, IEA Report, World Bank, Frost & Sullivan analysis.

TANESCO Independent Power Producers TANESCO TANESCO Generation Transmission Distribution Emergency Power Producers Small Power Producers

Southern Africa’s Energy Landscape

Electricity Supply Industry– Tanzania

16

Source: TANESCO 2013, Frost & Sullivan analysis.

• TANESCO had a revenue growth of 17%

in the year 2011 over the previous year with revenue being 337.5 million USD. For the year 2013, the revenue growth was 13% over previous year with the revenue of 577.4 million USD

• The company has incurred heavy losses

year on year. The loss for the year 2011 was 138 million USD which increased to 299 million USD for the year 2013. This heavy loss was mainly contributed by general inefficiency in management, poor billing system due to low metering accuracy, theft, corruption and unreliable power services

• There has been a steady increase in the

number of new connections year after

• year. The total number of new customers

for the year 2013 was 143,113 which was 88,996 for the previous year

2013 2012 2011 Revenue 577,4 507,4 337,5 Loss before tax 299,3 211,5 137,8 0,0 100,0 200,0 300,0 400,0 500,0 600,0 700,0 In Million $

Revenue & Loss, TANESCO, 2011-2013

Southern Africa’s Energy Landscape

Power Utility – Tanzania

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Source: Government of Nigeria, IEA Report, World Bank, Frost & Sullivan analysis.

Independent Power Plant (404 MW) Emergency Power Plant (205 MW) Small Power Plants (23.5 MW) IPTL Songas TPC Mwenga TANWAT Symbion Aggreko

• Independent Power Tanzania Limited (IPTL), which is a subsidiary of Pan African Power (PAP) Solutions

Limited, have a heavy fuel oil power plant of capacity 103 MW working on a Build, Own & Operate basis

• Songas is Tanzania’s second IPP also working on BOO basis with a plant capacity of 190 MW and is

working on natural gas sourced from domestic off-shore Songo Songo gas fields.

• TANESCO also sourcing about 25 MW of electricity from Small Power Plants running mainly on

biomass & hydroelectric power. These are TPC (17 MW running on biogas), Mwenga (4 MW running

• n Hydro) & TANWAT (2.7 MW running on Biogas). Others include some coal mine & sugar mills

however, they sell only small amounts of excess power.

• The country has faced repeated and prolonged drought impacting severely on the hydro generation
• capabilities. The limited capacity of gas processing and transmission infrastructure has also resulted in

power shortages, especially in the areas served by the Main Grid. The Emergency Power Plants (EPP)

• perators are hired to make up for the deficit of electricity. These EPP operators like Symbion & Aggreko

supply about 13% of total energy generated in Tanzania. Southern Africa’s Energy Landscape

Power Utilities in Tanzania – IPPs, EPPs, SPPs

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Source: Tanzania Electricity Supply Industry Reform Strategy and Roadmap 2014 -2025, Frost & Sullivan analysis.

Hydro Natural Gas HFO/GO/Diesel Coal Wind Solar Geothermal Interconnector 2015 561 527 495 2015-25 1 529,00 3 968,00 2 900,00 200 100 200 400 by 2025 2 090,84 4 469,00 438,4 2 900,00 200 100 200 400 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 Capacity (in MW)

Present and Projected Installed Capacity, Tanzania, 2015-2025

Key Takeaway: In future, the energy mix in Tanzania will see diversification in sources of generation with most significant increase will be in gas to power sources Southern Africa’s Energy Landscape

Future of the Power Sector– Tanzania

19

Source: World Bank, Frost & Sullivan analysis.

• The economy of Mozambique is among the most dynamic economies in Africa showing good positive

results year on year. The GDP was 5.7 Billion US Dollar in 2004 & started strengthening thereafter. It was 16.4 Billion US Dollars for the year 2014.

• In 2014 the GDP showed a robust 7.4% growth, although which was lower than expected mainly due to

severe floods early in the year. In the future, it is expected that the GDP will be getting more stronger due to the increase in coal production, implementation of large infrastructure projects & budgetary expansion from the government

• Due to some sector like the extractive sector, coal exports, finance, construction, services, transport and

communication which performed very well in 2013, the economy of Mozambique is becoming a better place for Foreign Direct Investments (FDI).

2010 2011 2012 2013 2014 GDP 10,17 13,24 14,95 15,63 16,39 Growth Rate 6,8% 7,4% 7,1% 7,3% 7,4% 6,4% 6,6% 6,8% 7,0% 7,2% 7,4% 7,6% 0,00 2,00 4,00 6,00 8,00 10,00 12,00 14,00 16,00 18,00 GDP Growth Rate (In %) GDP (in Billion USD)

GDP & Growth rate, Mozambique, 2010-2014

Southern Africa’s Energy Landscape

Economic Overview – Mozambique

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• The access to electricity in Mozambique in the recent years has shown a tremendous growth. For the

year 1990, it was 6.4% & for the year 2010, it was 15%.

• The access of electricity in urban population increased from 30.14% in 1990 to 54.5% in 2012. The status
• f electricity in rural areas is very poor. Only 0.1% people had access to electricity in the year 1990 which

increased to meager 5.4% in 2012 of the total rural population.

• The electricity consumption per capita for the country was stable for the decade. With new fuel resources

discovered, increasing rate of urbanisation and boosting up of economy, the rate of electrification will be expected to increase in the near future

• In 2012, large natural gas reserves were discovered in Mozambique, revenues from which might

dramatically change the economy

Source: World Bank, Frost & Sullivan analysis.

1990 2000 2010 2012 2014 % 6,44% 7,10% 15% 20,20% 38% 0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% 35,00% 40,00% % of Population

Access to electricity, Mozambique, 2014

2009 2010 2011 2012 2013 In kwh/capita 434,91 445,07 447,09 412,68 433,00 390,00 400,00 410,00 420,00 430,00 440,00 450,00 In KWh/Capita

Electricity Consumption, Mozambique, 2009-2013

Southern Africa’s Energy Landscape

Power Sector Overview – Mozambique

21

• In 2013 available generation capacity was 614 MW which was used domestically rest exported to SAPP.

Electricidade de Moçambique (EDM) is the public utility handling generation, transmission & distribution in Mozambique. The own generation capacity of EDM is 200 MW. It purchases the remaining electricity from IPPs & imports to make up for the demand.

• Most of the electricity generated came from the hydroelectric power plant - Cahora Bassa. The HCB

power plant is an Independent Power Plant (IPP) contributing to most of the electricity needs of the country and also exporting to the SAPP countries. The overall generation capacity of the project is 2075 MW

• Recently Aggreko also started a new IPP project of 100 MW which has started contributing to the

country’s demands

• Currently, Mozambique is importing 47 MW of its electricity for domestic distribution from the neighbouring

countries to reduce dependence on hydro power. The rest import is done for national aluminium smelter MOZAL

Electricity Supplier Installed Capacity (MW)

Electricidade de Moçambique 200 Independent Power Plants 2175 Imports 222 Total Installed Capacity 2597

Source: Electricidade de Moçambique 2013, Frost & Sullivan Analysis

Southern Africa’s Energy Landscape

Electricity Supply Industry – Mozambique

22

• Most of the electricity demand in Mozambique is supplied by hydroelectric power generated at Cahora

Bassa dam operated by HCB. The generated power is then purchased by EDM for further distribution apart from its own generation capacity.

• The transmission & distribution of electricity in Mozambique is governed solely by state utility EDM

(Electricidade de Moçambique)

• An independent transmission company MOTRACO owned by EDM, ESKOM and SEB equally is

responsible to supply electricity to MOZAL aluminium smelter in Mozambique and wheeling of power to EDM

• Since 2011, load has exceeded the peak load capacity. The excess power is imported from the SAPP to

satisfy the country’s increasing electricity demand. Almost 2% of electricity is being imported from its neighboring countries to fulfill its electricity demand

Source: Government of Nigeria, IEA Report, World Bank, Frost & Sullivan analysis.

Imports Independent Power Producers Electricidade de Moçambique Electricidade de Moçambique Generation Transmission Distribution Electricidade de Moçambique

Southern Africa’s Energy Landscape

Electricity Supply Industry – Mozambique

23

Source: EDM 2013, Frost & Sullivan analysis.

• The

revenues for Electricidade de Moçambique (EDM) were 11% higher in the year 2013 over the previous year with revenue being US$832 Million. For the year 2012, the revenue growth was again 11% over previous year with the revenue

• f US$658 Million
• The company has shown consolidated

profit in years 2011 & 2012 but registered heavy loss in 2013. Major reason for the loss were accidents, transformer failure, illegal connections, distribution losses & power thefts

• For EDM, the number of customers in

2013 increased by approximately 9%, growing up to 1,257,809 over the previous year figures.

• The total amount paid by EDM for

electricity in 2011 & 2013 was 63 & 84 million US dollars respectively. In 2014, it climbed to 133 million dollars because of purchases made from Aggreko power. For 2017, it is expected to rise up to 470 million US dollars, said chairman of EDM

2012/13 2011/12 2010/11 Revenue 107,6 97,2 85,1 Profit

• 0,8

1,2 9,5

• 20,0

0,0 20,0 40,0 60,0 80,0 100,0 120,0 In Million $

Revenue & Profit, EDM, 2011-2013

2011 2013 2014 2017 Cost 63,0 84,0 133,0 470,0 0,0 50,0 100,0 150,0 200,0 250,0 300,0 350,0 400,0 450,0 500,0 In Million $

Costs of purchasing electricity, EDM, 2011-2017

Southern Africa’s Energy Landscape

Mozambique - Electricidade de Moçambique

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The Southern African Power Pool (SAPP)

25

The Southern African Power Pool (SAPP)

History and future developments of the SAPP

• Electricity trading between the SADC countries

was already happening since 1950s

• It was only in 1995 that SADC established the

SAPP

• Donor funded, as well as member contributions
• In 2010 the SAPP passed the Regional Energy

Access Strategy and Access Plan, which formalises the trading of electricity between the various countries.

• Members include all national utilities of SADC
• Only IPP being from Zambia, Copperbelt Energy

Corporation

• Malawi, Angola, Tanzania are non-operating
• What ‘power’ does the SAPP really have? Only

an institution regulating trade - still need to adhere to national regulatory bodies

• Recent and future infrastructure developments:
• South Africa-Maputo connectors (completed)
• Zambia-Tanzania power line
• Mozambique-Malawi power line
• Fix Zambia power line
• Construction of an Inga 3 Hydropower Station - the

Westcor Project

Source: SAPP Website

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• Market for secure, effective and non-

discriminatory trade of electricity:

• Trading to be concluded daily for delivery next day
• Forward bidding up to 10 days
• Participants submit bids (purchase) & (sale) offers
• Only the market operator and participant know the

details of the bid / offer

• Price discovery
• Provides a neutral reference price
• Open and competitive market
• Provides platform to manage demand & supply

fluctuations

• Gives price signals to policy makers
• Stable & Liquid market will give investor confidence
• Supports an auction-trading model
• All sales & demand bids are aggregated at a fixed

time

• The balance price is valid for all trades
• Tool for managing grid congestion
• System price (no grid congestion)
• Area prices (if transmission capacity is exceeded)
• Conditions of Trade
• Participants can only trade directly on the DAM

market upon:

• Having been licensed or given permission by

the host country to undertake cross border trading

• Acceptance as a Market Participant by SAPP

Executive Committee

• Being party to a TSO connected to a SAPP Control

Area and have arrangements for Balance Responsibility

• Signing the DAM governance documents
• Opening of the requisite accounts for trading

purposes and having the requisite security for trading purposes

• Have at least two trained Traders

The Southern African Power Pool (SAPP)

The Day Ahead Market (DAM)

Challenges / Bottlenecks

• NERSA licencing

Source: SAPP Website

27

Eskom, the utility

28

• South Africa is the main source of coal on the African continent. The coal based power generating

plants are more prominent although the local power generation company Eskom, which produces 95% of South Africa’s electricity and more than 45% of Africa, have gas based, nuclear & hydroelectric power plants

• 91% of electricity generated in South Africa is being used in South Africa itself whereas the rest of the

demand is fulfilled by importing electricity from neighbouring countries like Mozambique

• According to the latest report from IEA, 59% of the electricity available is being used for industrial

purpose and 20% is being utilized for residential purpose. The remaining is distributed in commercial, agriculture, transport & others

Source: Eskom, IEA 2014, Frost & Sullivan analysis.

Eskom, the utility

Power Sector - South Africa

Coal 86% Nuclear 4% Hydro 5% Gas Fired 5%

Plant Mix for Generation, 2014

Imports 4% Exports 5% Domestic Supply 91%

Imports and Exports, 2014

Industry 59% Residential 20% Commerci al 14% Agriculture 3% Transport 2% Other Non Specified 2%

End User of Electricity, 2014

29

• The level of accessibility of electricity in Sub-Saharan Africa is improving due to better distribution and
• transmission. For South Africa, who is responsible for almost 45% of electricity generation in the

continent, it grew from 65% in 1990 to 89% in 2014

• The access of electricity in urban population increased from 88% in 2000 to 96.56% in 2012 of total urban
• population. The access to electricity in rural areas also increased from 37.1% in the year 2000 to 66.85%

in 2012 of the total rural population.

• The electricity consumption also grew every year although it saw a slack period in year 2009-10. The
• verall growth of this segment is said to be governed by the increasing urbanisation and improvement in

living standard of people. The country has planned to have more renewable sources rather than just being dependent on non renewable fuels, thus reducing overall carbon footprint.

Source: World Bank, Frost & Sullivan analysis.

1990 2000 2010 2012 2014 Access 65% 66,10% 82,70% 85,40% 89% 0% 20% 40% 60% 80% 100% % of Population

Access to electricity, South Africa, 1990-2014

2009 2010 2011 2012 2013 Electricity Consumption 4465,43 4580,62 4606,21 4841,30 5088,40 4000,00 4200,00 4400,00 4600,00 4800,00 5000,00 5200,00 In KWh/Capita

Electricity Consumption, South Africa, 2009-2013 Eskom, the utility

Power Sector Overview - South Africa

30

Source: Eskom, SAPP Report, SAIPPA 2014, Frost & Sullivan analysis.

Eskom Independent Power Producers Eskom Eskom Municipalities Generation Transmission Distribution

• ESKOM, being a part of the regional Southern Africa Power Pool (SAPP), imports 1,500 MW of hydro

electric power from the Cahora Bassa situated in Mozambique.

• Power generation is also done by some independent power producers. Eskom purchases this electricity

to fulfill its demand supply need gap

• The distribution is done to residential, commercial, industrial & various other sources directly by Eskom or

through local municipalities who collect the revenue from customers on behalf of Eskom

• This kind of a business model is very simplistic & easy to manage but there is a monopoly in the market

in terms of supply and distribution. The monopoly is also in terms of generation (but less so than a decade ago) and transmission

• Some municipalities like eThekwini municipality are involved in power generation through waste landfill
• gas. Municipalities are also involved in purchasing electricity from ESKOM & distributing it to customers

Municipality Generation

Eskom, the utility

Electricity Supply Industry - South Africa

31

Source: Eskom 2014, Frost & Sullivan analysis.

• ESKOM had a “decent” history with year-
• n-year gain in its revenue since past five
• years. It saw a 26% revenue growth in

2012 over previous year. In the year 2013, it was 12% whereas in year 2013, it was 8%

• Although there is a positive growth in

revenues of the company, the profits were not growing at the same pace. It was 16% of total revenue in the year 2012, 5% in 2013 & 7% in 2014

• In terms of international sales, Eskom

generated almost equal amount

• f

contribution by selling electricity to corresponding local utilities and selling directly to the end users

• Eskom invested $14.8 million into R&D

technologies to reduce its carbon footprint and improve technical and safety performance. It was 20% lower than R&D investment in the previous year ($18.5 million)

2013/14 2012/13 2011/12 Revenue 13235,9 12217,7 10896,3 Profit 869,4 663,4 1746,1 0,0 2000,0 4000,0 6000,0 8000,0 10000,0 12000,0 14000,0 In Million $

Revenue and Profit, ESKOM, 2012-2014

2013/14 2012/13 2011/12 Utilities 269,2 298,8 228,1 End users across border 289,4 260,2 231,7 0,0 50,0 100,0 150,0 200,0 250,0 300,0 350,0 In Million $

International Sales, ESKOM, 2012-2014 Eskom, the utility

Eskom Financials

32

The DoE’s Renewable Energy IPP Programme (REIPPPP)

33

Source: Frost & Sullivan

The South African Renewable Energy Landscape

Introduction

• Following a global trend, governments in most Sub-Saharan Africa countries have

established increasingly ambitious RE targets for their power sectors.

• Massive investments in RE power have been taking place in the last 3 years in South Africa

with the successful implementation of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

• Certain South African developers have begun showing an increasing interest to develop their

activities up north in the rest of Sub-Saharan Africa.

• Power demand remains, however, limited in most countries and, therefore, does not allow

the economies of scale benefitting RE developers in North Africa and South Africa.

• Nevertheless, there is a plenitude of “smaller” opportunities across the region. It will be

more a matter of finding an efficient way to finance them or to “scale them up.”

• A lot of solar and wind RE power projects are currently being developed. However, very few

have reached financial close to date.

• The main challenges to build large-scale RE power projects in Sub-Saharan Africa (excluding

South Africa) remain: (i) projects’ bankability, (ii) grid capacity, and (iii) electricity affordability.

• The process to negotiate a power purchase agreement (PPA) and to get the land permits

can take many years. Also, opposition from local communities is not to be underestimated.

34

Source: Frost & Sullivan

• Indeed, access to land has been an issue for large RE power projects, especially in Kenya

and Ethiopia.

• Having good RE resources is not sufficient. Investors must be wary of the country’s

independent power producers’ (IPPs’) track record and the private sector’s ability to conclude an acceptable PPA with the offtaker.

• In terms of procurement, a global market trend is currently favouring a competitive bidding

process even though a renewable energy feed-in tariff (REFiT) continues to be adopted, mainly in emerging markets. This is the case of Kenya, Uganda, Tanzania, Rwanda, Nigeria, and Ghana, which have all implemented REFiTs. Some countries are also adopting a mix of REFiT and competitive bidding such as in Kenya, Uganda, and Tanzania.

• The following table summarizes the top-5 countries offering the best opportunities to develop

large-scale RE power projects in Sub-Saharan Africa.

Final Weighted Ranking: Top 5 Countries per Technology, Sub-Saharan Africa, 2015

IPP friendly IPP expected soon No IPP track record

Rank CSP PV Wind Geothermal

1 South Africa South Africa South Africa Kenya 2 Tanzania Tanzania Tanzania Rwanda 3 Namibia Namibia Kenya Ethiopia 4 Zambia Ethiopia Namibia Tanzania 5 Botswana Nigeria Zambia Djibouti

The South African Renewable Energy Landscape

Introduction

35

• In 2014, total RE power installed capacity (all technology included) amounted to 27,600

MW in Sub-Saharan Africa.

• Hydropower represented 85.8% of this amount. Geothermal, solar PV, and wind power

witnessed the highest growth in 2014, progressively eroding hydropower’s market share.

• As of June 2015, the pipeline of large-scale RE power projects amounted to approximately

14,700 MW.

• With 62.9%, solar PV is the most popular RE power technology in the pipeline, followed

by wind (21.7%), geothermal (13.3%), and CSP (2.1%).

Note: *Excluding South Africa, African islands, and only including larger or equal to 5 MW solar PV, CSP, wind power projects. Source: Frost & Sullivan

The South African Renewable Energy Landscape

Introduction

36

• Namibia, Zimbabwe, Botswana, and Uganda present the most important CSP pipeline.
• Nigeria, Ghana, Cameroon, and Uganda are offering the most prominent solar PV pipeline.
• The wind project pipeline is mainly centered in Kenya, Ethiopia, Ghana, Sudan, Senegal,

and Tanzania.

• The geothermal project pipeline is limited to Kenya, Ethiopia, Uganda, and Djibouti.
• Some of these projects have been in development for many years, but without much

progress and with no certainty of being completed one day.

• However, since last year, significant progress occurred with some flagship projects being

commissioned or having reached financial close:

• December 2014: Financial closing of 310 MW Lake Turkana wind project in Kenya
• 2014–YTD* 2015: 306 MW of additional geothermal power (Olkaria I, III, and IV)

commissioned in Kenya

• February 2015: Commissioning of an 8.5 MW grid-connected solar PV plant in Rwanda
• May 2015: Commissioning of 153 MW Adama II wind project in Ethiopia
• 2014–YTD 2015: Almost 700 MW of wind, more than 1,000 MW of solar PV, and 100 MW
• f CSP power projects having been commissioned in South Africa under the REIPPPP

Note: *YTD = Year-to-date. Source: Frost & Sullivan

The South African Renewable Energy Landscape

Key Findings

37

The South African Renewable Energy Landscape

Power utilities in South Africa – Private Power Utilities & IPPs

Source: Government of Nigeria, IEA Report, World Bank, Frost & Sullivan analysis.

• According to the Integrated Resource Plan 2010 (revised in 2013) from Department of

Energy, 17,800 MW of the 2030 target are expected to be from renewable energy sources, with 5,000 MW to be operational by 2019 and a further 2,000 MW (i.e. combined 7,000 MW) operational by 2020.

• In another important announcement, the Department of Energy stated that the

procurement of additional power generation capacity from the private sector will be with the following allocations: 1) 2500MW from conventional coal sources 2) 800MW from co-generation 3) 3126MW from various gas sources & 4) 2609 MW from imported hydroelectric resources

• The Renewable Energy Independent Power Producer Procurement Program

(REIPPPP):- South Africa has a high level of Renewable Energy potential and presently has in place a target of 10000GWh of Renewable Energy. Government has determined that 3725MW to be generated from Renewable Energy sources is required to ensure the continued uninterrupted supply of electricity

38

The South African Renewable Energy Landscape

Outline of Renewable Energy Programme – Past tender results, ongoing projects, future prospects

• Past Tender Results (Windows 1-3)

38

Window 1

Wind PV CSP Hydro Biomass Biogas Landfill Total Capacity Offered (MW) 1,850 1,450 200 75 12,5 12,5 25 3,625 Capacity Awarded (MW) 634 631,5 150 1415,5 Projects Awarded 8 18 2 28 Average tariff (SAc / kWh) 114 276 269 na na na na Na Average tariffs (USc / kWh) ZAR R8/$ 14,3 34,5 33,6 Total Investment (ZAR million) 13,312 23,115 11,365 47,792 Total Investment (USD million) ZAR8 /$ 1,664 2,889 1,421 5,974

Source : Frost & Sullivan analysis and South Africa’s Renewable Energy IPP Procurement Program: Success Factors and Lessons Authors: Anton Eberhard, UCT; Joel Kolker, World Bank Institute and James Leighland, Private Infrastructure Development Group

39

• Past Tender Results (Windows 1-3)

39

Window 2

Wind PV CSP Hydro Biomass Biogas Landfill Total Capacity Offered (MW) 650 450 50 75 12,5 12,5 25 1,275 Capacity Awarded (MW) 562,5 417,1 50 14,3 1043,9 Projects Awarded 7 9 1 2 19 Average tariff (SAc / kWh) 90 165 251 103 na na na Na Average tariffs (USc / kWh) ZAR R8/$ 11,3 20,8 31,6 13 Total Investment (ZAR million) 10,897 12,048 4,483 631 28,059 Total Investment (USD million) ZAR8 /$ 1,372 1,517 565 79 3,535 The South African Renewable Energy Landscape

Outline of Renewable Energy Programme – Past tender results, ongoing projects, future prospects

Source : Frost & Sullivan analysis and South Africa’s Renewable Energy IPP Procurement Program: Success Factors and Lessons Authors: Anton Eberhard, UCT; Joel Kolker, World Bank Institute and James Leighland, Private Infrastructure Development Group

40

• Past Tender Results (Windows 1-3)

40

Window 3

Wind PV CSP Hydro Biomass Biogas Landfill Total Capacity Offered (MW) 654 401 200 121 60 12 25 1,473 Capacity Awarded (MW) 787 435 200 16 18 1,456 Projects Awarded 7 6 2 1 1 17 Average tariff (SAc / kWh) 74 99 164 na 140 na 940 Na Average tariffs (USc / kWh) ZAR R8/$ 7,5 10 16,6 na 14,2 na 9,5 Na Total Investment (ZAR million) 16,969 8,145 17,949 1,061 288 44,413 Total Investment (USD million) ZAR8 /$ 1,721 826 1,820 n/a 108 na 29 4,504 The South African Renewable Energy Landscape

Outline of Renewable Energy Programme – Past tender results, ongoing projects, future prospects

Source : Frost & Sullivan analysis and South Africa’s Renewable Energy IPP Procurement Program: Success Factors and Lessons Authors: Anton Eberhard, UCT; Joel Kolker, World Bank Institute and James Leighland, Private Infrastructure Development Group

41

• Past Tender Results (Totals)

41

Totals Wind PV CSP Hydro Biomass Biogas Landfil l Total Capacity Awarded (MW) 1984 1484 400 14 16 18 3,915 Projects Awarded 32 23 5 2 1 1 64 Total Investment (ZAR million) 40,590 42,130 33,797 631 1,061 288 120,263 Total Investment (USD Mill) 4,683 5,085 3,806 79 108 29 14,011

Wind; 1 984 PV; 1 484 CSP; 400 Hydro; 14 Biomass; 16 Biogas; - Landfill; 18 South Africa RE Technology Allocation Breakdown (Round 1-3)

Wind PV CSP Hydro Biomass Biogas Landfill The South African Renewable Energy Landscape

Outline of Renewable Energy Programme – Past tender results, ongoing projects, future prospects

Source : Frost & Sullivan analysis and South Africa’s Renewable Energy IPP Procurement Program: Success Factors and Lessons Authors: Anton Eberhard, UCT; Joel Kolker, World Bank Institute and James Leighland, Private Infrastructure Development Group

42

• Ongoing Projects
• Round 4 announcement made in April 2015
• Very promising news for South Africa’s renewable energy landscape
• Summary:
• 13 x Round 4 preferred bidders announced = additional 1,121MW of projects, including:
• No allocation made in this round for: biogas, landfill or CSP
• Financial close for Round 4: Expected Q4 2015

42 Wind; 676 PV; 415 Hydro; 5 Biomass; 25 South Africa RE Technology Allocation Breakdown (Round 4)

Wind PV Hydro Biomass The South African Renewable Energy Landscape

Outline of Renewable Energy Programme – Past tender results, ongoing projects, future prospects

43

Future Prospects

• An extra allocation from Round 4 is to be considered and announcement in this regard

made by end May / June 2015 (“Round 4b”)

• An expedited new RFP for 1,800MW of renewables to be announced by June 2015

(“Round 4c”)

• A redesigned RFP for Round 5 to be made in Q2 of 2016
• A new Ministerial determination for 6,300MW of renewables will be made to allow the

above procurement as well as future procurement

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The South African Renewable Energy Landscape

Outline of Renewable Energy Programme – Past tender results, ongoing projects, future prospects

44

The South African Renewable Energy Landscape

Impact on electricity price (including outline of Feed-in-Tariff programme)

• In short: move from Feed-In Tariffs to Competitive Tenders
• Summary:
• 2009: REFIT (Renewable Energy Feed-in Tariff programme)
• Current programme: REIPPPP (Renewable Energy Independent Power Producer Procurement

Programme)

• Round 1-3 = 64 projects
• 100 different shareholder entities, 46 of these in more than one project
• Round 1: 53 Bids for 2,128 MW received. 28 Projects for 1,416 MW allocated (US 6 Billion)
• Round 2: 79 Bids for 3,233 MW received. 19 Projects allocated
• Round 3: 93 Bids for 6,023 MW received. 17 Projects allocated for 1,456 MW.
• Private sector investment of US $14 billion committed
• Just shy of 4,000 MW
• Technology prices have decreased substantially over the past 3 bidding windows:
• Solar PV tariff:

68% decrease

• Wind tariff:

42% decrease

44

45 45

MYPD 1 Decision Revi sion 1: 2008 price in Dec 2007 Revi sion 2: 2008 price in Mar 2008 Inter im MYPD2 Decision Revi sion: 2012 Price Mar 2012 MYPD 3 Decision 2006 2007 2008 2008 2008 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2017 5,10 5,90 6,20 14,2 27,5 31,3 24,8 25,8 25,9 16,0 8 8 8 12,6 9 * * 17,9 1 18,0 9 18,2 7 22,6 1 25,2 4 33,1 4 41,5 7 52,3 65,8 5 60,6 6 65,5 1 70,7 5 76,4 1 79,7 3 82,5 3 89,1 3

Avg price increases (%) Avg price c/kW

Prices in Red applied

The South African Renewable Energy Landscape

Impact on electricity price (including outline of Feed-in-Tariff programme)

Source : NERSA

46 46

Source: Blue Horizon Energy

The South African Renewable Energy Landscape

Impact on electricity price (including outline of Feed-in-Tariff programme)

47

The South African Renewable Energy Landscape

Key players – Shareholders

• Key Private Sector Actors
• Initial debt providers in REIPPPP: Nedbank, Standard Bank, RMB,

ABSA, IDC, DBSA, EKF, Investec, Old Mutual, IFC, Rest

• Rest: OPIC, AFDB, Liberty Group, ACWA, EIB, Sanlam, FMO,

PROPARCO and Sumitomo

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5 10 15 20 Estimated No of Projects per Stakeholder Name of Company

Prominent Shareholders in REIPPPP Windows 1-3

Source : Frost & Sullivan analysis and South Africa’s Renewable Energy IPP Procurement Program: Success Factors and Lessons Authors: Anton Eberhard, UCT; Joel Kolker, World Bank Institute and James Leighland, Private Infrastructure Development Group

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• Main Wind and PV Equipment Suppliers in REIPPPP Rounds 1- 3

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2 4 6 8 10 12 14 Number of Contracts per Supplier Name of Company

Prominent Shareholders in REIPPPP Windows 1-3

The South African Renewable Energy Landscape

Key players – developers/IPPs, EPCs, suppliers of key components etc.

Source : Frost & Sullivan analysis and South Africa’s Renewable Energy IPP Procurement Program: Success Factors and Lessons Authors: Anton Eberhard, UCT; Joel Kolker, World Bank Institute and James Leighland, Private Infrastructure Development Group

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Thank you

50

Frost & Sullivan Contacts

Aurelia van Eeden Business Unit Leader: Energy & Environment +27 (0)21 680 3268 Aurelia.vanEeden@frost.com Johan Muller Programme Manager: Energy & Environment +27 (0)21 680 3210 Johan.muller@frost.com