This presentation focuses on risk assessment and financing options for renewable energy projects. Learn about carbon finance prospects for renewable energy projects.

1. Energy Management Conference
Renewable Energy and Project
Finance

2. Presentation
1. Introduction to Viability Africa
2. Project Components for Success
3. Energy Finance Sources
4. Venture Components for Success

3. Our Vision
Viability Africa, LLC’s overriding objective is to operate as the
leading development and financial advisory firm for clean
technology projects and ventures across East Africa. Viability Africa
will support investments that exhibit economic, technical,
environmental, and social viability and sustainability. The growth of
our team will focus on the recruitment and development of East
Africans seeking to become the future business and political leaders
of their country and region. Our Founders have committed to
reinvesting a significant portion of the company’s earnings to ensure
the company will have long-term sustainability and impact, and to
solidify Viability Africa as a resource available to the market for
years to come as the clean technology sector grows in relevance
and impact across East Africa.

4. Viability Africa, LLC
Carbon Energy Environment
• Asset Development
• Transaction Management
• Asset Monitoring
• Feasibility Studies
• Project Financing
• Financial Advisory
• Project Management
• Environmental and Social
Impact Assessments
• Environment Audits
Founded in 2009, Viability Africa has headquarters in Nairobi,
Kenya with near term expansion plans to establish offices in Dar es
Salaam, Tanzania. Our current portfolio crosses a number of
countries in sub-Saharan Africa and includes a diverse range of
innovative technologies and solutions.

5. Presentation
1. Introduction to Viability Africa
2. Project Components for Success
3. Energy Finance Sources
4. Venture Components for Success

6. Clean Technology Project Finance in
sub-Saharan Africa
• Fundamentals
• Project Company
• High leverage (60-80%)
• Debt service dependent on future cash flows, not necessarily
assets
• Non-recourse Financing
• Main security in project contracts
• Investors
• Equity
• Lender
• Developer

7. Project Finance Characteristics
• Special purpose vehicle (SPV), “ring fenced” project
• Finite life
• Often formed in later stages of development and assets
are transferred (not recommended if can be avoided)
• Appealing as it keeps financing exposure limited to the
project
• Traditional for infrastructure projects such as power
plants, toll roads, etc but also can be applied to
agriculture projects and innovative distribution
programs (financing against fixed service or product
delivery contracts)

8. Project Documents
• Traditional Required Documentation
• Feasibility Study
• EPC Contract
• Off-take (PPA)
• Land Agreements
• Environmental Requirements (EIA, Licenses, Water
Permit, etc)
• Input Supply (Biomass Project)
• Operations and Maintenance Contract
• Government Support Agreement

9. Project Example
• 5 MW Hydro Project Documents
• EIA Approved
• Feasibility Study
• EPC Draft
• ERPA Signed
• PPA Executed
• However…
• Timeline
• “Delays” that should have been anticipated
• Trust your partners (lender, adviser, sponsor)
• Government Negotiations

10. Lessons from Project Finance Transaction
in sub-Saharan Africa
• Bring a lender into conversations on PPA and other
project documents (EPC) before execution
• Ensure land is acquired/rights secured early
• Do not underestimate importance of EIA
• Be prepared to review and revise almost every document
to meet satisfaction of financiers
• Accept that as a developer with limited funding you will
have to give up majority ownership
• Do not get greedy!

11. Project Finance: Recommendations
• As a Developer
– Make a “checklist” and be realistic in what you will
need to develop a project and what you will
ultimately receive when it is fully financed
• Many developers spend all of their money, fall short of
getting the project to a “bankable” state, and ultimately
make nothing
• As a Lender/Investor
– Diligence, diligence, diligence…
• Land, PPA, EPC, Developer Capabilities, Developer
Attitude

12. Presentation
1. Introduction to Viability Africa
2. Project Components for Success
3. Energy Finance Sources
4. Venture Components for Success

13. Energy Finance Sources
1. Focused Equity Funds
2. Commercial Banks
3. Carbon Markets
4. Grants
5. Other

14. Focused Equity Funds
• Impact Equity Investors
– Social Metrics
– Environmental Metrics
– Financial Returns
• Additional Focus
– Renewable Energy
– Clean Technology
– Climate Innovation
• Most investors are cautious to base investments on
returns from carbon markets, so underlying
investment must provide viable returns and
sustainability

15. Focused Equity Funds
• Jacana East Africa Climate Venture Fund
– $10-20 million in size
– Focus on early stage investments in promising
climate friendly projects and ventures
– Average initial investment size $200,000
– Average investment size $1,000,000
– Experienced team in investing locally and in clean
technology space

16. Energy Finance Sources
1. Focused Equity Funds
2. Commercial Banks
3. Carbon Markets
4. Grants
5. Other

17. Commercial Banks – Energy Finance
• New Space/Lack of Capacity at Institutional
Level
• Development Finance Institutions
– Acting as Catalyst
• AfD Facility (CfC Stanbic Bank and Co-Operative Bank
of Kenya)
• Uganda Global Energy Transfer Feed in Tariff (GET FiT)
Program
– Allow Banks to Build Capabilities

18. Commercial Banks – Energy Finance
• Strong Level of Interest
– Nearly ever local commercial bank in the market
has an interest in exploring energy transactions
• Key Variables
– Insurance
– Guarantees
– Equity Sponsors
• Balancing act between market and lender
requirements

19. Energy Finance Sources
1. Focused Equity Funds
2. Commercial Banks
3. Carbon Markets
4. Grants
5. Other

20. Carbon Markets
• Regulatory Markets
– Clean Development Mechanism
• Price Volatility
• Registration Risk
• General Viability
• Voluntary Markets
– Gold Standard
• Premium Pricing
• Sustainable Impact Monitoring and Measurement
– Verified Carbon Standard
• Popular Mechanism
• Lower Price Point
– Others

21. Carbon Markets
• Commonalities
– Challenging and costly registration process
– Intense data monitoring requirements
– Requirements for external parties (Consultants,
Auditors, Brokers, etc)
– Uncertainty

22. Carbon Markets
• Transaction Structure
– Difficult to get creative with today’s pricing, but
traditionally:
• Fixed Forward
• Floor + Floating Percentage
• Pure Floating
• Floor + Floating Percentage with Cap
• Forward Payments (Rare)
– Costs Covered

23. Carbon Markets
• Sub-Saharan Africa Premium
– Few projects
– Sustainable impact
– Least Development Countries (LDCs)
– Innovative Solutions for Rural Populations
• Market Drivers
– Demand Participants
– Supply Constraints/Regulations

24. Energy Finance Sources
1. Focused Equity Funds
2. Commercial Banks
3. Carbon Markets
4. Grants
5. Other

25. Grants
• Number of programs, large and small
– USTDA (United States Trade Development
Agency)
– AECF (Africa Enterprise Challenge Fund)
• Typical Characteristics of Grant Programs
– “Free” money, so many bidders/applicants
– Timely process for review
• Are subsidies sustainable?
– For the right projects

26. Energy Finance Sources
1. Focused Equity Funds
2. Commercial Banks
3. Carbon Markets
4. Grants
5. Other

27. Other Clean Energy Finance Mechanisms
• High Net Worth Individual Donations
• Foundation Support
• Direct Corporate Support
• Intergovernmental Financing
• Micro-finance Climate Programs
• Crowd Funding
• New Mechanisms on the Rise

28. Presentation
1. Introduction to Viability Africa
2. Project Components for Success
3. Energy Finance Sources
4. Venture Components for Success

29. Small and Medium Size Businesses in
sub-Saharan Africa
• Investment Criteria
o Quality of Management Team
o Business Case
o Growth Potential
o Unique Competitive Advantages
o Exit Potential

30. Small and Medium Size Businesses in
sub-Saharan Africa
• Barriers to Access to Finance
o Unclear Vision/Strategy
o Lack of Competitive Advantage
o Incomplete Business Plan and Model
o Unprofessional
o Recommend Consultant
o Proof of Concept

31. Small and Medium Size Businesses in
sub-Saharan Africa
• Funding Options
o High Net Worth Individual/Angel Investor
o Venture Capital
o Private Equity/Growth
o Debt
• Groups
o InReturn Capital
o GroFin
o Invested Development
o Many options emerging in the market…

32. Small and Medium Size Businesses in
sub-Saharan Africa
• Negotiation Tips
o Seek a “Fair” Deal for both Parties
o Accept Help
o Consultants and Investors
o Weigh Options
o Give Yourself Time
o The more in a rush you are, the more you will
either agree to terms that are not in your favor or
scare away the investor
o Be Prepared from the Start

33. Questions?
Kyle Denning
Managing Director
Viability Africa, LLC
www.ViabilityAfrica.com
Kyle.Denning@ViabilityAfrica.com