1. No category

For more information:
Thierno Bocar Tall
Email: [email protected]
[email protected]
128, Boulevard du 13 janvier
BP : 2704 Lome – TOGO
http://www.faber_abref.org
TABLE OF CONTENTS
APPENDIXES ------------------------------------------------------------------------------------------------------------ II
GLOSSARY OF KEY TERMS ------------------------------------------------------------------------------------------ II
EXECUTIVE SUMMARY ---------------------------------------------------------------------------------------------- III
1
INTRODUCTION --------------------------------------------------------------------------------------------------1
2
RENEWABLE ENERGY IN AFRICA: A MARKET ANALYSIS ---------------------------------------------3
2.1
2.2
2.3
3
ABREC: A CATALYST FOR RET IN AFRICA ---------------------------------------------------------------- 9
3.1
3.2
3.3
3.4
4
BUILDING UP THE INVESTMENT INFRASTRUCTURE ACROSS AFRICA -------------------------------------- 22
PROJECT PIPELINE ORIGINATION AND DEVELOPMENT--------------------------------------------------- 22
ENTERPRISE DEVELOPMENT SERVICES---------------------------------------------------------------------- 24
SEED CAPITAL FINANCING --------------------------------------------------------------------------------- 25
TECHNICAL WORKSHOPS AND SEMINARS ---------------------------------------------------------------- 25
CARBON MARKETS ACTIVITIES ----------------------------------------------------------------------------- 26
RISK MANAGEMENT ---------------------------------------------------------------------------------------- 27
ACE-TAF: ENVIRONMENTAL AND SOCIAL POLICY-------------------------------------------------- 28
6.1
6.2
6.3
6.4
7
GOVERNANCE AND MANAGEMENT TEAM --------------------------------------------------------------- 17
THE KEY TEAM ----------------------------------------------------------------------------------------------- 18
ORGANIZATIONAL CHART ---------------------------------------------------------------------------------- 19
ACE-TAF: A STRATEGIC CONTRIBUTION ---------------------------------------------------------------- 21
5.1
5.2
5.3
5.4
5.5
5.6
5.7
6
CORPORATE MANDATE ------------------------------------------------------------------------------------- 9
ORGANIZATIONAL STRUCTURE ----------------------------------------------------------------------------- 10
ACE-TAF: A STRATEGIC ROLE---------------------------------------------------------------------------- 14
ABREF: A SYNERGISTIC RELATIONSHIP ------------------------------------------------------------------- 15
ABREC: GOVERNANCE STRUCTURE AND FUNCTIONAL ORGANIZATION -------------------- 17
4.1
4.2
4.3
5
THE ENERGY SECTOR IN AFRICA ---------------------------------------------------------------------------- 4
STATE OF RENEWABLE ENERGY IN AFRICA ----------------------------------------------------------------- 4
BARRIERS AND SOLUTIONS FOR RET IN AFRICA ----------------------------------------------------------- 6
IMPLEMENTATION ------------------------------------------------------------------------------------------- 28
DUE DILIGENCE --------------------------------------------------------------------------------------------- 29
MONITORING AND REPORTING ---------------------------------------------------------------------------- 30
COMMON PROBLEMS WITH ESIAS IN AFRICA------------------------------------------------------------ 30
ACE-TAF: FINANCIAL RESOURCES ----------------------------------------------------------------------- 31
7.1
7.2
ACE TAF FINANCIAL PROJECTION ----------------------------------------------------------------------- 31
THE CREATION OF A SUBFUND: AFRICAN GREEN DEVELOPMENT FUND (AGDF) --------------------- 34
Business Plan: ABREC
Appendixes
Appendix 1: ABREF’s Structure
Appendix 2: ABREC Shareholders
Appendix 3: ABREC & ACE TAF key team
Appendix 4: Pipeline of Pre-selected Projects
Glossary of Key Terms
ABREC
Africa Biofuels and Renewable Energy Company
ABREF
Africa Biofuel and Renewable Energy Fund
ACE-TAF
Africa Clean Energy - Technical Assistance Facility. A Special Purpose
Vehicle managed by ABREC
BDEAC
Banque de Développement des Etats de l'Afrique Centrale
DBSA
Development Bank of Southern Africa
EBID
ECOWAS Bank for Investment and Development. Equivalently, BIDC or
Banque d'Investissement et de Développement de la CEDEAO
FAGACE
Fonds Africain de Garantie et de Coopération Économique
PTA Bank
Eastern and Southern African Trade and Development Bank
SPV
Special Purpose Vehicle governed by a specific and legally binding
agreement and administered as a separate fund entity for accounting
and reporting purposes
RE
Renewable Energy
EDS
Enterprise Development Services
ii
Business Plan: ABREC
Executive Summary
The world is on the verge of unprecedented growth in the production and use of
renewable energy and biofuels. Although these energy sources supply less than 5% of
the world’s energy needs, fluctuating oil prices, national security concerns, global
climate concerns, the desire to increase farm incomes, and a host of new and improved
technologies are propelling many governments to enact powerful incentives for the
production and use of alternative sources of energy. This, in turn, is sparking a large new
wave of interest and investment in renewables and biofuels.
Renewable Energy in Africa: Ample Opportunities and Difficult execution
Notwithstanding these trends, Africa’s share of clean technology financing flows,
including carbon credits, remains disproportionately small. In 2009, there was no
recorded venture capital investment in Middle East and Africa and asset finance flows
reached only US$2.5 billion, most of which into wind and solar; this compares with global
investment in clean energy of close to US$162 billion in the same year. In terms of the
carbon market, Africa accounted for only 1.96 percent of all registered CDM projects as
of August 31, 2010 (only 46 out of 2,350 projects) and most of these projects (17 out of 46)
were located in just one country, South Africa. By contrast, sub-Saharan Africa’s
contribution to global emissions is relatively small—5 percent of the global total.1
Globally, China is the largest supplier of CERs in the world, issuing 47.67% of all CERs,
according to the United Nations Framework Convention on Climate Change (UNFCCC).
Still, the potential in Africa is impressive. Assessments conducted by the International
Energy Agency confirm that Africa is a potential superpower in renewable energy and
biofuels, and a recent World Bank study indicates high potential in terms of CDM
opportunities as well. By using the framework of methodologies approved by the CDM,
this World Bank study estimates a technical potential of more than 3,200 low carbon
energy projects, including 361 large programs, each consisting of hundreds or even
thousands of single activities. If fully implemented, this estimated technical potential
could provide more than 170 GW of additional power-generation capacity, more than
twice the region’s current installed capacity. The additional energy provided, both
electrical and thermal, would equal roughly four times the region’s current modernenergy production.
Structural problems in Africa have impeded the development of a flourishing renewable
energy sector. These problems include: (i) financial impediments; (ii) scarcity of skilled
human resources; (iii) lack of awareness and information sharing; (iv) institutional and
regulatory hurdles; and (v) infrastructure and market barriers.
With low levels of investment affecting the entire energy sector, Africa is generally
characterized as having:
1. Low energy consumption per-capita
In Africa the key contributing sectors with respect to emissions are forestry and agriculture, which together account for 73 percent of
emissions from the region (and 13 percent of the global total emissions from these sectors).
1
iii
Business Plan: ABREC
2. High dependency on traditional fuels and oil as fuel
3. Majority of population living in rural areas without access to commercial, stable
source of energy
ABREC: A Catalyst for RET in Africa
In 2008, African institutions (Ecobank, IEI, EBID) along with African states launched a
unique initiative for promoting the development of RE in Africa with the creation of a
company that structured the financing of RE energy projects. In March 2010 a successor
to the former company was incorporated as the African Biofuels and Renewable Energy
Company (ABREC) with the mandate to:
“Promote the identification, development, financing and implementation of selfsustaining biofuels and renewable energy projects in Africa.”
To achieve this objective ABREC devised two strategies:
1. Structuring a series of special purpose vehicles with a mandate to execute
ABREC’s vision in specific renewable energy strategies. The African Clean EnergyTechnical Assistance Facility (ACE-TAF) will be the first of such vehicles. It will
conduct project origination and evaluation. It will help enterprise develop RE
capabilities and it will provide seed capital for selected RE projects;
2. Sponsoring a private equity fund to be managed by an independent third party
fund management company with an international reputation and proven track
record in structuring and managing institutional strength renewable energy
private equity funds.
ABREC’s ambition is to become the hub for clean Energy in Africa and as such it upholds
a wider agenda that includes policy formation; developmental imperatives and building
an educational infrastructure. These objectives will entail:
1. Working closely with states for regional policy harmonization, conducting
analytical and diagnostic national studies, enhancing access to information on
technology and regional regulations, disseminating information about country
policy framework and investment opportunities;
2. Providing services to corporations and project promoters, including: advisory
services, energy efficiency program development, training, seminars organization
and management of carbon credit (ABREC is considering launching a dedicated
special purpose vehicle for carbon);
3. Collaborating with research bodies and other academic institutions to enhance
policy analysis and policymaking capacity.
iv
Business Plan: ABREC
Shareholders
ABREC’s shareholders include EBID as the founding institution as well as African states
and leading African institutions that have made a commitment to develop a sustainable
renewable energy sector across Africa.
Their investment in ABREC is recognition of the leading role that ABREC will play in
working with both the private and public sectors across Africa to promote the
development of the clean energy sector.
Whilst providing both financial and political support to ABREC and its affiliates, African
states will remain passive investors with limited voting rights and will not interfere in the
strategic direction or day-to-day operations of the company.
Organizational structure
The current organizational structure is a strategic choice originally guided by the World
Bank. In line with the broader objectives of ABREC’s founders, it was decided to put in
place a framework that would allow ABREC to develop over time the capacity skills and
financial clout to structure and launch the next generation of Renewable Energy Funds.
Thus recognizing the importance of attracting the support of international investors and
adopting best international practices, the founders of ABREC opted outsource the
management of its first fund to a reputed international fund manager with an
established track record in renewable energy that will run the fund as an institutional
private equity vehicle.
The founders also recognized the need to foster capacity building in the renewable
energy sector and to promote a coordinated response to climate change. Thus, it was
decided to set up a technical assistance facility (ACE-TAF) to be managed by ABREC.
This structure, the first vehicle that will be launched by ABREC, has attracted broad
institutional and political support.
ABREC created with an International Company status, headquartered in Lomé, will be
active in all African regions. To achieve a successful continent coverage, four regional
offices will be created:
-
ABREC West Africa, based in Accra
ABREC Central Africa
ABREC South Africa
ABREC North Africa
Each regional office will be hosted by a regional institution, partner of ABREC. So far, a
number of prominent institutions have expressed an interest in hosting ABREC offices,
including the Banque de Développement des Etats de l'Afrique Centrale (BDEAC), the
Eastern and Southern African Trade and Development Bank (PTA Bank), and the
Development Bank of Southern Africa (DBSA).
The regional offices will focus on projects based in their geographic area whereas
interregional projects will be under the management of ABREC headquarter.
v
Business Plan: ABREC
The legal relation between the Headquarter and regional offices will depend on the
constraint of hosting institutions. Thus in some cases, regional offices may be shareholders
of ABREC or merely partners.
Building an African Renewable Energy Database
ABREC will develop the information database and local contacts necessary to evaluate
legal and regulatory issues specific to each country. Parallely it will promote technical
and financial, project evaluation expertise.
Promoting Skill Formation
ABREC will also promote skills formation at the public and private sector level in Africa by
means of a series of technical workshops and seminars. These courses primarily aimed at
fostering an investment culture will focus on, institutional and regulatory aspects of
renewable energy (including the development of national and sectoral policies as well
as regional policy harmonization); finance and business models appropriate to ensure
faster uptake and scaling-up of renewable energy in Africa; and clean energy
technology choices and technical evaluation.
ACE-TAF selection of early stage bankable projects
ACE-TAF’s key objective is to help the RE sector mature. It will develop a robust pipeline
of bankable projects to offer in priority to ABREF and eventually other investors in Africa.
ACE-TAF will also set up a scheme to seed capital for high potential projects that are
matured for investment by ABREF.
Selecting and scoping bankable projects
ACE-TAF will help entrepreneurs and project developers assess the feasibility of
renewable energy projects, prepare business plans and investment proposals and
undertake the preparatory work (permitting, engineering, contracting, fundraising, etc.)
needed to develop an investment opportunity.
ACE-TAF aims to become the choice provider of technical assistance for African RE
entrepreneurs and project sponsors and will focus on the following:
1.
2.
3.
4.
5.
6.
7.
pipeline of potential investable projects for ABREF and other investors
pre-feasibility and full feasibility studies for entrepreneurs
project evaluation services
Assist entrepreneurs in writing business plans
Assist entrepreneurs and financial institutions with CDM transactions
Negotiate power purchase or other off-take agreements
Provide seed capital to carefully selected projects
ABREF will cooperate with ACE-TAF to the extent that much of ACE-TAF’s origination
efforts will be steered by ABREF’s investment objectives. As such the latter will have
vi
Business Plan: ABREC
priority above other institutional investors in reviewing and selecting projects presented
by ACE-TAF.
ACE-TAF will also provide seed capital for selected high potential projects in which ABREF
has a strong interest in investing once the company is scaled and matured by a first
round of financing. Such strategy in light of the state of the renewable energy market in
Africa will concern likely concern Greenfield projects that require early stage start up
structuring and seed financing.
ABREF – A private equity Fund
ABREF is to be incorporated as a private equity fund with the sole objective to make
profitable investments. To facilitate such objective it will be supported by an Advisory
board staffed by senior financiers from the International Fund Manager (IFM) and ABREC.
ABREC’s representatives will be senior African and International businessman. In line with
the guidance agreed by the IFM, ABREF’s advisory board will have purely a consultative
role and will help promote the fund at the pinnacles of the African and International
public and private sector.
IFM personnel will also have seats on ABREC’s board and ACE-TAF’s Investment
Committee. This measure will help ACE-TAF deploy capital according to commercial
private equity practices whilst helping ABREF in its pipeline development efforts. It will
also secure a coherent graduation of early stage projects into mature investable
companies compliant with ABREF investment criteria.
More broadly these measures will position ABREF as a key contributor to the development
of an investment infrastructure for renewable energy projects across Africa. These
measures should also result in skills transfer to ABREC that will empower it to launch the
next generation of renewable energy funds and fulfil its objective of fostering private
investment in the renewable energy sector in Africa.
Activities to Date
ABREC has conducted feasibility studies and helped for carbon trading in public and
private sector.
Besides, ABREC has
signed a number of memoranda of understanding with project
developers in West Africa and multilateral organizations with a view to exclusive
cooperation on the feasibility studies related to the implementation of biofuel and
renewable energy projects in Africa.
vii
Business Plan: ABREC
Governance Structure and Functional Organization
To ensure sound governance and accountability, ABREC will put in place a structure
independent oversight and public reporting of its activities. The governance structure
ABREC will include a Managing Director and a Board of Directors. ABREC’s Board
Directors will appoint an Investment Committee to oversee the investment activities
ACE-TAF.
of
of
of
of
Collectively, the Board of Directors of ABREC will represent one of the most seasoned
team of financiers in Africa. The Board will be staffed by the leaders of some of the
leading African institutions and include some of the most seasoned bankers on the
continent and at the international level.
In addition to seasoned bankers the Board of Directors, will include experts in Renewable
Energy and representatives of anchor donors and investors.
ACE-TAF will be an affiliate of ABREC and more specifically a Special Purpose Vehicle
headed by a coordinator and under the supervision of ABREC’s Managing Director.
Whilst the Managing Director will have the overall responsibility for the operations of
ABREC, including ACE-TAF, he will report to the Board of Directors on a regular basis. In
addition to providing strategic and operational guidance
To ensure that the pipeline development and the seed financing benefit ABREF, the fund
manager has committed to assist ACE-TAF to develop and implement appropriate
business systems, adopt best practices and develop effective investment selection,
monitoring and exiting capabilities.
To ensure accountability, particularly with respect to the judicious use of seed capital
funds, ACE-TAF will put in place a rigorous reporting and financial auditing system. In this
respect, the Board of Directors will ensure that an annual report on the operations of
each of ABREC and ACE-TAF is provided to the appropriate stakeholders within 90 days
after the end of each financial year and that ACE-TAF reports on the progress of its seed
investments on a biannual basis. The Board of Directors will also approve key corporate
policies; and it will ensure that appropriate internal controls and auditing procedures are
in place.
In addition, the Investment Committee will be responsible for overseeing the investments
made by ACE-TAF. As a key accountability measure, the Investment Committee will
promptly report on its discussions to the Board of Directors by distributing the minutes of its
meetings and, where appropriate, by oral reports at Board meetings.
viii
Business Plan: ABREC
In its effort to ensure efficient governance and accountability, ABREC will follow
guidance provided by OHADA and the Committee of Sponsoring Organizations of the
Threadway commissions (COSO), which is recognized worldwide for providing guidance
on critical aspects of organizational governance, business ethics, internal control,
enterprise risk management, fraud and financial reporting.
Internal procedures following guidance of COSO and OHADA will be submit to the board
for validation.
Risk mitigating
This structure of governance and organization will help better address the main concerns
investors have in Africa. The table below showcases the concerns of investors and how
ABREC organization will mitigate them.
Investors concerns
How ABREC will mitigate them?
Lack of private equity
track
ABREF will be managed independently by an International
fund manager with proven track record in RE private equity
Shortage of bankable
projects
ACE-TAF will develop a project pipeline for institutional
investors and supported by the IFM will provide seed capital
for selected projects that will be groomed for ABREF
Political interference
Government will be passive investors that will not interfere
with the management of ABREC
Differing Returns
Expectations
Create a special share class for investors that prioritise
developmental objectives and will cap their investment
returns and distribute surpluses in favour of other investors or
reinvestment in developmental programs
Financial Resources
ABREC
ABREC will be fully funded by its founding shareholders. Its funding level and future
revenue stream will be sufficient to fund its operations and development plans.
ACE-TAF
ACE-TAF will finance its operations mainly from an annual fee charged to ABREF, from
client fees it receives for projects undertaken and finally it will require Donors
contributions to help bridge its funding requirement. The annual fee charged to ABREF is
for pipeline development services ACE-TAF renders to ABREF and will be regulated by
contractual agreement between the latter parties. ACE-TAF will also charge subsidy-rate
fees to coroporates and entreprenurs for project work undertaken.
ix
Business Plan: ABREC
We have estimated that ACE-TAF has a shortfall of $9.524m reprsenting 60% of its
operational cost for the next five years. In addition 20% of the minium the sum sought to
deploy seed capital investments has been secured with ABREC and UNEP.
Donors will play an important role in the success of ACE-TAF by helping amongst others to
bridge the operating funding shortfall gap and to fund the seed capital investment
programme.
Therefore, it is crucial at this stage to secure additional funding
commitments for the initial phase of operations. We expect that the seed investing
programme will generate postive returns for the Donors.
Performance Criteria
ACE-TAF will set explicit criteria by which management and stake-holders will be able to
assess progress in the pursuit of the corporate mandate and ensure appropriate use of
financial resources. This will include specific objectives on the number of projects
evaluated and funded, the number of external seminars organized, and a ceiling on the
proportion of resources devoted to administration and overhead expenditures.
x
Business Plan: ABREC
1
Introduction
The world is on the verge of unprecedented growth in the production and use of
renewable energy and biofuels. Although these energy sources supply less than 5% of
the world’s energy needs, fluctuating oil prices, national security concerns, global
climate concerns, the desire to increase farm incomes and a host of new and improved
technologies are propelling many governments to enact powerful incentives for the
production and use of alternative sources of energy. This, in turn, is sparking a large new
wave of interest and investment in biofuels and renewable energy.
For Africa, the potential to be an active producer of alternative sources of energy is high.
Not only is Africa a potential superpower in renewable energy and biofuels, as
concluded in studies and assessments conducted by the International Energy Agency
(“IEA”) and the World Bank. By using the framework of methodologies approved by the
CDM, a recent World Bank report estimates that just in the energy sector, sub-Saharan
Africa could host in excess of 3,200 CDM projects that could attract over $150 billion in
investment, produce additional carbon revenues of $98 billion and reduce greenhouse
gases by some 9.8 billion tonnes of carbon dioxide through the life of the projects. These
projects would add 150 GigaWatts of renewable electricity capacity, more than twice
the current installed capacity.2
In addition, there are significant complementarities between public policy in Africa and
private-sector projects in clean energy. Biofuels and renewable energy operate at the
intersection of three key global challenges: income poverty, energy security, and
climate change. Clean energy projects operating in rural areas create employment
directly where the majority of income-poor people live, provide the opportunity to supply
energy to areas not currently on the electricity grid, and contribute to the global fight
against climate change (in addition to improving air quality locally by reducing the
amounts of ground-level ozone and other air pollutants associated with extensive
burning of wood and charcoal).
However, key barriers (including financial sector impediments, lack of human resources,
and lack of information on technology) have served to raise the level of perceived risk,
dissuade entrepreneurs from taking risks, and deter both domestic and foreign
investment in renewable energy and even in the broader energy sector.
To encourage entrepreneurship and to promote investment in renewable energy
projects across Africa, ABREC will launch a set of Enterprise Development Services
(“EDS”) and seed capital financing activities, under a special vehicle named ACE-TAF.
These instruments are specifically designed to complement the activities and
contributions of ABREF, a new renewable energy investment fund for Africa.
Christophe de Gouvello, Felix B. Dayo, and Massamba Thioye (2008) “Low-carbon Energy Projects for Development in Sub-Saharan
Africa Unveiling the Potential, Addressing the Barriers” (World Bank).
2
1
Business Plan: ABREC
The proposed approach to promoting renewable energy and investing in
entrepreneurship builds on existing efforts with the novelty that the specific linking of early
stage and subsequent growth investment will garner significant synergies. The general
experience of efforts to date have shown that assisting entrepreneurs to take risks, to
innovate the way they deliver goods and services, and to experiment and refine their
business models, can be an efficient and effective way to develop and grow new
sustainable energy markets. However the approach is unlikely to mature to any
appreciable scale unless more mainstream investment capital can be encouraged to
participate at the early stages of enterprise growth. To this end, new approaches are
needed to provide solid linkages between the early stage seed capital support and the
subsequent commercial capital energy investment activities.
The objectives and operations of ABREC are the primary focus of this business plan. After
a market analysis of renewable energy in Africa and the identification of key barriers to a
wider adoption of renewable energy technologies, this document reviews the corporate
mandate of ABREC and its organizational structure, provides an overview of ABREC’s
governance structure and functional organization discusses the main contributions and
functions and concludes with a synopsis of the financial projections.
Box 1. CDM Potential in Africa
According to a World Bank study, the potential for CDM projects in sub-Saharan Africa is:
3,200 projects that can provide up to 170 GW of additional power-generation capacity,
about 4 times the region’s current modern-production.
 More than 12% of the global hydropower
potential is located in Sub-Saharan Africa but less
than 10% of the 1.1 GW capacity is exploited
 More than 9,000 MW could be produced through
geothermal power but few countries are even
exploiting this source of energy.
 Total forest cover of 650 million hectares
accounting for approximately 17% of the world’s
total forest cover
 9m/s of average wind speed per 80m
 Most African countries enjoy about 325 days of
sunlight per year but solar power remains
marginal in most countries. Average sunshine
potential in West Africa represents 5 to 6 kWh/m²
per day.
2
Business Plan: ABREC
2
Renewable Energy in Africa: A Market Analysis
Africa’s vast size, abundant natural resources and suitable agro-climatic conditions
makes it an ideal location for the implementation of solar, wind, hydro, biomass, biofuels
and other types of renewable energy technologies (“RET”). Consistent with Africa’s
current state of infrastructure development and geography of needs, these sources of
energy are also well suited for more remote locations as off-grid or local grid
applications. Overall, the implementation of RET promises to alleviate many of the key
problems that face Africans on a daily basis and to make a significant contribution on
global climate change.
Although significant barriers have prevented the potential of RETs from being harnessed,
global trends and a renewed focus on clean energy present a unique opportunity for
Africa. After a brief overview of the state of the energy sector and renewable energy in
Africa, this section outlines the key barriers to the implementation of clean energy
projects in Africa and discusses how ABREC will assist both entrepreneurs and
governments to overcome these challenges.
Box 2. Biomass as a Key Energy Source in Africa
The primary source of energy in Sub-Saharan Africa is traditional biomass. Over 90% of
the total energy consumption is biomass in Ethiopia, DPR Congo and Tanzania. Projections
estimate that this will further increase, together with population increase and higher
energy needs. In total energy consumption, populous countries, such as Nigeria, South
Africa and Egypt have the highest levels of consumption of biomass.
3
Business Plan: ABREC
2.1
The Energy Sector in Africa
Consumption of modern forms of energy is very low in Africa, where the primary source
of energy is traditional (i.e. non-commercial) biomass. This includes mostly wood fuel
(wood and charcoal) but also agricultural residues and animal wastes. Broadly, there are
two exceptions to this rule: North Africa which relies primarily on oil and gas as a source
of energy, and South Africa which depends most heavily on coal (Box 1).
Traditional biomass energy use has severe health and environmental drawbacks.
Unvented biomass cooking stoves are a major contributor to indoor air pollution and
respiratory illnesses in highland areas of Sub-Saharan Africa. More broadly, reliance on
traditional biomass contributes to biodiversity loss, destructive deforestation practices
and the prevalence of burnings across Africa. The latter are a major source of surface
ozone and the dominant contributor to greenhouse gas (GHG) emissions from Africa.3
Indicative of the failure of the conventional energy sector to provide sufficient levels of
energy is the extremely low rate of access to electricity across Sub-Saharan – by far the
lowest of any region in the world. With the exception of South Africa and Mauritius,
electricity consumption is essentially confined to enterprises and high-income
households. For most Sub-Saharan African countries, the proximate causes of this
underperformance have been low rates of investment by the private sector and poor
financial performance by utilities.
Overall, Africa has 13% of world’s population and produces 7% of the world’s
commercial energy, but it consumes only 3% of the world’s commercial energy. The IEA
estimates that, by 2030, there could still be close to 600 million people in Africa without
access to electricity, out of a total of 1.4 billion worldwide.
2.2
State of Renewable Energy in Africa
Africa is endowed with substantial renewable energy resources, but similar to the case of
the electricity sector, the Continent has been relatively slow at harnessing this potential.
The indicators on the extent of the gap between potential and implementation are quite
striking:

More than 12% of the global hydropower potential is located in Sub-Saharan
Africa but less than 10% of the 1.1 GigaWatt capacity is exploited.

More than 9,000 MegaWatts could be produced through geothermal power but
few countries are even exploiting this source of energy.

Most African countries enjoy about 325 days of sunlight per year but solar power
remains marginal in most countries.

With favourable agro-climatic conditions and available arable land (including
semi-arid lands which are suitable for crops like Jatropha) Africa can become a
While fossil fuels contribute less than 4% of GHG emissions from Africa, burnings contribute close to 40% and deforestation accounts
for roughly 17%.
3
4
Business Plan: ABREC
global superpower in the supply of biofuels but most countries do not even have
a specific national biofuels policy or consumption targets.
Predictably, Africa also underperforms in terms of external financing flows into the clean
energy sector and access to carbon revenues. In 2009, there was no recorded venture
capital investment in Middle East and Africa and asset finance flows reached only US$2.5
billion, most of which into wind and solar; this compares with global investment in clean
energy of close to US$162 billion in the same year. In terms of the carbon market, Africa
accounted for only 1.96 percent of all registered CDM projects as of August 31, 2010
(only 46 out of 2,350 projects) and most of these projects (17 out of 46) were located in
just one country, South Africa. By contrast, sub-Saharan Africa’s contribution to global
emissions is relatively small—5 percent of the global total.4 Globally, China is the largest
supplier of CERs in the world, issuing 47.67% of all CERs, according to the United Nations
Framework Convention on Climate Change (UNFCCC).
More recently, a combination of factors have raised the profile of RETs across Africa.
These include: high and variable oil prices, recurrent crises affecting power utilities
(including most recently and prominently in South Africa), and key global initiatives on
global warming and promotion of clean energy. In addition, there is increasing
recognition among development and energy specialists that RETs effectively operate at
the intersection of three key global challenges:

Energy security

Climate change

Poverty reduction
In particular, clean energy projects operating in rural areas create employment directly
where the majority of the income-poor live, provide the opportunity to supply energy to
areas where the majority of the energy-poor live, and contribute to the global fight
against climate change.5
Figure 1. World Population without Electricity, 2002-2030
In Africa the key contributing sectors with respect to emissions are forestry and agriculture, which together account for 73 percent of
emissions from the region (and 13 percent of the global total emissions from these sectors).
5 In addition to improving air quality locally by reducing the amounts of ground-level ozone and other air pollutants associated with
extensive burning of wood and charcoal.
4
5
Business Plan: ABREC
2.3
Barriers and Solutions for RET in Africa
The launch of a new renewable energy investment fund in ABREF and a complementary
set of Enterprise Development Services (“EDS”) and seed capital activities under ABREC,
more precisely ACE-TAF is aimed at helping to overcome the barriers that have, thus far,
impeded a faster take-up of the available opportunities in renewable energy in Africa.
The key innovation in this initiative is the institutional link between ACE-TAF and ABREF
which provides the opportunity for technical and financial assistance from the beginning
to the later stages of a project’s lifecycle.
This synergistic approach of promoting investments provides a unique opportunity to
address some of the key gaps facing African entrepreneurs in the clean energy sector,
and by extension, it will also create the opportunity for ACE-TAF to work with both
government and conventional financial institutions in developing the sector awareness
and policies necessary to boost the clean energy sector. In addition, as ACE-TAF
establishes its own track record in project origination and evaluation, it will be able to
extend its contribution to the building of technical capacity and the strengthening of
investment infrastructure in Africa even after ABREF itself is fully invested, which is
expected to happen within four years.
2.3.1
Structural Problems
Structural problems impeding the development of Renewable Energies in Africa can be
effectively grouped into five categories: financial barriers (high perceived risks);
infrastructure and market barriers; lack of skilled human resources; institutional and
regulatory hurdles; and lack of awareness and information sharing. In practice, the lack
of information and general awareness of new technologies certainly impacts each of
the other categories, and these barriers are generally inter-related.
1. Financial barriers are a compound problem of lack of ready access to start-up
capital, low income, higher real and/or perceived risk, and lack of financing
mechanisms appropriate for RETs and local conditions. A relatively underdeveloped financial sector in combination with lingering concerns on the
investment environment and lack of awareness of newer technologies has
constrained the response of conventional financial institutions to the opportunities
available in the clean energy sector in Africa.
2. Infrastructure and market barriers arise partly out of a previous pattern of
underinvestment in the energy sector and related financial fragilities of power
utilities and partly out of the patchwork of small national markets constrained by
a lack of regional policy harmonization.
3. Lack of skilled human resources is in part a general issue of the level of education
and training and in part a specific issue related to a lack of well-trained
entrepreneurs with information on the opportunities and challenges of new
technologies. In some countries where relatively more skilled workers may be
available, there tends to be a lack of a critical mass necessary for technology
intensive projects. These shortcomings add to the overall transaction costs for
6
Business Plan: ABREC
clean energy and raise the sectoral risk perceived by both domestic financial
institutions and external investors.
4. Institutional and regulatory hurdles include: (i) policy-related shortcomings such as
a lack of clear policy targets for RETs, lack of fiscal incentives for clean energy
production combined with existing subsidies for conventional energy sources,
and more generally, a lack of guidance on future energy policy; (ii) institutional
barriers such as monopoly structures for existing producers and lack of purchase
agreements or feed-in tariffs for independent producers; and (iii) weak
environmental regulation and enforcement.
5. Lack of awareness and scarcity of information on technology selection creates
knowledge and credibility gaps at the level of consumers, lenders, developers,
utility companies and planners, particularly in the context of local conditions and
more recent technological advances. In Africa, planners as well as potential
developers and investors often lack the technical information base to effectively
identify and select RETs. Consumers also lack information on the potential energy
savings from energy efficiency and sometimes carry negative perceptions given
failures with past projects—which likely suffered from poor design, lack of quality
implementation, and insufficient maintenance.
In aggregate, this set of problems tends to raise transaction costs and has played a key
role in preventing Africa from getting its full share of clean energy investment and
carbon revenues.
2.3.2
Priorities and Strategies: Overcoming the Structural Problems
Over the medium term, the public policy priorities for Africa are primarily driven by the
need to promote economic development and to increase access to energy. In this
context, recent efforts to plug power supply gaps by stepping up investment in oil-fired
thermal generating plants are not a sustainable solution given rising oil prices and the
negative impact on emissions.
On the other hand, there are significant complementarities between public policy and
private-sector projects in clean energy. For example, biofuels and renewable energy
projects operating in rural areas create employment directly where the majority of
income-poor people live, provide the opportunity to supply energy to areas not currently
on the electricity grid, and contribute to the global fight against climate change.
However, realizing the ample potential of renewable energy in Africa will require
concerted and co-ordinated efforts by all stakeholders. The key strategies necessary to
overcome the previously identified set of interlocking barriers include:
1. Building confidence in the investment community and promoting African
entrepreneurship;
2. Development of institutional capacity to facilitate carbon financing;
3. Establishment of appropriate regulatory framework (e.g., setting of feed-in tariff);
7
Business Plan: ABREC
4. Infrastructure planning and investment for market access (e.g. transmission lines,
rural roads, decentralized power generation and distribution);
5. Strengthening skills and knowledge of local manpower on clean energy
technologies (e.g., training targeting specific labour forces); and
6. Dissemination of technical and economic information on clean energy
technologies (e.g., information campaigns with equipment providers).
2.3.3
The Approach of ABREC
ABREC will help to address these structural problems by working with entrepreneurs,
financial institutions and regional governments. ACE-TAF, the operational arm of ABREC
by providing EDS (including assistance with licensing and permitting, preparation of
feasibility studies, and writing of business plans); will enhance the local capacity of
human, technical and managerial skills.
ABREC and ACE-TAF will combine with ABREF to provide developers with a unique
opportunity to receive both seed capital financing from ACE-TAF, and also to qualify for
expansion financing either from ABREF or other private equity investors. As part of the
latter effort, ACE-TAF will promote the development of carbon finance desks at
conventional financial institutions locally.
To help ensure that the public sector also contributes to the promotion of RETs, ABREC will
help to: disseminate information about country policy frameworks and investment
opportunities; encourage regional policy harmonization; and conduct analytical and
diagnostic national studies.
Finally, a series of technical seminars will ensure that ACE-TAF personnel, entrepreneurs,
financial firms and policymakers are informed of best practices in technical and financial
areas. These seminars will be conducted in close collaboration with local and
international centres of excellence and educational institutions.
Box 3. The Congo Basin and the Kilimandjaro threatened
Total forest cover of 650 million hectares accounting for
approximately 17% of the world’s total forest cover. After the
rainforest, the Congo Basin is the second lung of the planet. It is
estimated that by 2080 there will be significant decrease in extents
of suitable rain-fed land and production potential for cereals due to
climate change and the proportion of arid and semi-arid lands in
Africa is likely to increase by 5-8% (60-90 million hectares).
The Third Assessment Report of the Intergovernmental Panel on Climate
Change (IPCC TAR) reports a warming of approximately 0.7°C over most of
Africa. Snow and Ice cover has decreased, and sea levels have risen by 10-20
cm; the Kilimandjaro has shrunk by over 70%.
By the end of this century, global mean surface temperature is expected to
increase between 1.5 ° C and 6° C.
8
Business Plan: ABREC
3
ABREC: A Catalyst for RET in Africa
The Africa Biofuel and Renewable Energy Company (“ABREC”), together with the African
Clean Energy-Technical Assistance Facility (“ACE-TAF”) and the African Biofuel and
Renewable Energy Fund (“ABREF” or the “Fund”), aims to promote African entrepreneurship
and to catalyze international and domestic support to stimulate sustainable investments in
Africa in the clean energy sector.
This section provides an introduction to ABREC’s mandate and organizational structure,
including a discussion on the role of ACE-TAF, ABREC’s key vehicle; the linkages with ABREF,
ABREC’s strategic partner. The section concludes with a brief summary of ABREC’s activities to
date.
3.1
Corporate Mandate
The corporate mandate of ABREC is
To create an investment infrastructure that will promote the identification,
development, financing and implementation of self-sustaining biofuel and
renewable energy projects in Africa.
The primary instruments for the pursuit of this mandate will be: ABREF and ACE-TAF
The unique relationship with ABREF provides ABREC with access to industry best-practices,
operational guidance from the inception of activities and a source of revenues. ACE-TAF will
be the primary vehicle and a Centre of Excellence in RE project evaluation, EDS and seed
capital financing.
To ensure achievement of its mandate, ABREC will:
1. Establish and entrench a culture of corporate entrepreneurship built around the
guiding principle that: “Entrepreneurs learn best from entrepreneurs”.
2. Aim for Administrative Excellence, Organizational Excellence and Technical
Excellence under the guiding principle of: “Adopting best international practices in
each core function”.
3. Organize its professional staff around three main service lines: Project Originators,
Research Analysts, and Negotiators.
4. Organize its project evaluation systems around three primary steps: (a) Eligibility
Review, (b) Pre-feasibility Appraisal, and (c) Feasibility Assessment.
5. Develop a proprietary methodology for a voluntary emission reduction.
6. Require the technical staff to contribute regularly to two series of working papers to be
published by ACE-TAF:
a. Technical Papers (aimed at disseminating information on technical and
financial evaluation of RE projects in Africa and promoting sectoral
investment), and
9
Business Plan: ABREC
b. Policy Papers (aimed at analyzing sectoral policy options and promoting
regional policy harmonization).
3.2
Organizational Structure
Organizationally, ABREC’s structure consists of:
1. A series of special purpose vehicles with the African Clean Energy-Technical
Assistance Facility (ACE-TAF) being the first vehicle launched by ABREC. ACE-TAF will
not only conduct project origination and evaluation but also provide enterprise
development services.
2. A standalone investment fund managed by an International Fund Manager. The
experience of the International Fund Manager and its collaboration with ABREC will
achieve skills transfer to help the latter launch the next generations of African
Renewable Energy Funds. DUET Infrastructure Partners has been selected, after an
international tender, to manage the fund.
Brief presentation of DUET
Duet is a global alternative asset management firm founded in 2002. The Group manages
over US$2.4 billion of equity as of the 1st of January 2011, across three business areas:
 Hedge Funds,
 Infrastructure & Real Estate
 Funds of Hedge Funds.
Duet Group employs 73 professionals in London, New York, Tokyo, Singapore, New Delhi,
Dubai and Istanbul.
The ABREF’s structure is presented in appendix 1.
Besides overseeing ACE-TAF and collaborating with ABREF, ABREC will:
1. Contribute to sectoral policy analysis and harmonization across countries;
2. Raise general awareness regarding biofuel and renewable energy among the public
and private sector through seminars and training;
3. Collaborate with research and other academic institutions to enhance policy analysis
and policymaking capacity, deliver effective training programs, and boost technical
and sectoral information sharing;
4. Develop energy efficiency program in collaboration with international institutions.
5. Provide advisory services to investors and projects’ promoters;
6. Promote the development of sector-appropriate
conventional financial institutions across Africa.
financing
instruments
at
10
Business Plan: ABREC
ABREF will be a leading renewable energy fund with a target size of over US$500 million, with
first closing expected to raise US$100 million by mid-2012. ABREF will be run as a commercial
private equity fund with the usual governance structure including an investment committee
and an advisory board.
DUET will have sole responsibility over investment decisions. The Fund is expected to make its
first investments in 2013, for which a potential pipeline of projects has already been identified
by ABREC. These investments are intended to kick-start the renewable energy industry in
Africa with specific focus on (i) energy-efficiency, (ii) solar, (iii) wind, (iv) hydropower, (iii) new
cogeneration, (iv) fuel switching, (v) landfill gas, and (vi) biofuels.
Chart 1. ABREC: Organizational Structure
ECOWAS
States
African
Institutions
Services agreement
DUET
ABREC
Investment mgt
agreement
ACE TAF
ACF (TBC)
SPFn (TBD)
FABER
Organizationally, ACE-TAF will be an SPV managed by ABREC under a legally binding
agreement. ACE-TAF’s mandate encompasses the development of a pipeline of projects
that will be offered to ABREF, as well as the funding of feasibility studies and the preparation
of business plans. In addition, ACE-TAF will provide limited amounts of seed capital funding for
high potential projects supervised by a Seed Financing investment committee staffed by
ABREC personnel and IFM personnel. This organization will allow ACE-TAF and then ABREC to
build its own track record in fund management and strengthen Africa’s investment
infrastructure.
11
Business Plan: ABREC
ABREF will be a stand-alone private equity fund managed by an independent International
Fund Manager. This association provides unique advantages for ABREC in two keys areas.
First, it is the intention of the International Fund Manager and ABREC that a key part of
International Fund Manager’s role is to ensure that there is meaningful skill transfer to the staff
of ABREC so that, once ABREF is fully invested, ABREC is able to operate as a stand-alone
entity in Africa to continue to develop world-class RE projects and secure funding for them.
Second, ACE-TAF will benefit financially from the allocation of services agreement fees
earned for its pipeline development work in favour o ABREF and potential capital gains from
its seed capital financing.
ABREC is also considering the opportunity of starting a new vehicle for managing the carbon
credits from projects in which it is involved. The purpose of the vehicle hereafter named
African Carbon Fund (ACF) is to collect carbon credits and offer them to the carbon market.
So far, ABREC along with its traditional partners, EBID and ECOBANK, have financed projects
which have generated about two million tons of carbon credit.
Considering its continental mandate, ABREC along with its regional partners will create four
regional offices. A number of prominent institutions have expressed an interest in hosting
ABREC offices. The Offices to be created are:
-
ABREC West Africa, Accra
ABREC Central Africa
ABREC East & South Africa
ABREC North Africa
The relationship between the regional office and ABREC’s headquarter will be as flexible as
possible. While some hosting institutions will require shares on ABREC, others will be liaised by a
bilateral agreement.
The primary objective of regional offices will be to identify potential projects which could be
considered for early stage financing.
Overall, this structure represents an innovative way to align interests during ABREC transition to
a Centre of Excellence in both RE project evaluation and EDS. It will also provide a solid
platform on which to ensure that donor contributions to ACE-TAF effectively act as a catalyst
for the sustained promotion of RE across Africa.
3.2.1
Brief History
In 2008, ECOWAS Bank for Investment and Development (“EBID”, or the “Bank”) appointed
Mr. Thierno Bocar TALL to manage a new initiative (the “Initiative”) to explore how Africa
could effectively participate in the growth of the global biofuel and renewable energy
sectors. Funding and technical assistance was secured from a number of multi‐lateral and
regional institutions, most notably the World Bank’s Carbon Finance Assist Program and
ECOWAS member states who wished to promote sustainable economic development in
ECOWAS and across Africa.
The Initiative proposed the establishment of an investment fund aimed at identifying and
financing biofuel and renewable energy projects in Africa – the African Biofuel and
12
Business Plan: ABREC
Renewable Energy Fund (“ABREF”) ‐ and launched ABREC to group together the interests of
African stakeholders who shared the vision of a private sector-led and investment-focused
continental strategy.
The current structure with ABREC delegating ABREF management to an international fund
management company is a strategic choice originally guided by a study conducted with the
assistance of the World Bank. It was decided to delegate the management of the Fund to an
established fund manager as it provided the best framework to allow ABREC to create the
necessary capacity and establish the required track record to be in a position to launch the
next generation of investment funds.
Indeed, having ABREF managed by an international fund manager with a proven track
record will build trust and mitigate the first-time fund concern investors may have, in addition
to provide international best practices to ABREC.
Thus, in recognizing the importance of attracting the support of international investors and
adopting best international practices, the founders of ABREC strategically opted to create
the jointly-owned fund management company and to open participation in its share capital
to an international fund manager. For the record, the founders of ABREC are the
governments of Burkina-Faso, Cape Verde, Gambia, Guinea, Nigeria and Togo as well as the
following financial institutions: EBID, Ecobank Group, FAGACE, and IEI of Nigeria. The
remaining countries of ECOWAS intend to make their equity contributions available by early
2011. In addition, ABREC has received strong expressions of interest for participation in ABREC
from other governments around the continent as well as financial institutions such as BDEAC
(CEMAC), PTA Bank (COMESA) and DBSA (SADC). Finally, it is important to emphasize that the
ECOWAS Commission and UEMOA have jointly signed an MOU in support of ABREC.
The stated intent of the founders of ABREC is to foster capacity building in the renewable
energy sector and to promote a co-ordinated response to climate change. This vision
includes a key role for ACE-TAF, which is an SPV managed by ABREC under a bilateral and
legally binding agreement. ACE-TAF is dedicated to: (i) project origination and evaluation; (ii)
the provision of technical assistance to entrepreneurs; (iii) seed capital financing in close
relationship with ABREF and (iv)the implementation of bilateral institutions strategy.
Organizationally, ACE-TAF will be managed in a manner similar to special funds and facilities
at multilateral and financial institutions.
Following an international tender process ABREC will select an independent Investment Fund
Manager for ABREF. It is expected that ABREF will launch its marketing and fundraising
campaign as well as its investment operations early 2011
3.2.2
Stakeholders of ABREC
In addition to the project promoter EBID, ABREC’s shareholders include African states and
leading African institutions that have made a commitment to developing a sustainable
renewable energy sector across Africa. These sponsors have recognized the leading role that
the company will play in working with both the private and public sectors across Africa to
promote the development of the clean energy sector6(see appendix 2).
13
6
In the circumstances, African governments will not directly contribute equity capital to ABREF.
Business Plan: ABREC
ABREC will be active in every region of Africa. Organizationally, ABREC has an International
Company status and is based in Lomé, Togo, but as capacity is developed and project
origination progresses, four regional offices will be set up to ensure continental coverage.
3.3
ACE-TAF: A Strategic Role
ACE-TAF will be the main vehicle of ABREC for project origination and evaluation and seed
capital financing. ACE-TAF will act as a focal point for the provision of technical assistance to
entrepreneurs, financial institutions and governments as it:
1. Develops a pipeline of potential projects to be considered for financing by ABREF;
2. Assists entrepreneurs for pre-feasibility and full feasibility studies;
3. Delivers project evaluation services;
4. Offers Enterprise Development Services;
5. Provides limited seed capital assistance for selected projects;
Initially, as it builds internal capacity and establishes its own credibility, ACE-TAF’s project
pipeline will be developed in close co-operation with ABREF. The seed capital financing will
be managed by a seed capital financing Investment Committee in cooperation with DUET.
ABREF will have the first choice of selecting projects sourced by ACE-TAF that meet its
investment criteria. Projects that do not interest ABREF will be offered by ACE-TAF to other
institutional investors.
On the ground, ACE-TAF will help entrepreneurs and developers assess the feasibility of a
venture, prepare business plans and investment proposals and undertake the preparatory
work (permitting, engineering, contracting, fundraising, etc.) needed to mature an
investment opportunity. These services will include:

Identification and training of new ‘pre-commercial’ clean energy entrepreneurs and
project developers,

Targeted coaching services for specific promising investment opportunities, and

Co-financing of pre-investment feasibility studies.
Some of the project development costs to be covered could include: (i) project technical
assessments, (ii) regulatory compliance and framework reviews, (iii) negotiations of power
purchase or other off-take agreements, (iv) operational and maintenance cost review and
analysis, (v) environmental impact assessments, and (vi) other aspects of the permitting
process.
As a direct complement to these EDS activities, ACE-TAF also intends to provide seed capital
financing intended to grow the scale and scope of selected companies to qualify for
subsequent round of financing, potentially from ABREF, but also from other investors.
As ACE-TAF develops a network of project originators with continental coverage, it is
anticipated that four regional offices will be set up: West Africa, Southern and eastern Africa,
Central Africa, and Northern Africa. Initially, activities will be conducted from Lomé, Togo; this
14
Business Plan: ABREC
will help ensure that systems and procedures are appropriately adopted throughout the
organizations from the start of operations.
To carry out project tasks, ACE-TAF will initially rely extensively on external experts while it
develops its own internal sector and project specialists. Over time, as ACE-TAF builds more inhouse expertise, the share of work done by internal staff should increase, providing a
significant capacity building exercise for African expertise and cost savings.
3.4
ABREF: A Synergistic Relationship
As an option, ABREF could select projects from ACE-TAF’s pipeline and consider them for
investment purposes. Nevertheless, the IFM is totally free to develop its own pipeline
independently. While ABREC’s main objective is to build capacity and nurture a strong
pipeline of investment grade projects in Africa, the primary objective of ABREF is to achieve
commercial based private equity returns in accordance to its investment criteria.
By contrast, ACE-TAF will focus on smaller and/or early stage projects which require technical
assistance and are eligible for seed capital financing. Over time, some of the projects in ACETAF’s pipeline are expected to mature sufficiently to become of interest to ABREF, and given
the close relationship, ABREF will retain the right of first refusal for any projects identified by
ACE-TAF
To summarize ACE TAF will have a special relationship with ABREF but not exclusive.
As a key contribution to the development of Africa’s investment infrastructure, ABREF’s fund
manager, is committed to assisting ACE-TAF to develop and implement appropriate business
systems, adopt best practices and develop investment decision-making capabilities. In order
to achieve this skills transfer, international fund manager will:

Hold joint bi-monthly meetings in Africa to review pipeline projects and generally assist
with pipeline management; these meetings will be held at the offices of ACE-TAF;

Assist with staff training by including one member of ACE-TAF in selected deal team;
and

Assist with overall monitoring and management by placing senior members on the
Board of ABREC and the seed financing Investment Committee of ACE-TAF.
Financially, ACE-TAF will also benefit from a recurrent source of business revenue as a result of
its pipeline development work. As indicated in the financial summary in Section 6 below,
ABREC will receive service agreement fees from the IFM from which it will compensate ACETAF for its pipeline development work.
Activities to Date
ABREC has conducted feasibility studies and helped for carbon trading in public and private
sector.
15
Business Plan: ABREC
Figure 2 : Capture and flaring of methane from
Figure 1: Production of bioethanol from sweet
municipal solid waste with Hysacam (Cameroun).
sorghum with Global Biofuels (Nigeria)
Besides, ABREC has
signed a number of memoranda of understanding with project
developers in West Africa and multilateral organizations with a view to exclusive cooperation
on the feasibility studies related to the implementation of biofuel and renewable energy
projects in Africa.
The table below summarize ABREC project activities to date:
PROJECTS
COUNTRIES
CATEGORIES
ACTIVITIES
Solar
pv
public
lightning
including
10,000
solar
streetlights dispatched over 14
towns
SIERRA LEONE
Public
Feasibility study
Cogeneration project from
organic waste with power
injection into the grid (about
28,5
GWh/year)
of
Ouagadougou
BURKINA FASO
Public / Private
Feasibility study &
carbon credits
transactions
Production of compost from
municipal solid waste in Accra
GHANA
Private
Feasibility study &
carbon credits
transactions
Solar public lightning in the
main
streets
of
regional
capitals and Conakry (4 485
lamps over 8 towns).
GUINEE
Public
Feasibility study
Rubber
trees
plantation
(Afforestation and production
of latex)
CÔTE D’IVOIRE
Private
carbon credits
transactions
Municipal
Solid
waste
management in (registered
project at the UNFCCC)
CÔTE D’IVOIRE
Private
carbon credits
transactions
16
Business Plan: ABREC
PROJECTS
COUNTRIES
CATEGORIES
ACTIVITIES
Capture
and
flaring
of
methane emitted by the
decay of municipal solid waste
in Douala (registered at the
UNFCCC)
CAMEROUN
Private
carbon credits
transactions
Production of bioethanol from
sweet sorghum
NIGERIA
Private
carbon credits
transactions
20 MW Wind farm in Zamfara
State
NIGERIA
Private
carbon credits
transactions
Industrial charcoal production
CONGO
Private
carbon credits
transactions
Construction of a solar PV
power plant and rural lightning
by solar PV kits
NIGER
Public
Feasibility study
30MW wind farm in Enugu
State
NIGERIA
Private
carbon credits
transactions
360MW natural gas combined
cycle power plant in Téma
GHANA
Public / Private
carbon credits
transactions
4
ABREC: Governance
Organization
Structure
and
Functional
To ensure sound governance and accountability, ABREC will put in place a structure of
independent oversight and public reporting of its activities. This structure will be headed by a
Board of Directors consisting of the most seasoned team of financiers in Africa and supported
by assistance from International fund manager; and it will include the publication of annual
financial reports, which will be subject to an external audit, as well as the publication of
operational reports on the investment activities of ACE-TAF.
4.1
Governance and Management Team
The governance structure of ABREC will include a Managing Director, an Investment
Committee and a Board of Directors. While the Managing Director will have the overall
responsibility for the operations of ABREC and ACE-TAF, he will report to the Board of Directors
on a regular basis. In addition to providing strategic and operational guidance, the Board
will also appoint an Investment Committee for ACE-TAF. It is expected that the Board of
Directors will consist of eight individuals and the Investment Committee will be composed of
five individuals, including independent experts, IFM personnel and representatives of anchor
donors and investors.
17
Business Plan: ABREC
Collectively, the Board of Directors of ABREC will represent one of the most seasoned team of
financiers in Africa. The Board will be staffed by the leaders of some of the leading African
institutions and include some of the most seasoned bankers on the continent.
ABREF’s fund manager will assist ACE-TAF to develop and implement appropriate business
systems, adopt best practices and develop effective investment decision-making
capabilities. As discussed previously, this skills transfer will include the fund manager providing
oversight for project pipeline management at ACE-TAF by seating on ABREC’s board and on
ACE-TAF Investment Committee.
To ensure accountability, particularly with respect to the judicious use of seed capital funds,
ABREC and ACE-TAF will put in place a rigorous reporting and financial auditing system. In this
respect, the Board of Directors will:
Ensure that an annual report on the operations of ABREC and ACE-TAF is provided to
stakeholders within 90 days after the end of each financial year.
Approve, on an annual basis, a written statement of investment and project selection
policies, standards and procedures.
4.2
The key team
ABREC and ACE TAF key team is composed of:

Board members;

ABREC and ACE TAF staff;

Associated consultants.
(For details on the key team see Appendix 3.)
Chart 2. Governance Structure of ABREC
Advisory and
Oversight
Executive
Management
Operational
Management
Investment
Committee
Board of
Directors
Managing
Director
ACE-TAF
Administration
and Finance
18
Business Plan: ABREC
Approve a corporate communications policy designed to help ensure effective relations and
exchanges between ABREC and its stakeholders, including on its investment policy and
record of investments.
Ensure that appropriate accounting policies and internal controls are in place to safeguard
the assets of ABREC, including by reviewing and approving the annual report of ABREC as
well as the quarterly and annual consolidated financial statements of ABREC; ensuring that
internal audits are conducted in respect of ABREC and its operations; ensuring that an annual
auditor’s report is prepared on ABREC’s financial statements, compliance with the stated
investment policy, and the record of investments.
In addition, the Investment Committee will be responsible for overseeing the investment
management and project selection function of ACE-TAF. As a key accountability measure,
the Investment Committee will promptly report on its discussions to the Board of Directors by
distributing the minutes of its meetings and, where appropriate, by oral reports at Board
meetings and provide donors semi-annual updates on the performance of companies
financed through its seed capital financing scheme
The choice of an SPV structure for ACE-TAF is designed to facilitate (i) expenditure control, (ii)
stewardship and financial reporting, and (iii) planning and budgeting. The related legal
agreement between ABREC and ACE-TAF will specify inter alia: (i) the mandate and areas of
operation for ACE-TAF, (ii) the sources and uses of funds, and (iii) the services to be provided
by ABREC. In terms of accounting systems, ACE-TAF will be a separate entity with its own bank
account, and financial records and controls 7.Quarterly operational and financial reports will
also be available from ACE-TAF and communicated to key stakeholders.
The terms of reference (“ToR”) for the Managing Director, Board of Directors and the
Investment Committee are attached as Appendices 6-8 to this Business Plan.
4.3
Organizational chart
Administratively, ABREC will be a lean organization focused on operational activities,
especially through ACE-TAF. At full operation, the contemplated functional structure of the
Company is provided below. This structure reflects the need for a governance structure,
including a Board of Directors and a sufficient level of separation of management and
operational functions that will ensure good stewardship and adequate financial reporting
practices.
Initially, ABREC will rely extensively on external consultants and employ a minimum of its own
structure and employees. That is, the structure discussed herein will be attained over the
course of time, as ABREC’s own internal capacity is strengthened and brought online and as
warranted by the level of activity in the project development pipeline.
19
7
Standard rules on Fund Accounting (which is common in public sector agencies, multilateral organizations, and legal firms) will be adopted.
Business Plan: ABREC
Chart 3. Organizational chart of ABREC
The corporate organizational chart will be gradually staffed as the company, its activities and
its financial resources grow. It is anticipated that the skills base of the organization will evolve
to reflect the structuring and increasing complexity of the African market.
Within the framework of its policy of corporate governance, the company prepared a
document of good governance on the basis of standard COSO (Committee Of Sponsoring
Organizations). It puts forward the identification and the evaluation of the operational risks,
the procedures, controls, the reporting and the piloting of the whole of the process of
administrative management and financial. It lays also down an internal policy of
communication.
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Business Plan: ABREC
Box 4. Projects under implementation with ABREC’s support
Bingerville Landfill (Côte
d’Ivoire)
Municipal Waste-To-Energy project from SITRADE (Côte d’Ivoire): The
project is the first CDM project ever registered in the West African
Economic and Monetary Union (UEMOA) at UNFCCC (on 09 July 2009)
with ABREC support in cooperation with ECOSUR. The project will collect
and treat 200,000 tons of urban waste per year in a new facility located
in Bingerville, North of Abidjan. After collection and sorting, waste will be
treated through anaerobic digesters. The resulting biogas will be used to
produce electricity while residual waste will be transformed into compost.
The project is expected to avoid more than 71,000 tons of CO2 eq. per
year.
Another project under implementation is Sekondi Takoradi Waste
from Ghana. The waste dump at Sofokrom is located 300 meters
from the road and habited area. It is situated in an L-shaped
valley that is filled for less than one fourth from November 2005.
The shape of the area where currently the waste has been dumped
is oval shaped. Average depth ca. 11 meters, 500 meters by 2 km.
Animal pests like birds and insects are prevalent. People select
recyclables on site. There is no control or technological applications,
therefore there’s no protection against groundwater pollution.
There has been fire half a year ago.
Sekondi Takoradi Waste
Guinea waste water treatment project
5
ACE-TAF: A Strategic Contribution
Under the leadership of ABREC, ACE-TAF will ensure that entrepreneurship, institutional and
project management capacity is strengthened across the continent through the adoption of
international best practices, the provision of enterprise development support, the
development of robust financing mechanisms, and engagement in policy consultancy and
advocacy. To complement this effort, ABREF will play a catalytic role in promoting new
investments in renewable energy and biofuels across the African continent.
The heart of these objectives is developing robust projects that can mature sufficiently to be
invested by ABREF or other funds in Africa.
This section discusses how ABREC and ACE-TAF will help to develop infrastructure across Africa
by supporting entrepreneurship and promoting investments in renewable energy. It also
discusses each of the main areas of responsibility of ACE-TAF, namely pipeline building,
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Business Plan: ABREC
enterprise development services, seed capital financing, technical workshops and seminars,
and carbon credits. The section concludes with a discussion of the main risks facing the
project selection and seed capital investment activities of ACE-TAF.
5.1
Building Up the Investment Infrastructure across Africa
Successful execution of their mandate means that ABREC and ACE-TAF will need to develop
expertise and capacity for technical and financial evaluation of projects as well as the
information database and local contacts that will be necessary to originate projects across
Africa and evaluate legal and regulatory issues specific to each country. ACE-TAF personnel
will conduct initial desk reviews on the suitability of each project but more complex
assessments will be primarily conducted by external experts. Over time, as ACE-TAF builds
more in-house expertise, the share of work done by staff should increase, providing a
significant capacity building exercise for African expertise.
Whilst the project origination and evaluation activities will initially focus on sourcing potential
projects for ABREF to consider, ACE-TAF will also process early stage projects that to promote
African entrepreneurship and support Africa’s needs for small and medium-sized projects
such as off-grid energy generation. In these cases, the goal for ACE-TAF will be to develop
and mature these projects further for institutional funding. .
As an integral part of the skills formation and entrepreneurial development program, ACE-TAF
will prepare (in close collaboration with international centres of excellence and regional
educational institutions) a series of external workshops and seminars.
ACE-TAF will continue its work of origination and development activity well beyond the period
during which ABREF is conducting investment operations.
5.2
Project Pipeline Origination and Development
As mentioned above, the initial focus of ACE-TAF will be on the development of a project
pipeline of RET projects that can be considered for funding by ABREF. ACE-TAF will initially
benefit from guidance from ABREF to help ensure that best practices are adopted by ACETA.
5.2.1
Project Origination
ACE-TAF will need to develop region-specific origination teams that will identify potential
developers and candidate projects and be able to conduct an initial desk review on their
suitability and stage of development.
As to date, ABREC and ABREF have originated two projects (Energy forestry in Ghana and
Togo and fuel and chemical production from lignocellulosic biomass in Ghana) and selected
19 projects among 90 identified. For more details regarding the projects selected and
originated, see Appendix 4. Whilst this pipeline is currently concentrated on West African
countries, ABREC and ACE-TAF mandate is pan-African. In 2012, work will intensify to broaden
the geographic focus of the pipeline.
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Business Plan: ABREC
5.2.2
Project Evaluation
The projects chosen must all have the potential to stimulate the development of biofuels and
renewable energy in Africa, using wherever possible carbon finance to enhance project
returns.
ACE-TAF will target projects with:

Proven technology and a development team with a proven track record who are
prepared to build an investment partnership with the Fund

Key success and risk factors that are clearly identified and understood

An approved CDM Methodology (exception: biofuels, energy-efficiency projects)

The support of the Host Country Government (as required)
Initially, ACE-TAF will focus its project evaluation efforts on carrying out pre-feasibility
assessments of the projects already selected for the pipeline. Where this high level review
confirms that a more detailed feasibility assessment is warranted, a combination of internal
and external specialists will begin the process of detailed technical and financial evaluations.
The chart below provides a general overview of the proposed ACE-TAF approach to
renewable energy project evaluation.
Chart 4. ACE-TAF Project Evaluation: General Approach
Construction and
Commissioning
Time
Feasibility
• Readily available site and
resource data is utilized
to judge whether a more
detailed f easibility
analysis is needed.
• An in-depth review of a
project’s viability
providing inf ormation on
a project’s physical
characteristics, f inancial
viability, and
environmental and social
impacts.
• Detailed and ref ined
inf ormation must be
collected and intricate
methodology applied.
• Engineering includes the
design and planning of
the physical aspects of
the project.
• Development involves
the planning,
arrangement, and
negotiation of f inancial,
regulatory, contractual
and other nonphysical
aspects of the project
• Certain construction
activities can be started
bef ore completion of
engineering and
development, and the
two conducted in parallel.
Engineering and
Development
Pre-feasibility
Money
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Business Plan: ABREC
5.2.3
Linkages with ABREF
ACE-TAF will not work exclusively for ABREF and will undertake early stage projects that would
otherwise required further development in terms of ABREF’s mandate (consistent with ABREC’s
broader investment objectives).8
In these cases, the goal for ABREC will be to more actively assist promoters in developing
these projects to make them eventually eligible for funding from ABREF or other external
funding sources. The diagram below provides schematics for cooperation in pipeline
development between ABREF and ACE-TAF.
5.3
Enterprise Development Services
As a Centre of Excellence in EDS, ACE-TAF will be responsible for capacity building, feasibility
studies, business facilitation and business planning aimed at promoting entrepreneurship in
Africa. In the initial phases, ACE-TAF will necessarily rely on outside consultants for these expert
services. Over time, the Company will develop internal capacity to provide enterprise
development services internally and employ more local experts rather than outside
consultants. The chart below provides an overview of how ACE-TAF intends to develop this
internal capacity.
ACE-TAF will also assist project developers by providing access to research and best
practices. Furthermore, ACE-TAF will engage in policy dialogues and consensus building with
national governments to ensure that regulation and domestic policy both work effectively to
promote renewable energy projects, and to promote policy harmonization across the region.
In order to achieve the objectives as indicated above, ABREC acquired in 2011
approximately 10 000 square meters of land (1 ha) intended for the creation of a 200-seat
training center and research laboratory for new technologies in the field of renewable
energies. In this context, partnerships will be established with research centres and universities
in Africa.
Given the anticipated size of ABREF, namely $300m at first close and $1bn at maturity, the Fund will aim to invest in
approximately ten projects after first close and between fifteen and twenty projects at maturity. As such the average
investment size per project is likely to be $50m or higher so the fund will be seeking to invest in major renewable
energy projects rather than small or development-stage projects.
8
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Business Plan: ABREC
5.4
Seed Capital Financing
The Seed Capital Financing programme is intended to provide seed capital for projects with
exceptional potential. The successful execution of such a programme is predicated upon 1)
Participation of the IFM in the investment decision 2) An explicit but non-binding intention of
ABREF to invest in the project once it is structured and matured.
The Seed Capital financing will be in the form of cash in exchange for a shareholding in the
company or at market the value of project development work undertaken or financed by
ACE-TAF in exchange for equity, or a combination of the two.
Such project development work may comprise (i) project technical assessments, (ii)
regulatory compliance and framework reviews, (iii) negotiations of power purchase or other
off-take agreements, (iv) operational and maintenance cost review and analysis, (v)
environmental impact assessments, and (vi) other aspects of the permitting process; whether
it is undertaken by ACE-TAF staff or by third party vendors financed by ACE-TAF.
5.5
Technical Workshops and Seminars
ABREC will be a knowledge repository and disseminate information about RE capacity
building to the private and public sector in Africa by means of technical workshops and
seminars. These courses will focus on: policy, institutional and regulatory aspects of renewable
energy (including the development of national sectoral policies and regional policy
harmonization); finance and business models appropriate to ensure faster uptake and
scaling-up of renewable energy in Africa; and clean energy technology choices and
technical evaluation.
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Business Plan: ABREC
Strategic Partnerships
In developing and implementing its program of technical workshops and seminars, ABREC will
establish training and development linkages with relevant educational institutions as well as
other agencies focused on capacity building. In addition to maximizing leverage of expertise
and existing initiatives, this approach is specifically geared to promoting the development of
capacity building networks.
To date, ABREC has reached understandings with the recently established ECOWAS Centre
for Renewable Energy and Energy Efficiency (ERC). This agency is charged with leading and
coordinating activities in the plan of action of the ECOWAS Regional White Paper on Energy
Access (which focuses on renewable energy and energy efficient technologies and
services). Central to ERC’s mandate are specific objectives related to:

capacity building “of market enablers and market players to develop and implement
renewable energy and energy efficiency investment projects/ programs in the
region”

knowledge management and communication, including “dissemination of
renewable energy and energy efficiency technologies and services, as well as
exchange of academicians and students amongst research institutes/centres and
universities in member states”

development of “a harmonized policy, regulatory and institutional framework” geared
to promoting the development of clean energy.
Through ABREC, the work of ERC can be leveraged to the benefit of countries in other regions
of Africa, and the focus and the work of ERC may even be formally extended to countries in
other regions of Africa.
In addition, ABREC has initiated discussions with:
1. Renewable Energy and Energy Efficiency Partnership (REEEP). This agency initiates and
funds targeted interventions in two specific areas: (i) assisting governments in creating
favourable regulatory and policy frameworks, and (ii) promoting innovative finance
and business models to activate the private sector. It also disseminates knowledge
through news items, publications, its website and events.
2. Sustainable Energy Programme of UNDP. This agency undertakes capacity
assessments and capacity development programmes geared to expanding access
and deployment of renewable energy technologies.
5.6
Carbon markets activities
ABREC and ACE-TAF will also undertake to provide assistance to project developers in Africa
with respect to carbon credits revenue mobilization. As in the case of project evaluation
tasks, external consultants will be extensively used in an initial phase while internal capacity in
this area is developed. During the initial phase, the costs of developing of CDM project cycle
and documentation will be supported by the purchasers of carbon credits.
The set of services provided by ACE-TAF in this area is expected to eventually include:
1. Clean Development Mechanism (“CDM”)
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Business Plan: ABREC
2. Voluntary carbon market
3. Project Design Documentation & Validation
5.7
Risk Management
ACE-TAF will develop, and provide seed capital for, projects in a region of the world which is
considered as relatively risky for investors. These higher risks will be managed, in part, by
specific criteria on the experience of project promoters, either in the specific sector or in
developing projects in their country of operation. In addition, ACE-TAF will: (i) require coinvestment (either/both by the project promoters and external funders such as local
commercial banks); (ii) nominate experienced entrepreneurs for the Board of Directors of the
project companies; and (iii) engage in a detailed process of feasibility assessment and due
diligence (for which ACE-TAF will benefit from the experience of external consultants and
from the oversight provided by international fund manager staff).
Additionally, it will be important that rules governing the selection of projects are clear but
also pragmatic (see the discussion in Sections 5.2 and 5.4 above as well as Appendices 2-4).
The primary risks facing ACE-TAF and the means to mitigate those risks are discussed below.
5.7.1
Country risk
Country risk can be mitigated through close working relationships with the governments of the
respective countries for whom the services to be provided by the projects are of critical
importance. These governments can and will need to assist by ensuring that obligations from
utilities are met, by issuing permits for projects, and by facilitating private investment through
appropriate legislation and regional policy harmonization;
ABREC will further mitigate country risk through diversification of its investments into different
countries, through sharing the risk with project developers and possibly through political risk
insurance.
5.7.2
Market risk
Investment in renewable energy and biofuels in a number of African countries will be the first
of their kind. Whilst there may therefore be little risk from competitors or alternative
technologies, there will be a risk from being the first in the market. This risk will be mitigated
through the selection of appropriate project partners in each country and through the
commissioning of thorough feasibility studies.
5.7.3
Economic risk
The investment cost of any project will need to be assessed against the pricing and tariff
regime of the country concerned in the case of electricity generation projects. Having the
benefit of carbon credits earned under the CDM mechanism will assist the economic returns
on the project.
5.7.4
Management Risk
The main management risk arises from the possibility that the management of ABREC do not
have a suitable background or track record to identify structure and execute transactions or
even the capacity to put in place the type of complementary financing network that will
facilitate the implementation of a successful exit strategy from seed capital investments. This
risk will be mitigated by: the guidance provided by international fund manager and the
oversight provided by the Investment Committee and Board of Directors of ABREC; recruiting
27
Business Plan: ABREC
good candidates for the key management positions at ACE-TAF; and developing strong
relationships and credibility with local financial institutions.
6
ACE-TAF: Environmental and Social Policy
Unexpected environmental and social impacts can result in project delays, additional costs
or even project failure from causes which could have been anticipated thorough a
successful assessment of environmental and social risks. Conversely, accurate environmental
and social assessments and related management plans can result in the improved economic
performance of projects as a result of:
1. Local information received during public consultation;
2. Reduced costs through risk mitigation and impact mitigation plans;
3. Affected communities contributing to project success through inclusion and impact
mitigation; and
4. Goodwill from governments and other stakeholders.
Therefore, project related environmental and social impact assessments (“ESIA”) form a key
part of project risk management and ACE-TAF will consider them as a critical metric in the
due diligence process. To this end, ACE-TAF will comply with the International Finance
Corporation’s environmental and social policy and performance standards to ensure the
implementation of a stringent approach to avoid adverse impact on workers, communities
and the environment, or where avoidance is not possible, to reduce, mitigate or compensate
its effects. ACE-TAF will also abide by the Equator Principles where they provide useful
guidance or procedures to ensure compliance.
ACE-TAF will not participate in projects which fail to meet these standards and will use
covenants to legally bind company management teams to abide by the ACE-TAF’s
environmental and social policy. Those projects which fail to meet the environmental and
social policy will be re-engineered to comply prior to investment. ACE-TAF will follow the IFC
Exclusion List that defines the types of projects that IFC does not finance.
6.1
Implementation
Environmental and social risks, and related costs, will be included within the initial screening
process for investment opportunities. Risks will be analysed in the context of the project’s area
of influence. Projects advancing beyond the screening process will be categorised
according to their environmental and social risk profile into three categories, as required by
the Equator Principles, which determine the resource requirements for compliance:
Category A Projects: Projects with potential significant adverse social or environmental
impacts that are diverse (geographically or thematically), irreversible or unprecedented.
Category B Projects: Projects with potential limited adverse social or environmental impacts
that are few in number, generally site-specific, largely reversible and readily addressed
through mitigation measures.
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Business Plan: ABREC
Category C Projects: Projects with minimal or no adverse social or environmental impacts,
including certain financial intermediary projects with minimal or no adverse risks. Category C
projects require no further environmental and social assessment or action.
The IFC performance standards require compliance in eight key areas:
1. Social and Environmental Assessment and Management System;
2. Labour and Working Conditions;
3. Pollution Prevention and Abatement;
4. Community Health, Safety and Security;
5. Land Acquisition and Involuntary Resettlement;
6. Biodiversity Conservation and Sustainable Natural Resource Management;
7. Indigenous Peoples; and
8. Cultural Heritage.
The first IFC performance standard outlines the process through which the environmental and
social risks are identified and how such risks will be managed in order to fulfil the requirements
of the latter seven performance standards. Compliance consists of an effective
environmental and social management system composed of five key sections:
i.
Environmental and social impact assessment. Category A projects require the
completion of a comprehensive ESIA which includes an examination of technically
and financially feasible alternatives to the source of any impacts. Category B projects
may also require an ESIA but with a narrower scope;
ii.
Management plan. This strategy indicates: (i) specific mitigation and compensation
measures which must be followed to ensure compliance with the latter seven IFC
performance standards; and (ii) processes for the implementation of the following
three sections, formulated in clear, detailed action plans;
iii.
Organizational capacity training;
iv.
Community engagement; and
v.
Monitoring and reporting.
The last seven standards outline the criteria for environmental and social sustainable and
responsible investing in each specific area of environmental and social risk. For every project
developed by ACE-TAF, these standards will be met, and in addition, the environmental,
health and safety guidelines prescribed by the World Bank’s Pollution Prevention and
Abatement Handbook will be followed.
6.2
Due Diligence
To ensure compliance with the IFC environmental and social policy, ACE-TAF’s Co-ordinator
will be appointed as environment officer for ACE-TAF. The Co-ordinator will ensure that initial
screening and categorisation are completed correctly and that projects under consideration
are aware of and comply with the environmental and social standards of ACE-TAF. In
29
Business Plan: ABREC
addition, third party environmental and social policy consultants will be engaged to
independently audit ESIAs and management programmes to ensure they are of a sufficient
standard for all category A projects and as required for category B projects. The consultants
used will be internationally recognised firms approved by the African Development Bank.
They will commonly work alongside local firms who bring experience of the local
environmental and social regulations which must also be met for compliance with the IFC
performance standards.
6.3
Monitoring and Reporting
Monitoring the implementation of the management program across the life-cycle of the
project and reporting to management and investors is an essential part of compliance.
Monitoring and reporting requirements vary depending on the risk profile of the project and
the processes outlined in the monitoring action plan will be project specific. High risk projects
with greater and more varied impacts will have more detailed and complex action plans for
mitigation and compensation, which require more frequent and more detailed monitoring.
Monitoring requirements are likely to change over the life-cycle of a project. Typically
environmental and social impacts are greater and more varied during the construction and
early operation phase of a project after which impacts become more predictable and static.
The mitigation and compensation action plans will reflect this through an emphasis on action
to be taken during high risk periods which will require more resources in monitoring and
reporting. Third party consultants will be engaged to assist with the monitoring and reporting
process with all category A and, as required, for category B projects. Third party consultants
provide an independent verification that the management program is being followed.
All members of ACE-TAF’s operational teams will receive environmental and social impact
training to allow ACE-TAF to directly monitor the implementation of the management
program during scheduled site visits for traditional investment monitoring. This will alleviate the
dependence on third part consultants. While independent monitoring of the operation of the
management program will remain a compliance requirement in high risk projects, the
frequency of such visits and the associated costs can be reduced.
6.4
Common problems with ESIAs in Africa
African development projects have often had significant
environmental and social policies. Typical causes include:
problems
in
executing
1. Lack of commitment from developers and financiers to rigorously pursue the policy;
2. Bureaucracy which inhibit government involvement or development
governments which ignore or distrust environmental significance;
hungry
3. Ineffective public consultation due to scarcity of local knowledge or a lack of
commitment to the process, which reduces the effectiveness of the assessment; and
4. Lack of availability of environmental experts with local knowledge and experience.
Notwithstanding these obstacles, ACE-TAF is fully committed to its environmental and social
policy and its obligations to the IFC performance standards as a means to enhance the
overall performance of its investments. ACE-TAF regards the policy as a crucial part of the
30
Business Plan: ABREC
investment process and will not invest in projects where these risks are not adequately
addressed.
Box 5. Ethanol project in Nigeria: Global Biofuels Ltd
Global Biofuels Ltd (GBL) intends to establish a 90,000 liters per
day ethanol refinery with 7,500 ha of cultivated sweet sorghum
which provides the feedstock for the refinery. The excess of
bagasse will be used to add 15 MW of installed power and the
resulting electricity surplus will be exported to the national grid.
The renewable energy generated by the project activity will
decrease the fossil fuel proportion of the national energy mix and
thus will reduce the combined margin grid emission factor. The
project is expected to avoid more than 60,000 CERs/year. This project
is under validation at UNFCCC.
7
ACE-TAF: Financial Resources
ACE-TAF will be administratively autonomous with its specific funding sources. ABREC and
ACE-TAF will publish separated financial accounts and operational reports. The governance
and administrative support that it receives from ABREC will be compensated by ACE-TAF at
pre-agreed market rates.
The ACE-TAF financing model is predicated upon financial suppport from Donors and
benevolent institution.
7.1
ACE TAF Financial projection
ACE TAF will finance its operations mainly from an annual fee charged to ABREF, from client
fees it receives for projects undertaken and finally it will require Donors contributions to help
bridge its funding requirement. The annual fee charged to ABREF is for pipeline development
services ACE-TAF renders to the Fund and it is regulated by contractual agreement between
the latter parties.
ACE TAF will also charge subsidy-rate fees to coroporates and
entrepreneurs for project work undertaken.
Donors will play an important role in the success of ACETAF by helping amongst others
tocontribute fund the seed capital investment programme. Therefore, it is crucial at this
stage to secure additional funding commitments for the initial phase of operations.
We
expect that the seed investing programme will generate postive returns for the Donors.
ACE-TAF will monitor the development of companies within the renewable energy and
biofuel sector and will strengthen the management capacity of related projects in Africa. This
contribution will be done by setting up pipelines of projects, developing companies, partly
financing the seed capital, organizing technical workshops and seminars.
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Business Plan: ABREC
7.1.1
The financial balance
The evolution of accounts; be it estimated operating accounts statements or
Resources/application of funds statements, shows a sharp increase in constant rise over the
period 2012 – 2016. The accounts analysis of ACE- TAF has been done before taking into
account external financing except the startup allocation of USD 500,000 from ABREC.
7.1.2
Provisional operating accounts statements
The evolution of operating accounts of ACE-TAF show that products should grow from USD
270,000 in 2012 to USD 1,308,000 in 2016; that is mean annual increase of 96%. The growth of
ACE TAF products also follows the same trend, mainly boosted by revenues coming from the
implementation of the feasibilities studies of projects.
The table below shows the operating budget of ACE TAF.
32
Business Plan: ABREC
ACE TAF OPERATING BUDGET
US $ 000
2012
Assumptions
Projects evaluated
Workshops & Seminars (number)
SEED Capital
Projects exited
Private projects among evaluated
ASSUMPTIONS ON ACTIVITIES
ACETAF
ACETAF OPERATING BUDGET
REVENUES
3.1 Grants received from ABREC
ABREF Pipeline development fees
3.2 Project Review & Evaluation
Identification
Due diligence
3.3 Enterprise Development Services
3.4 Income from Workshops & seminars
3.5 Income from SEED CAPITAL investment
OPERATING
COSTS
4.1 Project Review & Evaluation
Identification
1 000
Due diligence
5 000
4.2 Enterprise Development Services
Counseling
Workshops & Seminars ( 2/yr)
4.3 External consulting fees
4.4 Staff Costs
4.5 Various Management fees
4.6 Miscellaneous
5000
150000
OPERATING PROFIT (LOSS)
EXPENDITURE
Investment & renewal
Variation BFR
ACE TAF TREASURY
OVERALL CUMULATIVE CASH
2014
5
2
3
10
2
5
12
2
6
3
7
9
2015
18
2
9
3
13
2016
24
2
12
5
20
270
F.R.
F.R.
110
10
100
100
60
470
F.R.
F.R.
220
20
200
200
50
554
F.R.
F.R.
264
24
240
240
50
956
F.R.
F.R.
396
36
360
360
50
150
1 308
F.R.
F.R.
528
48
480
480
50
250
726
30
5
25
1 215
60
10
50
1 307
72
12
60
1 544
108
18
90
1 790
144
24
120
100
300
60
130
96
10
200
300
120
429
96
10
240
300
144
445
96
10
360
300
216
445
105
10
480
300
288
463
105
10
- 456
RESOURCES
2013
- 745
- 753
- 588
- 482
44
-745
-753
-588
-482
600
1000
1200
1800
2400
-556
-556
-1745
-2301
-1953
-4254
-2388
-6642
-2882
-9524
P.M.
33
Business Plan: ABREC
Operating expenses should increase between 2012 and 2016 up to USD 1,790,000 in 2016. In a
context of growing activity, the increase of expenses is accompanied by productivity gains,
the expenses increase by 36% in average over the period.
Consequently, without considering the external financing at the start-up of ACE-TAF, the
operating income should be at USD -456,000 in 2012 and at USD – 482,000 in 2016. This result
should be in deficit over the period if appropriate resources are not brought in for the start-up
of ACE-TAF.
7.1.3
Financing requirements
The treasury of ACE TAF is negative over the entire period without the setup of initial
allocations in form of equity and assimilated equity fund.
ACE TAF will hold a stake in the form of risk capital (seed capital) for amount up to an
average of USD 200,000.
The amount of participation to the seed capital could be modulated in relationship with
other structures acting in the domain for a synergy of actions.
The cumulated cash needs in the treasury of ACE-TAF, in order to be consistent with its
financial balance, would go from USD 506,000 in 2012 to USD 9,524,000 in 2016.
7.2
The creation of a subfund: African Green Development
Fund (AGDF)
To cover the financing requirements for ACE TAF as indicated above, ABREF proposes to
establish a subfund with a capital of $10m : the African Green Development Fund(AGDF)
managed by ABREC.
The main contributors of AGDF will be the potential investors of ABREF. In the meantime
(alongside with others institutions), the contribution from other institutions will be seeked
(UNEP, UNDP, UN Fundation, Bilateral DFIs, etc).
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Business Plan: ABREC
APPENDIXES
35
1
Business Plan: ABREC – Appendix 1
ABREF Structure
1
Business Plan: ABREC – Appendix 2
ABREC SHAREHOLDERS
FINANCIAL INSTITUTIONS / COUNTRIES
AMOUNTS (US$)
PERCENTAGE
ECOWAS Bank for Investment and Development (EBID)
200,000
7%
International Energy Insurance (IEI) of Nigeria
200,000
7%
ECOBANK Development Corporation (EDC)
100,000
4%
Fonds Africain de Garantie et de Coopération
Economique (FAGACE)
86,000
3%
NEXIM Bank (Nigeria EXIMBANK)
200,000
7%
Total share for Financial Institutions
786,000
28%
BURKINA FASO
200,000
7%
CAPE VERDE
64,000
2%
COTE D’IVOIRE
200,000
7%
GAMBIA
196,000
7%
GHANA
400,000
14%
GUINEA
200,000
7%
NIGERIA
194,000
7%
SIERRA LEONE
198,000
7%
SENEGAL
200,000
7%
TOGO
200,000
7%
Total share for Countries
2,052,000
72%
TOTAL
2,838,000
100%
Financial Institutions
ECOWAS Member States
1
Business Plan: ABREC – Appendix 3
ABREC & ACE TAF KEY TEAM
The Board Members
Thierno Bocar TALL – Chairman
 CEO, African Biofuel & Renewable Energy Company (ABREC)
Adji Otèth AYASSOR – Member

Minister of Economy & Finance, Republic of Togo
Tony MADOJEMU – Member

Chief Executive Officer, International Energy Insurance (IEI) Assets Ltd
El Hadj Ibrahima THIAM – Member

Chairman & CEO, ECOWAS Regional Electricity Regulatory Authority (ERERA)
Michael CARRICK – Member

Chief Executive Officer, Duet Infrastructure Partners
Robert U. ORYA – Member

Managing Director, Nigerian Export-Import Bank (NEXIM)
Mahama KAPPIAH – Member

Executive Director, ECOWAS Regional Centre for Renewable Energy and Energy
Efficiency (ECREEE)
2
Business Plan: ABREC – Appendix 3
The ABREC Staff
Thierno Bocar TALL – Chairman and Chief Executive Officer
Mr. Thierno Bocar TALL holds a Master Degree in Finance and Economics. He was
appointed as the Chairman and CEO of ABREC in February 2011 and brings to this position
over 25 years of experience.
Sylvain FEDY – Head of Finance and Administration
Mr. Sylvain FEDY holds a Master Degree in Business Management. He joined ABREC as the
Head of Finance and Administration in January 2011 with 8 years of experience.
Grace Odile A. DURCHBACH – Administrative Assistant
Mrs. Odile A. DURCHBACH holds a Master Degree in Human Resource Management. She
joined ABREC as the Administrative Assistant in January 2011 with 9 years of experience.
Boris Ekoue G. AMAGLI – IT Specialist
Mr. Boris E. G. AMAGLI holds a BTEC Higher National Diploma in IT. He joined ABREC
as the IT Specialist in January 2011 with 7 years of experience.
The ACE TAF Staff
Christian Hoyobony TOKORO – Projects Officer
Mr. Christian H. TOKORO holds Master Degree in Industrial Physics and Electrical
Energy and its Environment. He joined ABREC as the Projects Officer in January 2011 with
5 years of experience.
Abdel Karim TRAORE – CDM Specialist
Mr. Abdel Karim TRAORE holds a Master of Sciences in New and Renewable Energy. He
joined ABREC in June 2011 with 2 years of experience.
3
Business Plan: ABREC – Appendix 3
The Associated Consultants with ACE-TAF
Papa Momar NGOM – CDM Specialist
Mr. NGOM holds a Master Degree in Electro-mechanics with 10 years of experience in
Renewable Energies sector.
Nicolas Jacques Alphonse DIENG – Project and Financial Analyst
Mr. DIENG holds a Master Degree in Economic Sciences with 33 years of experience in the
preparation, the studies, the structuring, the administration and the follow-up-evaluation of
projects.
John Gerald O’BRIEN – Environmental Finance Advisor
Mr. O’BRIEN holds a Master Degree in Environment with 14 years of experience in
Environment and Climate Change sector.
Joel AGBEMELO-TSOMAFO - Lawyer, environmental inspector & appraiser
Mr. Joel AGBEMELO-TSOMAFO holds a Master’s Degree in Law and Environment with 13
years of experience in Environmental sector.
Aliou BA – Energy and Environment Specialist
Mr. Aliou BA holds a Master’s Degree in Energy and in Management of Sustainable
Development Projects with 20 years of experience in the Energy sector.
Moussa DIOP – Energy, CDM and Environment Specialist
Mr. Moussa DIOP holds a Master’s Degree in Energy, Environment and Economic
Management with 21 years of experience in CDM, Renewable Energies and Energy
Efficiency.
1
Business Plan: ABREC - Appendix 4
THE PIPELINE OF THE PRE-SELECTED PROJECTS
N°
TITLE
SECTOR
COUNTRY
COST / FINANCING(US$
MILLION)
Total
Equity
Requested
costs
CARBON
CREDITS
(TCO2/YR)
Observations
WASTE MANAGEMENT
Prefeasibility study, seeking fund to
undertake the feasibility studies and
36 000
the Environment impact
Assessment
1
Waste to Energy. The harvest of Energy and
recyclables from household waste (Basanda
Company Ltd)
Private
Ghana
15,046
4,514
10,532
2
Lagos State Waste-To-Electric (WTE) Energy
(Highland Nigeria Ltd Power Projet)
Private
Nigeria
102
15,3
86,7
Feasibility study is completed.
60 000 Environment impact Assessment
ongoing
3
Municipal solid waste to Energy
Private
Sierra Leone
19
5,7
13,3
Feasibility study ongoing.
45 000 Undertake Environment impact
Assessment
WIND POWER
4
Enugu wind farm 30 MW (Kedari Capital Ltd)
Public/Private
Nigeria
48,437
9,68
38,757
The PIN and the feasibility study are
25 000 completed. Environment impact
Assessment ongoing
5
Zamfara wind farm 20MW (Kedari Capital Ltd)
Public/Private
Nigeria
32,625
6,525
26,1
The PIN and the feasibility study are
17 000 ok. Environment impact Assessment
ongoing
6
South Africa flag 10 MW wind farm business
(Haiko Green Consulting)
Private
South Africa
16
4,8
11,2
The PIN and the feasibility study are
46 250 ok. Environment impact Assessment
ongoing
7
NEK 50MW Wind Park Project
Private
Ghana
121,4
36,42
84,98
The PIN and the feasibility study are
46 000 ok. Environment impact Assessment
ongoing
2
Business Plan: ABREC - Appendix 4
N°
8
TITLE
30MW Wind farm
SECTOR
COUNTRY
Public
Niger
COST / FINANCING(US$
MILLION)
Total
Equity
Requested
costs
51
5,1
CARBON
CREDITS
(TCO2/YR)
Observations
The PIN and the feasibility study are
ok. Environment impact Assessment
ongoing
45,9
SOLAR POWER
9
Production of 1.5MWc solar power plant in
Gambia
Public
Gambia
7,753
10
Electrification by photovoltaic solar system in
over 80 villages
Public
Niger
Public
11 Solar power station with 10MWp installed
12
Production of a concentrating solar thermal
power plant of 50 kW
13 Solar power station with 10MWp installed
2
5,753
Only the project profile is available
30
30
Feasibility study ongoing. it will be
available before the end of August
2011.
Niger
50
50
Feasibility study ongoing. it will be
available before the end of August
2011.
Public
Niger
0,57
Private
Togo
1,07
0,057
0,513
Feasibility study is completed.
1,07
Feasibility study is completed.
BIOMASS TO ENERGY
14
Production of Biomass fuel briquettes used as
efficient substitutes of Fire Wood & Charcoal
Cogeneration by waste from mango and tomato
15 processing industry and agricultural waste
(4.76 MW to 10.76 MW)
Private
Côte d'Ivoire
12,461
3,792
8,669
90 000
Feasibility study is ok. the PIN
ongoing
Public/Private
Burkina Faso
20
6
14
34 000
Feasibility study and the PIN are
completed
0,506
4,554
ENERGY EFFICIENCY
Promoting of Appliance Energy Efficiency and
16 Transformation of the Refrigerating Appliances
Market in Ghana
Public
Ghana
5,06
Only the project profile is available
3
Business Plan: ABREC - Appendix 4
N°
TITLE
SECTOR
COUNTRY
COST / FINANCING(US$
MILLION)
Total
Equity
Requested
costs
CARBON
CREDITS
(TCO2/YR)
Observations
AFFORESTATION / REFORESTATION
17 Development of rubber trees
Private
Côte d'Ivoire
1294
790
504
495 000
Feasibility study and PIN are
completed
BIOFUEL
18 Biodiesel production from Jatropha
Private
Burkina Faso
4,5
1,65
2,85
Project profile
19 Jatropha Oil production
Public
Ghana
50,41
18,15
32,26
Feasibility study summary
COSTS (US$ MILLION)
SECTORS
NUMBER
TOTAL
COSTS
EQUITY
REQUESTED
Waste Management
3
136,046
25,514
110,532
Wind Power
5
97,062
21,005
76,057
Solar Power
5
89,393
2,057
87,336
Biomass
2
32,461
9,792
22,669
Energy Efficiency
1
5,06
0,506
4,554
Afforestation /
Reforestation
1
1294
790
504
Biofuel
2
54,91
19,8
35,11
TOTAL
19
1708,932
868,674
840,258
4
Business Plan: ABREC - Appendix 4
THE TWO ORIGINATED PROJECTS BY ABREC AND ABREF
1. Energy Forestry in Africa
Owners:
 MIRO Forestry Company;
 African Biofuel & Renewable Energy Company (ABREC);
 African Biofuel & Renewable Energy Fund (ABREF).
Objectives
The project aims at:
 Producing wood chip biomass from sustainable energy forestry.
 Providing high energy biomass for decentralized electricity production
in West Africa and for biomass export to support regional and global
renewable energy requirements.
 Carbon positive, as the trees sequester more carbon than is
subsequently released in burning of the wood chips for power
generation.
 Providing rural employment and electrical power for rural
development.
 Regenerating and commercializing degraded land areas while
promoting indigenous flora and fauna.
 A commercial and profit focused business opportunity led by an
experienced team with proven track record.
5
Business Plan: ABREC - Appendix 4
Financial requirements
The project requires US$25 million of total funding of which:
 US$10 million is required for forestry operations directly related to
producing the wood biomass feedstock; and
 US$15 million is required for a 500,000 tons per annum wood chip
plant and associated operational infrastructure.
2. Ligno-cellulosic conversion to chemicals and fuels
Owners:
 African Biofuel & Renewable Energy Company (ABREC);
 African Biofuel & Renewable Energy Fund (ABREF).
Description:
The project consists in converting residues (and, for energy crops, whole
plants) into a potentially wide array of organic chemicals, liquid
transportation fuels and direct energy.
Benefits:
The benefits are obvious:
 increased food availability for the home market, with potential for
export;
 increased revenue from cash crops, both to farmers and processors;
 substantial new revenue stream from ligno-cellulosic residues,
benefitting farmers, industry, infrastructure (through export of power)
and commerce.
 finally, government tax revenues, both direct and indirect, increase.
Financial requirements
The project requires US$400 million of total funding of which:
 US$100 million for equity; and
 US$300 million for debt.