Transcript Slide 1

2008 Electricity Distribution
Maintenance Summit
Stream 3A: Funding, Investment
and Financial issues
10 June 2008
Theo van Vuuren
Divisional Executive
South African Operations
Development Bank of Southern Africa
Background
• Challenge as stated in the objectives of this summit to seek solutions to the
challenges in the distribution sector and to form through partnerships to
achieve a sustainable outcome
• DBSA's role is to promote socio-economic development, upliftment of our
people and stimulating growth
– Main focus is on investing in the provision of sustainable infrastructure
– Role of financier, advisor, integrator, implementor, partner
• DBSA focus on investment support to both public and private sector,with a
focus on:
Key indicators
Area in sq km
1,221,246
% urbanisation
GDP
55.9%
1,070,090,795
GDP growth rate
Population
48,502,065
Population growth rate
# households
1.0%
12,500,634
As % of SA
Need for growth in economy
100.0%
% unemployed '06
% poverty '06
43.5%
2006 household backlogs:
Total backlog: # services to be
provided
Total backlog %
As % of SA
13,699,516
21.9%
100.0%
Metros
18.6%
Secondary cities
26.9%
Poorly resourced munis
54.5%
without access to water
% households
without access to sanitation
% households
in informal dwellings
% households
without electricity
% households
without refuse removal
% households
Annual delivery on backlogs (200107)
# services provided annualy
– Maintain asset base:
Estimates backlog in
maintenance by public
authorities:R5 billion
upwards
1,418,393
11.4%
1,305,213
10.4%
3,681,088
29.4%
2,490,337
19.9%
4,804,485
38.4%
2.2%
1,374,628
– Est. for universal
electrification vary
widely i.e. R21.5 billion
for 3.4 million
household connections
by 2013, plus R10.8
billion for bulk
infrastructure and
refurbishment
South African Operating Environment: needs and opportunities
National average backlogs
11.4%
16% 19%
20.0%
Electricity
2.4million
Refuse
4.7million
Sanitation Housing
1.3million 3.7million
38.4%
10.4%
81% 13%
(Household
numbers)
Water
1.4 million
0.9 mil
17%
0.9 mil
18%
26%
29.5%
18
45
Areas of
economic growth
Backlogs per provinces
higher than the national
average 2007 indicated
on map
58%
24%
0.4 mil
34%
14%
0.2 m
21%
48%
24%
13%
0.5 mil
16%
29%
1.1 mil
40%
29%
0.1 mil
26% 11% 19%
30%
35%
60%
26%
0.9 mil
46%
0.2 mil
17%
4
Key Challenges
• Supply side:
– Growth in demand is outstripping supply (4% p.a.) - mainly driven by high industrial
and population growth
– Insufficient infrastructure to deliver energy services
– Deteriorating quality of supply mainly due to:
• ageing equipment, inadequate maintenance, skills base and institutional
capacity
• Distribution side:
– High level of technical and non-technical losses in the distribution system \
– Slow progress on industry restructuring
– Limited capacity on especially municipal levels
– Structural issues: municipal financial viability
• Enabling policy, legal and regulatory environment required to attract
private participation in energy sector investments
• Significant investment is required for power generation, transmission
and distribution
• Capacity building
Universal access may not be achieved by 2013………
DBSA role: INVESTMENT SUPPORT
– Create a balance between commercially viable and socially desirable
investments
– Broadening pool of role players: BBBEE e.g. through IPP project funding
– Support delivery of access to basic energy services: mainly through
municipalities (More than 1 million households benefited from various
projects during 07/I8)
– Financial structuring
– Increase pool of funding
– Application of strict sustainability criteria in funding projects
DBSA Energy sector loans; 2001 to 2007
4,000,000
3,500,000
Rands ('000)
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2001
2002
2003
2004
2005
2006
2007
Examples of investment support
DBSA Development Thrust: To support the provision of enabling infrastructure
Solar
Water
Programme (SWH)
Heating
Potential investment value: R2 billion
Strengthening the provincial economy by the provision of appropriate energy
supplies and creation of employment and entrepreneurial opportunities directly
related to the project. Partnered with Joburg City Power to implement a pilot project to
test the acceptability and feasibility of solar water programme at household level. Working
closely with Eskom to develop a business case for the roll-out of the programme.
Umgeni
Infrastructure Potential investment value: DBSA: R1.156 billion
development programme
Provision of bulk water and sanitation to the Umgeni supply area/ This area covers
Ethekwini, Msunduzi and vast rural areas in KwaZulu- Natal Number of households
benefiting is approximately 500 000 (3 million people).
Independent
Suppliers (IPP)
Power Potential investment value:
R6.5 billion. DBSA: R835 million
Supporting the energy needs of the South African economy by addressing
shortages. This focus on alternative organizations who can play a role in the energy
sector and strengthen the overall supply chain.
Alternative
energy Potential inves tment value: R2.5 billion. DBSA: R600 million
development
in
the Investigating alternative energy (Ethanol Production and grid power production) in joint
Makhathini Flats
venture with CEF, IDC, Provincial Government and Private Sector. Will unlock development
potential of a depressed area , promote the development of the agricultural sector, and
generate additional sustainable energy supply for the national grid.
Creation of 215 permanent jobs in the milling component, 4 200 in agricultural sector and 13
800 indirectly. Estimated that 59 0 00 individuals and 1 100 households will directly benefit.
DBSA’s Role: Technical support
• Available as partner in funding technical studies, pilots,
development of plans and solutions.
– e.g. Darling Wind Farm, SAPP 2007 to conduct Regional Tariff Study
– Grant funding for research and feasibilities
• Siyenza Manje deployees on municipal level
• Advisory function to role players
– Best practice, development information
• Key issue:
– Internal assignment to investigate ways to support
municipalities to be financially sustainable with reduction in
income from lower electricity consumption
– Innovation and alternative sollutions
Conclusion
• Affordable energy services can contribute towards poverty
alleviation
• Significant investments required to meet increasing demand
• Pooling of technical and financial resources is key to
addressing investment requirements
• Support initiatives to accelerate project implementation
• Explore opportunities for both grid and off-grid electrification
technologies
• Strengthen partnerships & co-funding with local government
agencies
• Need for innovative approaches and financing models for
distribution projects