FacilitatingFinancingforMiningHybridsinDevelopingCountriesCaseofpowerandminingintegrationinAfrica

EnergyandMinesWorldCongressToronto,December11,2018

MamadouBarry,EnergyandExtractivesGlobalPractice

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Key Barriers to Renewable Energy Finance in Developing Countries

Ø Inception: Limitedaccesstocapital,insufficientinvestmentsize,lackofcompetition,hightransactioncosts,highperceivedrisks.

Ø Development: Limitedhostcountryinstitutionalcapacity,politicalrisk,policyandregulatoryrisk.

Ø Operation: Off-takerrisk,Gridinterconnectionandtransmissionlinerisk,Currencyrisk,Liquidityandrefinancingrisk,Resourcerisk,Technologyrisk.

The World Bank Group: A partner in Facilitating Renewable Energy Finance in Developing Countries

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IBRD/IDA• LendingtoGovernment• Policyadviceonregulatoryissues• Guarantees/creditenhancement

MIGA• Political riskinsurance• Creditenhancement

IFC• Privatesectorlending•Creditenhancement• Equityinvestments• Advisoryservices

World Bank Group Climate-Related Finance

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Affiliate FY15 FY16 FY17 FY18IBRD 3.4 5.7 4.9 8.9IDA 3.1 2.8 4.3 6.8IFC 2.3 2 3 3.9MIGA 1.1 0.3 0.6 0.9Total 9.9 10.8 12.8 20.5%totalcommitments 18 18 22 32.1

FinancinginUS$billion(2015-2018)

Ø Targetfor2021-2025:US$200billion, including US$100forIBRDandIDAandUS$100million forIFCandMIGA.Ø RenewableEnergyFocus:Support thegeneration, integration,andenabling infrastructure for36GWof

renewableenergy andsupport1.5millionGWhequivalentofenergysavingsthrough efficiencyimprovement.

World Bank Group’s Typical De-risking Package for Solar Renewable Energy Development: The Scaling Solar Initiative

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Simple and rapid tendering

Competitivefinancingandinsurance

Advice to assess right size and location of PV Plant

Fully developed templates

Risk mitigation andCredit enhancement

Senegal:2smallprojectswith60MWcapacity.Competitiveauctionyielded3.8centsperKWh.Zambia:Round1(76MWlowesttariffinAfrica);Round2(2to4large-scaleprojectsofupto500MW).

World Bank Group De-Risking and Facilitation of Major Mining and Solar Photovoltaic Investments

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Large-ScaleMinedevelopmentØ Challenge(2016):Facilitatingtotalinvestmentof$4.4billiontodevelopOyu Tolgoi

(Mongolia),oneoftheworld’slargestcopperdeposits.Ø De-riskingstrategy:IFCprovidedloanfacilityofUS$1.2billion;MIGAissuedGuarantees

ofUS$1billion;andIDAsupportedTechnicalAssistancetothegovernment.

LargeScaleSolarPowerDevelopmentØ Challenge(2018):FacilitatinguptoUS$2bninvestmentinEgypt’sSolarFeedinTariff

(FiT)program,whichistheworld’slargestsolarphotovoltaicgenerationpark,consistingof29separatesolarPVprojectstoprovide1.4GWofcarbon-freepower:

Ø De-riskingstrategy:IFCprovided$660millionfor13PVprojects(500MW);MIGAprovidedguaranteesfor$102.6millionagainsttherisksofExpropriation,TransferRestrictionandInconvertibility,BreachofContract,andWarandCivilDisturbance;partnershipwithEBRD,whichfinanced16solarprojects(750MW);IFCandEBRDsyndicatedtootherlenders.

World Bank Group Climate-Related Finance in 2018

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WorldBankGroupcommitted$20.5billionor32.1percentofitstotalfinancingtoprojectswithclimateco-benefitswhichcontributedto:

Ø Generatingorintegrating18gigawattsofadditionalrenewableenergyintoelectricitygrids;

Ø Mobilizingover$10billionincommercialfinanceforcleanenergy;

Ø Investing$784millioninimprovingclimate-resilienttransportsystems;and

Ø Supporting$7.7billioninadaptationinvestments.

Flagship Initiative for Renewable Energy in 2018:Accelerating Battery Storage for Development

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Ø WorldBankGroupcommitted$1billionforanewglobalprogramtoaccelerateinvestmentsinbatterystoragetohelpcountriesrampuptheiruseofrenewables(particularlywindandsolarpower)andexpandaccesstoelectricity.

Ø The$1billioninWorldBankGroupfinancingisexpectedtomobilizeanother$4billioninconcessionalclimatefinancingandpublicandprivateinvestments.

Ø Theprogramaimstofinance17.5gigawatthours(GWh)ofbatterystorageby2025– morethantriplethe4-5GWhcurrentlyinstalledinalldevelopingcountries.

Ø Theprogramwillalsosupportlarge-scaledemonstrationprojectsfornewstoragetechnologiessuitablefordevelopingcountries’needs.

Power of the Mine Initiative to address Africa’s Energy Access Paradox

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Ø Africahasverylimitedenergyaccess(1in3haveaccesstoelectricity)…

Ø Abundanceofenergyresources:1.2TWpotentialcapacity,excludingsolar;Estimated10TWofsolar…

Ø Butthesearelargelyundeveloped:12%ofglobalhydropotential,but3%ofglobalhydropowersupply;only10%oftechnicalpotentialforhydroutilized.

Ø Challenges:addressinvestmentclimate,inefficiency,andbelow-costpricinglimitnecessaryinvestmenttounlockrenewableenergypotentialandreach310GWby2030.

Power of the Mine Concept: Potential for leveraging extractive industry investments to boost energy access in Africa

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Ø Abundanceofanumberofmineralswhichrequireenergy-intensiveprocessing(bauxite,nickel,cobalt,copper).

Ø Powercostisakeyelementofcompetitivenessofminingoperations,representing10to25%ofoperatingcosts

Ø Miningcompaniesareactivelyseekingpowersolutions:minesareprojectedtoneed23GWofpowerandareexpectedtospend$3.3billiononself-supplyaloneby2020.

Ø Self-supplytosustainminingoperationsisexpensiveandsociallyinefficient.

Ø Onepotentiallywin-winsolution:explorepublic-privatealternativetoleverageextractiveindustryinvestmentstoexpandenergyaccess(off-grid,mini-gridsorlinktogrids).

Six distinct intermediate power sourcing arrangementsMines are sourcing power in a number of ways ranging from self-supply at one end and grid supply at another

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Self-supplySelf-supply

+CSR

Self-supply+selltothe

grid

Grid supply+selfsupplybackup

Minessellcollectively to

gridMinesinvestin

grid

Minesserveasanchor demand

forIPP Grid supplyDe

scrip

tion Mine

producesitsownpowerforitsownneeds

Mineprovidespowertocommunitythroughmini-gridsoroff-gridsolutions

Mineproducesitsownpowerandsellsexcesspowertothegrid

Themineisfirstconnectedtothegridandismovingintoown-generationwhenmoreeconomical

Coordinatedinvestmentbyagroupofmines,producers,andusersinonelargepowerplantoff-siteconnectedtothegrid

Mineinvestswithgovernmentinnew,orintheupgradingof,powerassetsunderdifferentarrangements

Minebuyspowerfromanindependentpowerproducerandservesasananchorcustomer

Minedoesnotproduceanypower,butbuys100%fromthegrid

Main

Gene

ratio

ndrivers

DieselHFO

DieselHFO

Coal,Gas,Hydro

DieselHFO Diesel,HFO,Solar Hydro, Gas Any Any

Presen

ce

Mali andGuinea

SierraLeoneand Liberia(oil)

GuineaMadagascar

ZimbabweMozambiqueCameroon

DemocraticRepublic ofCongoTanzania

GhanaNigerDemocraticRepublic ofCongo

SouthAfrica MozambiqueZambia

Intermediate1 32

Source:PoweroftheMinereport–WorldBank

Key goals of the Power of the Mine Initiative

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Ø Supportingthedevelopmentofcheaperandcleanerpowertotheminestoincreasetheireconomicviabilityandreducetheirenvironmentalfootprint.

Ø Leveragingminepowerdemandtoincreaseaccesstoelectricityforthecommunitiessurroundingthemines,eitherthrough“mini-grids”orothermeans(e.g.batteryleasingetc.)

Ø TakingadvantageofeconomiesofscaletoproducecheaperpowerbyaggregatingdemandandproducingpowerthroughlargerPVsystems(generallyover50MW).

Ø IntegratingplansforgridextensionbyensuringthatanydevelopmentofaPV-basedmini-gridformineandcommunityelectrificationshouldbecompatiblewiththegridwhenanextensionarrivesinthearea.

Ø Addressinglongtermoff-takerisksbyaligningtolocation/sizeofthepotentialPVplantwithenvisagedgridextensions/interconnections,toenablesecuringLTofftakebeyondthereservelifeofthemines(initialofftakers).

Tapping into mine demand for power to develop clean power for mining and community needs: Case of Randgold’s operations in Africa

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TOTAL ELECTRICITY USED (000MWH)

Source:Randgold

Mali – Opportunity for Power of the Mines Pilot on the Loulo-Tabakoto Gold Operations and beyond

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Loulo isanoff-gridgoldmine inWesternMalioperatedbyRandgold neartheborderwithSenegal.Themine isapproximately106kmfromtheManantali damgridconnection.Ø Themine’scurrentaveragepowerdemand isapproximately39MWwithpeakdemandupto43MWandminimum loadof32MW.

Ø Theminecurrentlyhas50MWofinstalledcapacityviamediumspeedCaterpillargenerators;theunitsareHFOfueledwithdieselstart.ReportedaveragepowerpricesforLoulo arebetween15to17centsperkWh.

Ø Thereareanestimated15,000people livingwithin20kmofthemine,noneofwhomhaveaccesstoelectricity.

Tabakato isalsoanoff-gridminelocatedatabout25kmeastofLoulo andisoperatedbyEndeavourMining. Ø Themine’scurrentaveragepowerdemand isapproximately13MWwithpeakdemandupto14MWandminimum loadof5MW.

Ø Theminecurrentlyhas21MWofinstalledgensetcapacity;theunitsareHFOfueledwithdieselstart.

Ø ReportedaveragepowerpricesforTabakoto are25centsperkWh.

Source:IFC

Randgold’s Loulo Hybrid Power Project

Aim:Achieveahybridwith:

Ø Dailyyield:over2200kWh/m2fortheminesite

Ø Size:24MW

Ø Targetpowercost:USD2c/kWh

Ø PerformanceGuarantee:50000mWh fromasingleaxistrackingsystem

Source:Randgold

Loulo Hybrid Project: Expected Benefits

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Ø Technical:Providereactivepowerduringthenightcontributingfurthertoefficiencyofthedieselmachines.Thegeneratorduringthisperiodwillrunmoreefficientlyaidedbythereactivepowerfromthesolar.Thevoltagestabilitywillimproveasaresultofreactivepowersuppliedbytheinverters.

Ø Economic:Reducefuelexpenditurewhilemitigatingagainstvolatilitycausedbyfluctuatingfuelprice.Contributetotransitiontolowcarboneconomy.

Ø Environmental:Theintroductionof24MWp solarintotheenergymixwillyield44000to50000MWh(dependingonthetechnologyused)ofcleanenergywhileoffsettingover10000000litersoffuelperyear.FacilitatesCO2 reductionofover11,000tonnes peryear.

Ø Sociallicensetooperate:reliablehybridmicrogridsolutionforruralelectrification;affordableandsustainablepowerforpostmineclosure.

Source:Randgold

Bank Proposed Support to hybrid development around minesAssess opportunities to develop the power of the mine initiative in Western Mali

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Ø Assessdemand forecastandaggregation ofdemand frommines- evaluationofandanalysisofdemandfromtheminesandthesurroundingcommunities.Thestudyshouldtakeintoaccountthemines’expansionplans,populationgrowthfactor,profileofnon-miningconsumerbaseetc.

Ø Obtainsocio-economic data andconduct geospatialanalysis aroundtheminestoassessthepossibilities/optionsforpowersolutionstoextendthereachofpowergeneratedaroundtheminesintothesurroundingcommunities.

Ø Evaluatesizingandcostingtherequiredpowerinfrastructure tomeetthedemand - optimumcapacity,transmissionlinesandassociatedruralelectrificationplan.

Ø Developgeo-spatialanalysisandplanningofpotentialleastcostgenerationoptionsintheareas:Thiswillincludethesuperpositionoftheelectricitygridmap,miningprojectmaps,socio-economic data,powerdemand.

Ø Analyzesolarpowerdevelopment/financing options:analysisofdifferentscenariosforsolarpoweroptions.

Bank Proposed Support:Develop public-private partnership for rural electrification of mining communities

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Ø Bank-fundedProject:Mali- RuralElectrificationHybridSystemProject

Ø TotalProjectCost:US$40.50million

Ø Fundingsource:IDA($25.00million)andClimateInvestmentFunds($15.50million)

Ø Developmentobjective:expandaccesstomodernenergyservicesinruralareasandincreaserenewableenergygenerationintargetareas.

Ø Activitytobesupported:linktotheLoulo hybridpilotthroughmini-gridextensionanddensification;developmentofoff-gridlightingmarketsandenergyefficiency;capacitybuildingandtechnicalassistancetoruralenergysectorstakeholders.

Ø Implementingentity:TheMalianagencyforruralelectrification(AMADER).

Bank Proposed SupportPromote scaling up of solar energy by reducing offtake risk for mines

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Ø EngageMalitoadjustregulatoryframeworkwithaviewtoenablegridconnectionandofftakefromsolarPVplantssupplyingthemines.

Ø AssistMalitointegrateminingpowerdemandincountryandregionalpowersectorplanningby:(a)discussingwiththeregionalorganizationOMVS(SenegalRiverDevelopmentOrganization)aboutmediumandlong-termoptionsforincludingtheminingprojectsoroperationsintheprioritiesofitsNetworkMasterPlanandNetworkAdaptationPlanwiththeaimofconnectingtheseminestothenationalgrids;and(b)adaptingregulatorymechanismstoenableotherplayerstoactasapowerdistributingcompanybeyondNationalUtility(EDM)andtoimprovetheenablingenvironmentforIPPs.

Ø SupportingMali’seffortstocomeupwithtransparentandefficientpricingforenergy.

The Cost Advantage of Scaling Up Case of the Loulo Mining Hybrid

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PVinstalledCapacity(Mwac) 20 30 40

PVEnergyContribution(%) 19.4000 28.9000 35.7000

GenSetEnergyContribution(%) 80.6000 71.1000 64.3000

PVPlantO&M(US$/KWh) 0.0045 0.0045 0.0045

ThermalO&M(US$/KWh) 0.0194 0.0177 0.0165

FuelCostOpex (US$/KWh) 0.1040 0.0920 0.0830

TotalCostofEnergy(US$/KWh) 0.1236 0.1096 0.0997Source:Randgold

ThankyouMamadou Barry

Senior Mining Specialist

Energy and Extractives Global Practice

Tel: 202 473 3561

Email: mbarry2@worldbank.org