Norfund: Investing in renewables. 1 September 2011

Transcription

1 Norfund: Investing in renewables 1 September 2011

2 Norfund Became operational in 1998 Invests in commercial enterprises in developing countries Invests on commercial terms, always with partner(s) and normally with a 20-35% stake, never in majority Legal entity with limited liability Capital provided by the Norwegian government Norfund is an integral part of Norwegian development cooperation Investments under management approximately USD 1 billion* Norfund s mandate:.reduce poverty and create sustainable economic growth by investing risk capital in profitable businesses in developing countries. *as of

3 Norfund s investment areas Financial Institutions SME Funds Renewable Energy Industrial Partnerships Build financial infrastructure Finance SMEs Power economic growth Risk capital for development Why Many people and small businesses lack access to financial services How Invest in SME banks and microfinance. Norwegian Microfinance Initiative (NMI) Why SMEs face difficulties raising equity How Invest through PE funds, or set up new funds where none are currently available Why Adequate electricity is a precondition for economic growth How Co-invest with technical partners. Mobilize Norwegian capital and expertise Why Start-ups and agribusiness face capital constraints How Identify high quality industrial partners Be a long-term and active owner 3

4 Strategy: Competence Capital Value Add Geography: Four regions with emphasis on Africa and LDCs Sectors: Renewable energy, financial institutions and agribusiness Direct investments: Direct investments in Africa with Norwegian/international partners Ambitious CSR agenda: Project development, support and development of investees and local communities San José, Costa Rica Bangkok, Thailand Nairobi, Kenya Johannesburg, South Africa Focus areas Norfund s regional offices SN Power Invest

5 Investments in Renewable Energy 3200 MNOK 120 MNOK 60 MNOK 40 MNOK 30 MNOK CHILE La Higuera La Confluencia Colmito Totoral PERU Cahua Electroandes Cheves INDIA Malana Allain Duhangan Africa Wind & hydro Central America Wind & hydro 40 MNOK UGANDA Bugoye Other small hydro 35 MNOK Central America/Africa SMEs in clean energy services FUND INVESTMENTS 13 MNOK East Africa Small scale solar energy devices NEPAL Khimti Kirne Tamakoshi PHILIPPINES Magat Binga Ambuklao Global Syndication tool for climate change mitigation investments Southern Africa SMEs in clean technology, incl renewables & energy efficiency Investment fund Country Technology CASEIF II Nicaragua Solar European Financing Partners SA Kenya Geothermal and other China Environment Fund 2004 China Solar and other APIDC Biotech Fund India Biodiesel Other fund investments BRAZIL Figures shown are approved amounts as of year-end

6 Barriers to investment in renewables Renewables are perhaps the least attractive power generation technology from an investor s perspective Very capital intensive particularly relevant where political risks increase the cost of capital Construction risks are huge esp for hydro relating to geological risks in underground construction Hydrological/wind risks are large, and particularly so where data is weak and where there are large seasonal variations In many developing countries, the only purchaser is a state utility with signficant counter-party risk. Where there are modern power markets, regulatory risks remain high But once a portfolio is built and in operation, value add can be high Renewable energy is strategically attractive for many investors Diversification reduces country, market & hydrological risks Potential upside linked to carbon benefits Growth prospects in emerging markets are strong Denne presentasjonen heter 6

7 Risks & risk mitigation Market risks Price & volume risks Counterparty risks Political & regulatory risks Traditional political risks Behaviour of sector regulators Change in regulations/tax etc. Technical risks Financial risks Interest rate Currency Refinancing Reputational risks Environmental Social Corruption Construction risk Resource risks O&M performance Denne presentasjonen heter 7

8 What does a financial equity investor look for in a renewable energy project? Number 1: A good partner We need an industrial investor at the table Preferably a majority investor With a balance sheet, track record and resources Number 2: A good project Allocation/mitigation of risks Comfort margins in financing & returns Number 3: A good deal A suitable risk-related return Aligned interests & a role in governance An exit route 8