PRESENTATION TO THE NATIONAL ASSEMBLY PORTFOLIO COMMITEE ON ENERGY EXPLORING SOLUTIONS TO CHALLENGES ON FINANCING & CERTIFICATION ON LOCALLY PRODUCED RENEWABLE PROJECTS PRESENTATION TO THE NATIONAL ASSEMBLY PORTFOLIO COMMITEE ON ENERGY ENERGY STAKEHOLDER MEETING, 30 August 2012

OVERVIEW ROLE & CONTRIBUTION OF BANKING SECTOR EXPERIENCES/LESSONS IN PROCUREMENT OF RENEWABLES PROGNOSIS ON KEY ISSUES

ROLE & CONTRIBUTION OF BANKING SECTOR INDEPENDENT POWER PRODUCERS (IPPS) SUCCESS STORY - IRP INTRODUCED MARCH 2011 (17 MONTHS AGO) - 2011 -2% RENEWABLES (RE) - 2030 -IRP 42% CAPACITY (17 000 MW) RE - 2016- 3 625 MW (RE TARGET) - 2012 - 2 460 MW (ACHIEVED 68% OF RE TARGET) - FIRST RE PLANT ON LINE APRIL 2013 - 2012 IPP RE PROJECT FINANCE R100 BN OF WHICH R70 BN FROM DEBT FINANCE (COMMERCIAL BANKS PROVIDED/WILL PROVIDE IN EXCESS OF 80% OF THIS FUNDING) - LOCAL CONTENT (ROUND 1: 28.5%, ROUND 2:47.5%, TARGET 60/65%) - COMPETITION (ROUND 1&2) HAS ALREADY DRIVEN DOWN PRICES PV 2.8C/KWH TO 1.7C/KWH, WIND R1.14/KWH TO 89C/KWH - SURPLUS BIDDERS/FINANCIAL INTEREST RENEWABLE ENERGY IS AT CRITICAL STAGE. EARLY SIGNS ARE ENCOURAGING BUT THERE IS A LONG ROAD AHEAD

ROLE & CONTRIBUTION OF BANKING SECTOR (CONT.) COMMERCIAL BANKS WILL COMPETE FOR & EXPLOIT ANY VIABLE & RESPONSIBLE OPPORTUNITY (COMMERCIALLY VIABLE & SUSTAINABLE). DFIs (SUB-COMMERCIAL, RISK SHARING) ALREADY MOVED INTO: - INVESTING SOLUTIONS E.G. GREEN EXCHANGE TRADED FUND (+30% JSE OUT-PERFORMANCE) - FX - INTEREST RATE & COMMODITY HEDGING - AGENCY/TRANSACTIONAL SERVICES - CDM (R100M ALREADY INVESTED) CAPITAL IS NOT AN ISSUE BANKS ALREADY RETROFITTING THEIR EXISTING PREMISES (PLUS R100M SPENT) - WHY: IT WORKS, DECREASES SUPPLY PRESSURE, DECREASES OPERATING COSTS, STATE REBATES/TAX IINCENTIVES MAKE IT ATTRACTIVE (BEHAVIOURAL ECONOMICS) IT PLATFORM ELECTRICITY BACK UP (COST UNKNOWN) ALREADY 3 -5 GREEN STAR AWARDS ON NEW BUILDINGS

EXPERIENCES/LESSONS IN PROCUREMENT OF RE CHALLENGES (IPP’S) - RISK - TIME CONSTRAINTS - INEXPERIENCE OF BIDDERS - BUREAUCRACY - STATE: BALANCE BETWEEN SOCIAL & ECONOMIC IMPERATIVES - INABILITY TO REACH LOCAL CONTENT CRITERIA - CORE MANUFACTURING LOW – ESPECIALLY IN PV AREA (NEED FOR AN ENABLING ENVIRONMENT: FINANCE REASSURANCE, MARKET LONGETIVITY) - FEED-IN TARIFFS - STATE BOTH “REFEREE & PLAYER” CRITICAL FOCUS AREAS FOR RE: - MARKET CERTAINTY - LOCAL CONTENT - FOREIGN MANUFACTURING INVESTMENT - SUITABLE FINANCE (NBI CO-ORDINATED “GREEN FINANCE” PROJECT (BANKS,DBSA,IDC). OUTCOME BY END 2012 - LACK OF EXPERTISE - DECOUPLING VALUE CHAIN TO PROMOTE COMPETITION & TO ENABLE MARKET TO GROW BEYOND ITS “INFANCY” - RE INFRASTRUCTURE SUPPORT

PROGNOSIS ON KEY ISSUES BEHAVIOURAL ECONOMICS AT PLAY: MARKET WILL RESPOND - COMMERCIALLY/ECONOMICALLY VIABLE/SUSTAINABLE - ENABLING ENVIRONMENT (STATE SUPPORT, RIGHT LEVEL OF REGULATORY FRAMEWORK (DON’T OVERDO)) - COMPETITION - OPPORTUNITY - MARKET CERTAINTY (MANUFACTURERS, IPPS,CONSUMERS,) - CONSUMER EDUCATION FOCUS ON IMPLEMENTATION - KEY FOCUS AREAS/PRIORITIES (IT’S OK TO MAKE A MISTAKE - LESS TALK/POLICY PERFECTION - MORE IMPLEMENTATION FOCUS) NEED TO SEE LOCAL CONTENT/JOB CREATION IN BROADER VALUE CHAIN SENSE (SA INC. OPERATES WITHIN GLOBAL CONTEXT WHERE INVESTMENT & SKILLS FLOWS ARE MOBILE AND CONVERGE TO MOST ATTRACTIVE DESTINATION/S (SIGNIFICANCE OF SA WITHIN GLOBAL CONTEXT, CORE COMPETENCIES, SKILLS, COMPETITIVENESS, STABLE POLITICAL/MACRO-ECONOMICS, INVESTOR PROTECTION ETC.) BALANCE SOCIO/ECONOMIC DEMANDS OR FRIGHTEN BOTH LOCAL/ INTERNATIONAL INVESTORS AWAY

ANY QUESTIONS ?