Standard Bank : Avior Renewable Energy Investor Engagement

AN OVERVIEW OF THE SOUTH AFRICAN POWER SECTOR

October 2024

Presented by Rentia Van Tonder

CONTENTS

01 Standard Bank

02 SA Power Market Overview

03 SA Market Size and Drivers

04 SA Market Outlook

05 Themes and Opportunities

06 Africa energy overview

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01

Standard Bank

CLIMATE POLICY OVERVIEW

Standard Bank is committed to driving Africa's growth by balancing the urgent need for energy security with a responsible transition to a low-carbon future. Through its

phased reduction of fossil fuel financing and strong support for renewable energy

Climate Policy Goals

• Standard Bank Group (SBG) commits to achieving net zero carbon emissions by 2050 for its operations and financed emissions

Oil Commitments

Coal Commitments

Gas as a Transition Fuel

Fossil Fuel Transition Plan

Scope:

Includes financing for exploration, extraction, refining, and oil-fired power generation

Commitments:

• SBG will reduce oil financing by 5%by 2030
• No financing for newoil-fired power plants unless part of a renewable solution
• Companies must have plans to eliminate flaring for existing assets​

Scope:

Financing covers mining, coal- fired power generation, and associated activities

Commitments:

• Coal financing will drop to 0.50% of total loans by 2030
• No financing for newcoal power plants or expansions
• Support for coal plants focused on improving efficiency and reducing emission

SBG views gas as a transition fuel to reduce reliance on coal

Commitments:

• Commitments to financing gas projects with reduced emissions intensity, especially where gas complements renewable energy
• By 2045, SBG aims to phase out gas financing unless used as part of a well-defined transition to cleaner energy sources​

SBG is committed to a just transition, ensuring energy security while supporting decarbonization efforts

Prioritization of renewable energy financing:

• SBG has provided over ZAR50bn for renewable energy projects to date, significantly exceeding its fossil fuel financing​​

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Sources: Standard Bank Climate Policy

FUNDING THE JUST ENERGY TRANSITION IS A KEY FOCUS

Unrivalled Sector Credentials with a Broad Base of Leading Clients

Standard Bank has executed the most innovative transactions across the financing, investment and hedging spectrum, including some of the largest public and private transactions in Africa

Market Participation

Standard Bank is one of the largest renewable

funders in South Africa

Leading funding

track record

• Award-winningfranchise
• Significant experience in leading, arranging, structuring and tailoring lending instruments

African Banker Awards			Bonds & Loans Africa		Euromoney Awards For
African Bank of the Year	Global Finance		Awards		Excellence
2023		ESG and Sustainable		Best Investment Bank in
Best Bank in Africa
		Adviser of the Year		Africa
	2022		2022		2021

Standard Bank has emerged as the leading

renewable investor in the country, demonstrating its dedication to sustainable development and a just energy transition for the whole continent

Strong relationships with

key stakeholders

• On-the-groundmarket presence enables local insights and expertise, local currency financing and access to key relationships
• Ability to leverage strategic relationships with key government stakeholders

Global reach with presence in

• 26 countries

• 20 countries
• 653 branches in South

Africa Africa

• 546 branches in Rest of Africa
• 4 global centres & 2
  Rest of offshore hubs
  world

Recognised brand

Standard Stanbic

Bank Bank

Representation in

major financial centres

London, New York,

Dubai, Beijing

Projects closed to date (1)

c. 8 894MW

8 153MW - REIPPPP & RMIPPP

741 MW - Distributed Generation

Market share of government

programs

Total MW closed:

BD 1 to 4 - 24%

RMIPPPP - 41%

Bid Window 5 - 83%

Strong sector coverage team in SA and across Africa with deep understanding of Energy and Infrastructure trends

Scatec ASA

REIPP BD 5 - 3x 75MW

2023

ZAR5.1 billion

Sole Mandated Lead

Arranger, Account Bank, Agent and Hedging bank

Seriti acquisition of Windlab

2022

ZAR 892m

Seriti's acquisition of 100%

of Windlab South Africa

and 75% of Windlab East

Africa

M&A Transaction Advisor

ABO Wind Lichtenberg 2

& 3 PV

2022

ZAR4 billion

Joint Mandated Lead

Arranger, Account Bank

and Hedging bank

Red Rocket

Brandvalley Wind

RietKloof, Wolf

(2x140MW, 1x 70MW)

2023

South Africa

ZAR 5,4 billion

Joint Mandated Lead

Arranger and Underwriter

In the last 24 months, Standard Bank has financed over 30 projects and ZAR50bn in the sector, showing our commitment to ESG, knowledge of renewable energy and ability to underwrite large ticket sizes

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Notes: (1) MW calculated on a total project size basis

02

SA Power Market Overview

SA POWER MARKET OVERVIEW

SA power market is the largest and fastest growing in Africa with demand at c. 239 TWh per year and the 20th largest globally in terms of demand

Regulation and

Planning

Procurement Programs (1)

Generation

Offtakers

Transmission

Distribution

Retail

Department of Electricity and Energy

Minister in the Presidency responsible for Electricity

National Energy Crisis Committee (NECOM)

National Energy Regulator of South Africa (NERSA)

REIPPPP, RMIPPP, BESSIPPP, GtP

Eskom		IPPs (c.15%)		Municipalities
(c.85%)			(<1%)

Private

EskomMunicipalities

PPAs

NTCSA

EskomMunicipalities

EskomEskom

1

Generation

• The ongoing liberalization of South Africa's electricity market is bringing about major structural changes
• Originally vertically integrated, the electricity market has opened up to generation competition, with several public procurement programmes bringing in IPPs
• Offtake is mainly operated by Eskom, but the structuring of wheeling tariffs is enabling the development of private offtakers buying wheeled electricity

2

Transmission

• Transmission, has been transferred to the National Transmission Company of South Africa (NTCSA), which has independent governance structures. The NTCSA has been mandated as the transmitter, central purchasing agency and market operator

3

Distribution

• Distribution is shared between Eskom and municipalities, with the distributor also acting as retailer, handling billing and payment collection, among other tasks

Sources: Eskom Integrated Report 2023; WEF Community Paper- Mobilizing Clean Energy Investments in South Africa June 2024

Notes: (1) The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), The Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), The Battery Energy Storage Independent Power Producer Procurement Programme (BESIPPPP).

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EVOLUTION OF THE SOUTH AFRICAN ENERGY MARKET

The development of RE in South Africa has increased generation capacity and reduced unserved demand, as well as decarbonizing electricity production

Route to Market for RE Projects

Market Challenges

Power Pools

1	Grid Availability

Single Buyer

Government backed off-taker (Eskom)

Bilateral Corporate PPAs

Direct energy agreements between producers and consumers either behind the meter or wheeled through the grid

Power

Aggregators and

Traders

Facilitate the pooling of electricity from various IPPs to sell to offtakers, by wheeling through the grid

Customized energy procurement, where buyers can participate in long- term agreements without taking on individual legal and operational responsibilities

■ Grid availability is constrained in the

wind and solar resource-rich Northern

Cape, Western Cape and Eastern Cape

as well as in certain parts of the Free

State

■ Eskom's Transmission Development

Plan (TDP) aims to solve this problem by

building c.14000km and 37HW of

connection capacity between 2025

and 2033

No Grid Capacity			GP
Minimal Grid Capacity	4680MW
Moderate Grid Capacity					LP
Substantial Grid Capacity		3360MW
NW					MP
				3320MW
1660MW
			FS	KZN
NC	1420MW	5500MW

0MW

South Africa has some of the worlds leading wind and solar load factors. Relaxation of regulation for embedded generation has led to significant growth in the corporate PPA market

■ Curtailment studies are being conducted

to provide generators with an alternative

option to connect in constrained areas

EC

WC0MW 0MW

Efforts to improve the EAF(1) include extensive maintenance, the return of key generating units to service, and the integration of new capacity from renewable sources and IPPs

The Government plans to publicly procure 15 GW wind and solar projects

and 1.2 GW of battery energy storage system ("BESS") projects in the next

24 months

Sources: Eskom Integrated Report 2023; WEF Community Paper- Mobilizing Clean Energy Investments in South Africa June 2024; GCCA 2025

Notes: (1) Energy Availability Factor

2	Eskom's Financial Health

• Non-costreflective tariffs, non-payment by municipalities, poor management and legal disputes have led to spiraling debt for Eskom

3	Municipalities

• Lack of a comprehensive, clear regulatory framework that facilitates wheeling through municipalities
• Municipalities often operate under unclear or fragmented regulations, making it difficult to coordinate across different jurisdictions
• • Page 8

03

SA Market Size and Drivers

SIZE OF SOUTH AFRICA'S RENEWABLE ENERGY MARKET

Total Market Size: The large-scale renewable energy, energy storage, and component manufacturing market is projected to reach ZAR468bn by 2030 (from 2024)c.ZAR78 bn

annually

Private Procurement

Key drivers of the private

market include energy

security, corporate

environmental targets, and the deregulation of energy generation which has resulted in growth driven by private PPAs

• Market Size Opportunity: ZAR214 billion by 2030
• • Solar PV: ZAR116bn
  • Wind: ZARR9bn
• Annual Growth: Projected to grow at ZAR36bn pa

Key Segments`

Public Procurement

Key programs like

REIPPPP, RMIPPPP and

BESIPPPP will drive

growth in this segment, with large-scale solar and wind projects complemented by BESS to relieve grid constraints

• Market Size Opportunity: ZAR212bn by 2030
• • Solar PV: ZAR50bn
  • Wind: ZAR79bn
  • BESS: ZAR83bn
• Annual Growth: Projected to grow at ZAR35bn pa

Local Manufacturing

Local content

requirements for public

and private projects, driven by the South African Renewable Energy Masterplan (SAREM), which focuses on fostering local manufacturing of various components

• Market Size Opportunity: ZAR42bn by 2030
• Annual Growth: Projected to grow at ZAR7bn pa

Key Differences Between the Segments`

Private Market

• Demand: Demand is driven by large energy users like mining companies, manufacturers, and corporates aiming to meet ESG targets
• • These users prioritize cost savings and energy reliability
• Price: Prices are negotiated between the IPPs and private offtaker. The pricing is competitive and can be tailored to specific energy demands
• Returns: Higher returns are generated from private sector deals
• • Flexibility of PPAs allows for higher margins, as projects are designed to meet the specific needs of energy-intensive users like mines and large corporates

Public Market

■ Demand: Demand is governed by government programs such as the REIPPPP

and municipal projects

- These initiatives are critical for addressing national energy needs and grid

stability

■ Price: Prices are more standardized, influenced by structured bidding rounds, the

REIPPPP bid rounds show increasing prices, with solar PV bids rising from

R431c/MWh in BW5 to R502c/MWh in BW6

- The market is influenced by grid constraints and project timelines, which can

drive up the costs compared to behind the meter private sector deals

While deregulation of energy generation and rising corporate demand for ESG

compliance have driven growth in renewable uptake, challenges like grid capacity and

delays in finalising certain policies still remain

■ Returns: Generally lower in public procurement, as projects are bound by fixed

tariffs and competitive bidding processes

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Sources: GreenCape: Large-scale Renewable Energy Market Intelligence Report 2024

Notes: