effective employment of solar pv minigrids in african mining

GG Energy Holdings Stable Power Stable Pricing Page | 1

Employing Solar PV in African Mining

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The Mission of GG Energy

STABLE POWER AT STABLE PRICES!

Generating needed & affordable power Targeting long-term contracts directly with

bankable private customers in the African Industrial & Mining Sectors

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GG Energy Credentials

• Track record of 150 MW installed and operating renewable energy projects

• 100 plus MW under development in the Mining Sector

• Financed over $350 million sustainable energy projects

• Founding Sponsor of US Power Africa Initiative

• Working relationships with global technology leaders

• Financial Strength – Commitments in excess of $400MM for initial projects

• Sponsors of African Energy & Mining Forum

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Increasing Demand for Power At Mines

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Source: World Bank – The Power of the Mine

• Forecast Demand CAGR of 5.6% to 2020 • Continuous growth in South Africa • Increasing growth in Sub Saharan Africa

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Macro Challenges to Power at Mines

Mining in Africa suffers from Macro issues: availability, quality and pricing:

• Declining Hydro levels

• Where gas is available - Slow integration of domestic natural gas supply:

o Little attention to national policy

o High cost of extraction

o Glut of supply limits price and market potential

• Overall move towards Cost reflective tariffs

• Potential Introduction of Carbon Tax – impacting expanded use of coal

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Unstable Power...

Power Issues Facing Mines in Africa

Poor grid maintenance and distribution leads to erratic voltage levels and power availability.

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Intermittent Outages…

Power Issues Facing Mines in Africa

Power availability issues are agnostic to grid availability especially in core mining countries... South African issues are no less acute.

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Escalating Pricing Uncertainty!

Power Issues Facing Mines in Africa

* Simple linear extrapolation based on approved annual average tariff increases

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Overcoming the Power Crisis at the Mines

In sum, Africa is engulfed in Long-term structural issues leading to:

Unstable Power

Intermittent Outages

Escalating Pricing Uncertainty

Mines seek Power Reliability and Quality, which for many reasons is not fully present in Africa.

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Why Go Solar?

Important Reasons for deploying Solar PV at Mines:

1. Reduce risk of power loss from supply disruptions;

2. High potential to reduce and stabilize electricity costs;

3. Reduce carbon emissions;

4. Enable Mines to repurpose land used;

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5. Opportunities for cooperation with neighboring industries/communities.

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Powering Mines with Solar PV

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Off-Grid

• Long-term pricing hedge

• Thermal-Solar Hybrid for lower cost of power

• Baseload with Energy Storage

• Rapid Deployment

On-Grid

• Long-term pricing hedge

• Load Balancing

• Rapid Deployment

Weak-Grid

• Long-term pricing hedge

• Load Balancing

• Grid Stabilization

• N2 Baseload with Energy Storage

• Thermal-Solar Hybrid for lower cost of power

• Rapid Deployment

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Winning plan for Solar PV

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• Fast and flexible deployment • Provide for Long-term pricing hedge • Road map to succeed in deployment of Solar PV:

a. Technical Challenges b. Commercial Issues c. Regulatory statutes

Structure for success!

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Overcoming the Technical Challenge Customized Solar PV solutions must provide for:

Power Reliability and Quality Ensure continuous operation and performance

MAINTAIN MINE SAFETY!

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On-Grid Applications:

• Meet Load Shedding needs

• Ability to maintain power over tie-line controls

• Support Gen-sets for Black Start during power failure (Island Mode)

Hybrid Solutions for Off-Grid Applications:

• 24/7 Solution

• Conventional Power base

• Solar PV provide 60 to 80% of load

• Utilize storage for load balancing and minimize spinning reserve requirement

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Complete Micro-Grid Solution

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GG Energy and CAT provide integrated Power Solution for 24/7 efficient operation: • Diesel/HFO Generators • Solar PV Power Modules • Battery Storage • Hybrid Controller

Minimize Fuel Consumption Seamless integration Reduced emissions

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Solving the Commercial issues • IFRS treatment of PPA or Lease arrangements on

Balance Sheet

• Capital Costs – Inverse relationship between Solar PV and Conventional Power

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• Pay upfront – Solar PV Take-or-Pay Framework vs. Pay-as-you-go for Conventional

• Life of Mine – often shorter pay-back period than Solar PV project!

• Potentially Stronger Business Case for Solar PV/Hybrid systems in remote, off-grid locations! Shorter Life of Mine; Offsetting higher priced fuels

• Consider using Mining company subsidiary SPV structure for Power company – becomes a self-production venture.

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Effective Financial Structures • Balance risk allocation to those best able to manage it!

o Contract/Termination Risk – according to source of default

o Construction Risk – seek strong EPC to backup

o Payment Risk – possibly include ultimate off-taker coverage

• PPA Payments – target to Levelized cost of electricity and expected cost of power

• Separate Availability (capacity) and Minimum Output payments

• Optimize debt sources – Integrate DFI lending and ECA coverage for longer tenure and lower cost

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How Making Renewables work

Work Cooperatively – IPP and Mine are not adversaries!

• Focus on Grid Parity – Seek integrated solutions priced to meet customers long-term power costs

• Investigate Lease Models – Match commitment to buy power consumed

• Expand off-take group – sell to mining consortium/ regional power pools

• Include sustainability and environmental issues in cost-benefit analysis

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FOCUS ON THE LONG TERM!

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Thinking “out of the Box”

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Tender for Partners not Projects!

• Saves time and costs on all sides

• Work cooperatively for the most cost-effective solution and approach

Secondary Off-takers – Look for

local off-taker opportunities to backup primary

PPA

Establish a joint-venture with the IPP:

• Self-production Model

• Overcomes regulatory and commercial hurdles

• Mitigate potential tax/balance sheet implications

Bring in Utility as a partner:

• Direct PPA between IPP and Utility

• Mine can provide guaranteed off-take

• Utility provides load balancing

• Grid benefits from stabilization from Solar PV

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Closing Words

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• Long-term structural issues impacting Energy supplies and pricing;

• Mines have to be proactive and bold in sourcing alternative power sources;

• Solar PV is the fastest clean energy source that can deployed at Mines;

• Cooperation between the IPP and the Mine in early stages of a project is critical to successful and beneficial implementation of Solar PV Solutions at Mines -

• Collaboration is the Best way to overcome:

Regulatory obstacles

Technical issues

Commercial challenges

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Questions and Follow Up

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Ira Green Managing Partner

GG Energy Holdings LLC Tel +1 646 443-0513

ira.green@ggenergyholdings.com