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Dealing with climate change 'good business sense'
Dealing with climate change 'good business sense'

Dealing with climate change 'good business sense'


Business Live - Nov 25th 2011, 08:26

If climate change is left unchecked, then it will hamper Africa's economic growth and development, says Sim Tshabalala, Chief Executive of Standard Bank SA.  

Addressing a media briefing ahead of the start of the COP17 proceedings in Durban, Tshabalala said the future risk created by carbon emissions and the consequence of climate change cannot be ignored.

He said as a corporate citizen, dealing appropriately with the environment makes perfect business sense and is a commercial imperative.

He said it would be interesting to see which direction the deliberations at COP17 would take.

"Hopefully we will unlock the power of the market to address the issues," he said.

"Our future depends on a green and prosperous Africa and we will contribute all we can to achieve this noble goal," he said, referring to initiatives undertaken by Standard Bank.

Geoff Sinclair, Head of Carbon Trading at Standard Bank, said the COP17 negotiations would be baffling, extraordinarily complex and "a mesh of so many different interests that it will be almost impossible to follow even if you are in the middle of it."

He said there will be a lot of noise and backroom negotiations, with the most important period being the last 12 hours.

Sinclair, who is a world expert in his field, said most in the climate change community do not believe that an agreement will be achieved.

The first legally binding protocol was ratified under the UNFCCC at COP3 in Kyoto, Japan, in 1997. In the document, industrialised nations agreed to decrease their greenhouse gas emissions 6%-8% from 1990 levels. The first period of the protocol went into effect in 2008 and will expire on December 31, 2012.

"If we get a binding agreement, it will be a fantastic outcome for SA as convener of the conference," he said.

He said at the moment there was a lot of "finger pointing" going on among the various countries, in the developing and developed world.

He said it would be positive if a specific agreement could be reached that ensured the clean development mechanism (CDM) would continue. He said the private sector market was looking for certainty over that.

He said he would also like to see some movement in climate finance. Agreed to at the Cancun talks, the Green Climate Fund would provide US$100 billion per year to developing nations for climate change projects, paid for by developed nations. But with Europe and the US teetering on the edge of financial crisis, asking these countries to capitalise the fund couldn't come at a worse time.

Alastair Campbell, Head of Power Finance at Standard Bank, said the bank was putting its money where its mouth is and had committed on several fronts to Renewable Energy projects, not only in SA, but in Africa.

He said the bank had supported a number of bidders in the first bidding stage of the Renewable Energy IPP (Independent Power Producers) procurement process.

Standard Bank has underwritten approximately R12 billion of debt on various wind and solar mandates.

"The bank supported a number of bidders in the Renewable Energy IPP procurement process on which the first bid date has just reached conclusion. The mandated clients comprise 401MW of wind and 442MW of solar photovoltaic."

"Should these projects succeed in achieving preferred bidder status, they will produce approximately 1,850 Gigawatt hours of renewable energy a year," he said.

Campbell said this represented a significant commitment from the bank to the establishment of a renewable energy sector in SA.

The total allocation of 3,625MW for the procurement process is likely to translate into approximately R75 billion of investment, with roughly R52 billion coming in the form of debt. Bidding for these projects closed on November 4, 2011.

The government is expected to announce preferred bidders for Bid Date 1 just before the start of the COP17 conference

Campbell added that the bank had secured a number of further mandates to fund a variety of developers through the second Bid Date. The group had already financed five deals in other African countries worth US$535 million, with a capacity of 500 megawatts of electricity.

Some of the consortia that Standard Bank has supported on Bid Date 1 include Basil Read, AE-AMD, Biotherm, Red Cap, Metrowind, ACED, Sun Edison and SARGE.

Initial interest in the first phase of the competitive bidding process for the development of renewable energy projects in SA suggests that it will be significantly over-subscribed, confirming that there is overwhelming interest from both local and international developers to invest in local power generation.

Four other bidding rounds are expected to take place roughly six months apart from March 2012 onwards to allocate the total 3,625MW. In accordance with the countries long-term power plan, SA aims to secure a total of 17,800 megawatts of renewable energy or 42% of SA's new generation capacity by 2030.

More than 300 potential renewable energy developers of mainly wind and solar have registered with the DOE, comprising about 27,000MW of interest and worth about R240 billion.

Campbell noted that the bank was involved in various other renewable energy initiatives which were underway across SA's borders. These include the Mphanda Nkuwa dam and hydropower plant in Mozambique, and the Turkana Wind Power Project in Kenya.  

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