Promotion of Green Hydrogen in South Africa Dr. Thomas Duve

Promotion of Green Hydrogen in South AfricaDr. Thomas Duve

June 2021

Outline

1 Overview KfW Development Bank

2 Gerrman Hydrogen Strategy

3 Promotion of Green Hydrogen in South Africa

2Promotion of Green Hydrogen in South Africa, June 2021

Organisation and Tasks of KfW Development Bank

KfW Development Bank / Financial Cooperation with developing countries and emerging economies 3

KfW presents itself / June 2021 4

Financing with a public mission

− Promotional bank of the Federal Republic of Germany

− Established in 1948 as Kreditanstalt für Wiederaufbau

− Shareholders: 80% Federal Republic, 20% federal states

− Headquarters: Frankfurt am Main

Branches: Berlin, Bonn and Cologne

− Representative offices: about 80 offices and representations worldwide

− Balance sheet total 2020: EUR 546.4 billion

− Financing volume 2020: EUR 135.3 billion

− 7,610 employees (as of 31/12/2020)

− Best long-term rating: Aaa/AAA/AAA

More than 70 years of KfW

We promote

development

We support internationalisation

International project

and export finance

We promote Germany

Municipalities

Financing and supporting sustainable change at home and abroadTotal funding volume in 2020: EUR 135.3 billion

KfW – A bank with a wide array of functions

Domestic financing International financing

Developing and emerging countriesRetail customersSMEs Start-ups

5Promotion of Green Hydrogen in South Africa, June 2021

6

How we finance

Development Loans

Promotional Loans

Funds from:

the German Federal Government budget funds

and KfW funds raised on the capital market.

Development loans combine KfW funds with a

grant from the German Federal Government

which serves as an interest subsidy (providing

significantly better conditions than loans at

market prices).

Interest rate depends on:

▪ Partner

▪ Country rating

Funds entirely from:

KfW funds raised on the capital market.

Promotional loans are primarily used in

countries without apparent debt related

problems and for revenue generating projects

only.

They are an important pillar of German

international commitments for meeting Official

Development Assistance (ODA) requirements.

▪ Invested on behalf of the German Federal

Government

▪ But with faster processing

▪ Additional KfW bank audit due to higher

operational risks for KfW

Our financing instruments

Grants Blending

Funds entirely from:

the German Federal Government budget

funds.

The grants invested by KfW in South Africa

mainly support the social, non-profit generating

sectors.

Both instruments aim to reduce poverty and/or

protecting the environment.

Promotion of Green Hydrogen in South Africa, June 2021

German Hydrogen Strategy

FC with South Africa, Promotion of Green Hydrogen, May 2021 7

− Generation, transport and use of green H2 key for

global decarbonisation

− In 2019, worldwide conventional production of 70 m t

H2 (IEA), thereof emissions of 830 m t CO2e

(corresponds to German GHG emissions in 2019)

− Majority of green H2 in GER / EU has to be imported

− Investment needs until 2050 in bn EUR/a:

GER ~7 (BDI), World ~4.000 (Bloomberg)

− Implementation of NHS by the Federal Government

supported with funds from the economic stimulus

programme of EUR 9 bn, thereof 2 bn for

international cooperation

− BMWi takes the lead / regular discussion in the

steering group

8

Hydrogen/Sector Coupling

KfW to support in the implementation of the German NHS

Sector Coupling as an energy

policy issue of the future

Germany‘s National Hydrogen

Strategy (NHS) / Green Deal


9

Implementation of the international component of the NHS

Funding Guideline

•Pilot phase

•Capital grants to

German

companies

P2X Growth Fund

•Market ramp-up

• Investment financing

•Design of H2

partnerships

H2 Global

•Hint.Co

•Safeguarding

imports

•OPEX funding

Bilateral EC

• Local value creation

• Frameworks of

partner countries

•Knowledge transfer


German H2 Initiatives

Morocco

Brasil

TunisiaAlgeria

Georgia

Egypt

Uganda & Kenia

RSA

Colombia

Namibia

Chile

Worldwide activities in the field of Green H2


Promotion of Green Hydrogen in South Africa


• Funding through KfW

o Up to EUR 200 Mil promotional lending available to fund promising project approaches

o Additional TA funding can be made available for project preparation

o Funds must be disbursed through a public partner

• Current Status: Pre-feasibility Study

o The CSIR and Meridian Economics have been appointed by KfW to design and implement an evaluation process for green

hydrogen project opportunities in the South Africa.

o A Request for Information (RFI) will soon be issued by CSIR and Meridian on behalf of KfW inviting information about

potential project opportunities from a wide range of networks (mid-to-late June 2021)

12

Approach H2SA


13

Types of green hydrogen projects which will be considered for funding

− New projects for the production, transport, export, storage of green hydrogen and its derivatives,

− Projects in existing value chains that support the transition of fossil-based processes to green hydrogen within a specific timeframe, for

example in heavy industries, chemicals and transport.

− Offerings from financial institutions, such as innovative financial instruments or funded subsidy mechanisms for stimulating the

competitiveness of green hydrogen in the South African market will also be considered.

Green hydrogen project assessment criteria

1. Environmental Impact – what is the CO2 emission reduction potential of the project?

2. Financial Viability – is the project financially viable with the concessional finance?

3. Technical Risk – is the project technology commercially proven? Is there a manageable level of implementation risk?

4. Development Status / Execution Ability – how advanced is the project planning process? What is the likelihood of successful

implementation of the project in the required timeframes? Does the project team have sufficient capacity to implement?

5. Social Impact – what is the net social impact, how can the project contribute to a Just Energy Transition, e.g. job creation?

Types of projects and assessment framework


Programme timeline

2023

Progress

to date

Market primerRequest for information

(RFI)

Assessment and evaluation

of viable projects based

on set of criteria

Bilateral engagements

with select projects

Identification of projects for

funding

Appraisal and contracting

Funding disbursement

to public partner/ selected projects

June July August

20222021

Project information and evaluation (CSIR, Meridian, KfW) Project selection process (KfW)

RFI to be issued

late June


Thank you


Documents

Promotion of Green Hydrogen in South Africa Dr. Thomas Duve