IDC fund helps companies go green



SA Calcium Carbide In South African Calcium Carbide’s current
production process, the waste gas
generated by heating raw materials in
furnaces is simply flared-off on site. But
with IDC funding this gas will now put to
good use as fuel for an 8MW cogeneration
plant. (Image: IDC)

• Industrial Development Corporation
Green Energy Efficiency Fund
+27 11 269 3000

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Energy-efficient and environment-friendly South African companies now have a competitive edge, thanks to the R500-million Green Energy Efficiency Fund launched by the Industrial Development Corporation (IDC) and German development bank Kfw in mid-October.

The fund has been developed to provide loans with favourable terms to small to medium-sized enterprises that use energy-efficient equipment and technologies, increase productivity while cutting back on waste, and reduce emissions or use renewable resources. To qualify, companies will have to have a turnover of R51-million or less, hold R55-million in assets and employ no more than 200 people.

Speaking at the launch of the fund, IDC CEO Geoffrey Qhena said it was designed to promote investment in energy efficiency and renewable energy, technologies that will help South Africa transition to a low-carbon economy.

“We want to provide increased access to energy efficiency and renewable energy financing across all industry sectors, he said. “Setting up this fund with Kfw is crucial for the country and a key addition to our portfolio of ring-fenced funds directed at a specific goal.” The fund is aligned to government’s Industrial Policy Action Plan and New Growth Path.

Qhena said the fund was suited to smaller enterprises as it provided cheaper financial backing than other sources on the market. Loans from R1-million up to R50-million are available at the concessionary rate of prime less 2%, with a repayment period of up to 15 years.

“Funding is available to companies who plan to implement projects that will provide significant energy savings and/or emissions reductions, or will offset grid-connected electricity through renewable energy generation for self-use,” said Rentia van Tonder, head of the green industries strategic business unit at the IDC.

In addition to funding, approved companies will also get technical support from the IDC and Kfw.

“We have access to both local and international technical experts who will develop eligible enterprises by performing energy assessments, calculating financial benefits and supporting the selection of eligible equipment and enhanced performance technologies,” said Van Tonder.

From waste gas to electricity

One company whose loan has already been approved is South African Calcium Carbide (SACC), an energy-intensive chemical producer with monthly electricity costs of almost R7-million.

In the company’s current production process the waste gas generated by heating raw materials in furnaces is simply flared-off on site. But with the new funding SACC will now put this waste gas to good use, generating fuel for an 8MW cogeneration plant that will decrease the company’s reliance on the national grid and cut emissions by 46 000 tons of carbon dioxide a year.

“The decision to invest in a cogeneration plant comes on the back of increasing electricity prices and constraints in South Africa, as well as growing environmental concerns,” says general manager of Claudio Siracusano.

He adds that the additional capacity created by the plant will enable them to operate at full production compared with the current 70% capacity because of electricity constraints.

The new plant will be operational by October 2012 and has been registered as a Clean Development Mechanism project. Revenues earned from the 450 000 carbon credits expected to be earned by the project will be used to pay back the 10-year IDC loan.

Carbon neutral clothing

A funding success story which is already up and running is that of Impahla Clothing in Cape Town. A small company manufacturing sports and leisurewear, Impahla is South Africa’s first carbon neutral clothing company, an accolade it received three years ago.

“In order to reduce our carbon footprint, Impahla Clothing took the decision to find alternative sources of energy and being based in Cape Town, South Africa, solar energy, although not a cheap option, was the most obvious,” William Hughes, managing director for Impahla, said in an IDC case study.

With the Green Energy Efficiency Fund the company installed a grid connected rooftop Solar Photo Voltaic system which generates 25% of the company’s annual electricity requirements. This saving fully covers the investment cost and interest on the loan which will be paid back over 14 years.