Recording and presentations: Managing Contract and Supply Chain Disruptions to Deliver Successful Solar PV Projects in Africa
28 May 2020
Automated transcription (it may contain errors)
Belén Gallego 1:00
Good morning, good afternoon, depending where you’re joining from today, I just wanted to let you know that we are going to wait one more minute to start this webinar. And I mean, it literally will start two minutes past. But you’re in the right place. We are in the session here for managing contracts and supply chain disruptions to deliver successful solar PV projects in Africa. And what I would invite you to do all of our attendees is if you please can use the chat, which is in your right hand side, make sure that you tag all attendees and you introduce yourself, your company and also where you’re joining from. Usually, these webinars are really International, and it’s always very, very cool to hear about you or your company, and where you’re joining. So please do use the chat and we will begin in literally 30 seconds. Thank you
Okay, we’re going to begin. So here we are in the webinar, managing contracts and supply chain disruptions to deliver successful PV projects in Africa. As you know, this year, we faced a crisis that I don’t think anyone had imagined that could happen or could happen through the world with this COVID 19 any sort of disrupted supply chains and economists everywhere. We’re now in this webinar looking at not only this particular issue because you know, a supply chain canes and conquer fulfillments were always, you know, a little bit tricky anyway, in certain places, but we’re looking also at how this is going to change things going forward and how, you know, developers ABCs project owners, governments can still today make sure that those projects go on time and on budget. And with me today, we have three experts on the topic, and I’m going to ask them to introduce themselves to place I’d like to ask Charlie, Charlie, I’m gonna take your microphone off, and I’d like Please, could you introduce yourself your company?
Unknown Speaker 3:30
Sure. Thanks very much. And ladies and gentlemen, thank you very much for joining the webinar. My name is Charlie person. I work for Ayaan in London. And we’re a multinational firm with over 50,000 employees globally. We are focused mainly on risk retirement and health solutions. And obviously within the risk Spaceballs, falls insurance and the majority of view on the webinar, we’ll be watching aware of the critical role that insurance plays, both within making sure a project is bankable, but then also from securing your investment that you make in the NPV projects. Personally, I’ve got 10 years of experience within the insurance market. And I’ve seen projects across Africa, across Latin America and then obviously across Europe as well.
Belén Gallego 4:27
Excellent. Thank you very much chatter, chatter you’re joining today from London. Is that correct?
Unknown Speaker 4:31
That’s correct. Yep. Sunny London.
Belén Gallego 4:33
London is any Madrid here as well all from home by the way, you guys probably should stay at home too if you can. Right. Next I’d like to ask Haney to introduce yourself. I’m going to unmute your microphone Hannah so that you can do that. No, I can’t you have to do yourself. There you go.
Unknown Speaker 4:49
Hey, everybody. Um, hi new low from Johannesburg, South Africa. Senior key account manager for lunches soda. Literally We are the largest mono manufacturer globally and over 10 years of experience in Santa modules and solar modules, high speed African region.
Belén Gallego 5:12
Thank you very much. haina Hi, no, sorry. The pronunciation this is the problem with the Spanish speakers. Where are you joining from? Dare you say Joburg? Right.
Unknown Speaker 5:22
Belén Gallego 5:23
Excellent. Okay, so last but certainly not least, I’d like to ask Kevin to introduce yourself and see if I can I cannot unmute your microphone either. There we go. Kevin.
Unknown Speaker 5:33
I Berlin. Thank you very much and good morning and good afternoon to those attendees wherever you wherever you are in the world. So my name is Kevin Robinson. I’m speaking to you today from a very cold and wet Cape Town.
Unknown Speaker 5:49
So very unusual that London is nice and sunny and Cape Town is golden red. But there you have it. The new normal I guess
Unknown Speaker 5:59
we got to change that.
Unknown Speaker 6:01
So I’m a electrical engineer by training. And I’ve got a background in telecommunications, military and avionics. And for the past, what’s it now 12 years I’ve been working mostly in the module manufacturing business. And recently starting to do consulting work to to solar edge inverter manufacturing company. So based working for in the South African market, and I’m also working as an advisor to what’s not a paid role, but it’s an advisory role to the African Solar Energy Association. FCR.
Belén Gallego 6:46
Excellent. Well, thank you very much to the three of you. And I can see there are so many people from so many different places have you seen, we have India we have Iraq, we have Ethiopia, Lebanon, Sierra Leone, London, of course. And in the UK, we have Tanzania, where Some people from Spain, Morocco, Legos, Nigeria, Nigeria. So thank you very much for joining us today. I haven’t said everyone. I also like to thank personally someone that I know, Michael guy for being here in many of our webinars. Thank you for coming, Michael. And without further ado, I’m going to ask Charlie to share his screen and prepare for his presentation. And I’m going to explain to you guys how this is going to go is really simple for those of you that have been in other webinars that we’ve done. Okay. So we’re going to do is three presentations. We have Charlie, hi, no, and then Kevin. And then we’ll take the questions at the end, you can send the questions to the q&a box, which is at the bottom in your toolbox. Don’t use the chat because they get lost in all of the other chatter. But if you send it through the q&a, we’ll go with it. And these guys, they’ve said that they’ll even answer with text. I can see Charlie that you’re ready. But just one more thing, just to remind people, we are recording this webinar, okay, and you will have access to the materials we will send them to you through an email. And without further ado, please Charlie, go ahead and give us your presentation.
Unknown Speaker 8:00
Sure, thanks very much Berlin.
Unknown Speaker 8:03
So, in essence, I sit within the infrastructure practice group within Ayaan. And we have a series of specialists that deliver solutions, diligence and risk advisory services, which we aim to deliver qualitative and quantitative insight across a range of risk categories. And so, in the presentation, I give you a bit of a an understanding and an overview of the division that I sit within what are kind of client focuses pertinent to this, what are our kind of African network coverages, and then how we how we effectively deliver project support to financial sponsors, to lenders, and to EPC contractors and developers. I’m also going to touch towards the end of how we see the impact of COVID-19. But then, also Kind of pertinent for everyone is what the impact is on the insurance market because more and more insurance costs are becoming an increased line item when it comes to actually cost expenditure and capital expenditure when it comes to developing solar PV. So, what, what do we bring, we’ve got, um, you know, 17 gigawatts of solar project experience. We’ve got a network of over 200 200 Pass specialists, and this covers both conventional and renewable power. We place over a billion dollars of infrastructure premium into the into the market. We’ve got m&a specialists who focus on secondary market transactions. But critically, we’re not just insurance practitioners. We’ve got people who have joined from PwC from rating agencies. We’ve got IP specialists, cyber specialists, so we’re kind of multifaceted. And so we’d like to think that in essence that when a click comes to us with a project no matter what stage it is, we can deliver solutions to them. So, in terms of our client focus, effectively, what we try to do is deliver advisory services and combine these with insurance backed capital solutions to assist equity sponsors and and also lenders in realizing investment objectives. So, the slide that you can see in front of you really focuses on on on, on our approach in which is around the sort of securing investments. We do this by gaining deeper deal insight. And that what we what we aim to do is, is provide project sponsors with with enhanced returns when they come to exit the actual project. So, on the left hand side, you know, this really covers off the what you what you would probably see as the core a on services so that’s risk and insurance, cybersecurity, human capital, so the actual individuals who are part of the project team and then In this advisory as well, now, within that there’s a number of risk transfer solutions for both known and unknown risks. And then we go on to a little bit more of the fruity stuff, which is the kind of balance sheet and capital optimization. We’re not going to cover that as part of this. But what we’re really going to focus on is risk insurance and then the kind of consultancy side of the business that I work in. So in terms of our, our, our presence on the African continent, and where we cover, just to give a bit of an overview, the map in front of you, in red highlights the owned operations that Avon has, a couple of years ago, Avon took a decision to to divest some of its operations, and that was a management decision. And then these are now sort of run by a number of correspondence. The critical message that I’d like to get across here really, is the fact that even though there are a number of countries that Ayaan does not have owned operations, we are able to deploy capability And also deploy, you know, our technical expertise in risk and insurance right across the continent. And so, how do we do this? And then and then really how do you engage with us. So, what, what what we do is essentially break down the advisory risk restaurants and transaction solutions that we were that we provide along the product lifecycle into several different phases. Critical for this is an end for this presentation is around the project launch area, because when it comes to supply chain risk management, understanding risk allocation insurability and extensive cover that could be available for projects. We like to get in but in but involved right at the very earliest stage, you know, kind of at the project launch, and this is where we can effectively deliver the best capability. And the reason I say that is because
Unknown Speaker 12:54
risk allocation within contracts is incredibly pertinent and so If you’re a project sponsor, if you’re an EPC, contractor, it’s understanding right from the get go, who bears the risk. And then also within that weather, the weather the weather, the contract party, that is that is to bear that risk has the capital position to be able to meet any damages that are due due to say a supply chain disruption. What we’re not going to do now is go through every single one of these different aspects, but what I will cover off is is is the next sort of element which is the review of the contractual framework, the concession agreement and the offtake. So, within this phase, what we what we try to do is what with all the different project parties, representing obviously our main client, which tends to be the project sponsor, and then provide insurance, insight and then also contractual expertise when it comes to drafting various different clauses within that within the contracts to make sure that the indemnity provisions are are correct and the risk is allocated correctly. So, in terms of risk management, we have a, we have about 1600 people who sit within our consultancy business. And fundamentally, you know, I don’t think anyone will underestimate the the, the importance of risk management, for business optimization. You know, I’ll pick a couple of these, but effectively, you know, making sure that there’s a proactive risk management process will always enable companies and projects to seize and achieve opportunities. And those organizations which which we’re all aware of that have robust risk management will typically have stronger cash flow positions. And that’s right at the kind of project outset phase. Right where the project launches, right through the project completion. The entities that engage with us tend to rely quite heavily upon Aidan’s expertise in terms of benchmarking and providing understanding. Outside of obviously, the technical side, which people I know and Kevin have. But what we do have with with that some 17 gigawatts of solar experience is a large number of have a huge amount of information and data that we have gathered from project experience across the globe. That allows us to provide a kind of softer insight ensuring that it whether it be the risk management division, you know, whether it be the financial team, whoever it is, is is taking account of risk management and making sure that if that risk management approach drives people’s people’s approach to Supply Chain risk management, but then also to successful delivery of a project. So, coming swiftly on to supply chain risk management. Now obviously we live in a complex global risk environment and risk managers are increasingly playing a vital role in helping organizations understand, prioritize, and then manage the critical exposures affecting operations and supply chains. Now, obviously, within the solar industry, you have a large number of vertically integrated companies, you know, the, the importance of China within supply chain should not be underestimated. You know, it’s a huge strength and has led obviously to the, to the ever increasing decrease of the cost of solar power. But obviously, what has been born out of that is a huge reliance upon single source manufacturing. So, where we try to, to assist is by mapping out the different risks along the supply chain. And by allowing companies to understand where those risks can be transferred into the insurance market and pricing those up accordingly, but then also where those risks can be transferred to assist with flagging those, and then also feeding in and working with legal advisors to make sure that contracts are drafted correctly
Unknown Speaker 17:35
to ensure that if there is a supply chain disruption or if there is a, an effect that that is a logistics important delay, how the either the insurance will respond and making sure that it will respond through contract drafting, but also making sure that the risk management team know the weather isn’t an insurance solution where they can find Other other remedy. And so that the kind of graphic below shows how what shows the number of different risks that will face a project specifically, you know, if we look at kind of property risks, and that was and then also under that red construction risks, you know, you can see that it’s it’s fairly heavily weighted a lot of the focus by risk management teams tends to be on the kind of physical aspects of of risks associated with supply chains. But then critically what we try to do and working with colleagues in the credit insurance market is look at supply solvency. You know, if you are reliant on your project for a single source supplier, you need to make sure that that supply itself is is is insolvent and has the capital position to be able to to to meet any damages. That can be bought and bought against it. And likewise that they aren’t going to go bankrupt midway through the construction phase of your project, leading to a suppose a catastrophic event and jeopardizing successful project completion. And so, critical questions which we try to kind of push. And now these will obviously have to be tailored to the makeup of the of, of the project team. But they’re very, very simple and they should be addressed at every stage really. And what we what we see a lot of time is that projects do not have a fully developed risk management framework. And that’s something where that we can assist with we we have consultants who readily work with Project companies who can almost have boilerplate risk management payments, which will then be tailored for the specific policy. specific project, but then also making sure that that is communicated across the organization and feeding that into the kind of strategic decision making of the project is critical. So, it’s also understanding what the what what, what the kind of quantity or what what what the quantitative and qualitative assessment will be on the severity of an impact that arises from an extreme event. We’ve seen very recently, obviously, with COVID-19 that it was a completely unforeseen event. And a number of companies and entities have looked for resolution from their insurance policies and have found that those insurance policies actually have not responded in the way that they thought they would. And while I come on to at the end of this presentation is specifically on the issue of force majeure.
Unknown Speaker 20:55
And what we’re seeing around that
Unknown Speaker 20:59
so What was our kind of value proposition in terms of in terms of assessing the risk of supply chain? So, the our kind of Enterprise Risk team will assist projects with that risk identification your project teams are, are rightly focused on ensuring that they have all the all the relevant kind of concessions in place they have the relevant permitting permitting in place. One of the things that often go is missed or slightly overlooked, is that your proper kind of risk identification and quantification modeling, and making sure that the financial model of a project actually actually has significant reserves or is factoring in the the capital position of, of that project. And so the Enterprise Risk team that we have can effectively act as an outside or outsourced consultancy, to help develop a kind of a risk management design implementation, which covers off elements such as risk resilience, governance, and then and then future look at risk maturity and, and risk profiling. So taking a kind of a bit of a step back, looking at the global insurance market, the outlook unfortunately for project comm projects is is not good. The global insurance market pricing for the outlook of the second half of 2020 is is increases in premium rates, and that’s from construction to operation insurances. And this has really been driven by successive poor, poor kind of claims in the insurance market, not specifically within solo, but you’ve got to remember that we’re in a global marketplace, a lot of the insurance capacity, comes back to London or goes to Bermuda or goes to Singapore, and so on. The global effects of natural catastrophe of events means that there is a restriction in that capacity which will leave you know, pressure being applied on, on, on, on out of warranty, wind, solar
Unknown Speaker 23:20
coverage, we, we expect that to kind of remain stable. But critically,
Unknown Speaker 23:29
what we are trying to educate our clients to do is to make sure that they are presenting information as early as possible to us and involving us as early as possible so that we can make the best representation of that to the insurance market and the insurance market at the moment is, is in a mindset where they aren’t where they will not underwrite risks, where they do not have full sort of information and be a risk and that really kind of goes to the heart of the supply chain as well. Typically, you would, you would be able to see extensions suppliers and customers, those just not being given at the moment. And likewise, there had been previous extensions for increased costs due to infectious disease, I can say with fairly with fair certainty that those will not be given in the future. And so, just lastly, you know, and it was a, it was a question that Kevin raised previously to me was around what what the impact of COVID-19 kind of is and I hope that this will address a number of the questions that that will come through. But basically business interruption insurance, a lot of clients have looked to claim a claim against business interruption due to COVID-19. Critically for business interruption insurance to be triggered, there needs to be a physical damage event.
Unknown Speaker 24:47
Unknown Speaker 24:50
what despite a lot of press saying the business interruption would cover it, that there needs to be there needs to have been a physical damage
Unknown Speaker 24:59
loss event occur
Unknown Speaker 25:02
and extensions. for, for, for infectious disease, yes, you could probably claim on those but that but they will be sublimated and so your recourse will be will be fairly limited and then just covering off Lastly, the impacts and effects of force majeure. force majeure has been declared by a number of of my clients. And what we’ve actually seen is is rather than a full blown force majeure event being being being triggered, as there has been discussion about whether they can declare it, and as we’ve seen a lot of resolutions so both parties involved in content involved in construction projects, actually having a dialogue and finding consensus rather than trying to claim liquidated damages or declare force majeure. And walking away from the project. We’ve actually seen an increased dialogue and and into the resolution. I’m conscious in terms of time I’ve taken so far, I will answer any questions on the chat. But it’s probably best as I hand over
Unknown Speaker 26:06
Belén Gallego 26:08
Thank you very much, Charlie, thank you very much is very, very small typing here very important information. So we will make sure that everyone gets a copy of that is the kind of thing that he has is the kind of thing that everyone is going to want to know. You know, and actually check that very, very carefully. I’m going to ask you now to stop sharing please, Charlie, so that you can have an expression share. And don’t worry, you will get a copy of this. So I know if you now can prepare yourself for the to share your screen. And just a reminder, you do send your questions, you know where we have one ready, but do send your questions through the q&a box. And actually, Charlie, hi, no, and all of the rest will actually start answering lots of text from where they can. Can you make that into a large presentation, please? Yeah, perfect. Okay, we can see it now and we can hear you so go ahead.
Unknown Speaker 27:00
Thank you very much Berlin. Thank you, my joined today. I think from a module manufacturers point of view, basically want to just give you guys a bit of more insight as to what has been happening in the last two quarters with the pandemic and what the thickness has had on acity products and obviously price levels. Yeah, just a quick introduction to our company we were established in the year 2000. At a moment, we’ve got more than 30,000 employees. We’ve achieved some good accolades from from the company as given by Forbes, Fortune Magazine, Goldman’s touch MIT scientists, technology and leadership roles 2018 we’ve achieved 40% of the global share in monitoring wafers apply to markets we’ve also achieved 7.1 gigawatts of modular supply with three gigawatts of that was by facial modules. In terms of products apply their accolades we’ve gotten data from both photon and be very highly rated third party companies. And lunges are tier one motor manufacturer currently we are second on the list in terms of actually capacity optimization score we also most financially stable company i think that’s that’s very key important role at a moment is financially financially stable companies. I think a lot of the smaller companies model manufacturers will struggle through freedom over time, as we see a two reduction in sales through free difficult times and you also maintain the triple A bankability with PV tick. So we are still the only module manufacturer with triple A financial stability in terms of the manufacturing capacity on a global scale, I think in q1 we saw the virus great in in China first and with final taking two weeks. The shutdown basically we we saw a bit of panic buying from from local markets, but it was a bit of a surge in order taking in q1. In q2 we saw a lot more of the global markets being under lockdown and restrictions in policies to try and install local markets and scores some some disruption in local local markets were obviously in q1 modules was order due to stock arrived at ports and
Unknown Speaker 30:08
no projects to go to. The
Unknown Speaker 30:13
good thing is the Chinese are still wanting to increase production capacity for 2020 by 60%. of the global markets 30% of the global market will still be consumed by China. still seeing on our plans to do 33 to 45 gigawatts installs this year. There has been a bit of a slowdown in q1 and q2 for this. We are expecting a bit of a ramp up a freak you for two orders. And on a global scale, we are expecting 18% in global orders. Instead of 129 gigawatts, we are expecting 106 gigawatts completed by the end of 2020. terms of what’s expected from from manufacturers for this year with I think, since last year already and a lot of the manufacturers have moved over to monitor and we expect by the end of this year 80% of all waste for production with E minor modules and terms of modules, we’re also seeing a lot more manufacturers bringing up 500 watt plus modules lungi will also release a new module heimer. Five in enough may they do. And in terms of wafers that’s currently mostly supply to the market. We’re seeing a lot of more people moving to G one wafers and M six wafers. So I think that will be major supply coming forward.
Unknown Speaker 32:03
Done from a production standpoint laundry will still achieve 50 gigawatts of supply to the market this year and 25 gigawatts of module. So with the think buying in q1 and also to close down our factories in q1 we’ve been able to gain all the production lands from from a model supplier we are moving all our production now to hangar four, which is your 441 on 70 saw module and all the PS. Smaller wafers will also be changed as also on a wafer side. A lot more of the module manufacturers will move to larger wafers larger modules. I think this is important to notice when designing projects And playing final contracts of fans is to open the design spec, as there’s a lot of changes in module last while is to leave open. Yeah, the final design call final order placement as exchanging currently. In terms of the price levels, what we’ve seen this year as I said q1 with the pig buying, I think it’s it was remained fairly stable. And this was released in q1 where everybody assumed moderation manufacturers would be would be ramping down due to the corona spread. But it was an awesome mock up. I think the Chinese handled Newman very well. And manufacturing capacity in China is back to normal again, I think due to pricing and a moment We are definitely seeing passing well below the any $2 savings. This will remain for the remainder of the year I’m not sure I think as mobile companies or global countries ease up on restrictions of trade and installations everything freaky for we might see a surge in orders again, which will, pricing under pressure. And, Arthur, just a conclusion on what we see as the markets going forward is with restrictions and everything is up over over the world now. I think the supply chain will will start easing up now again. I think if we’ll have something working on a moment it would be to get your contracts. Yes as soon as possible. q3 q4, will they see us pressure as global markets back to normal again? And in terms of model supply? I think, you know, we’ve seen quite a lot of changes since the beginning of last year to now. A lot of improvements on efficiency. And I think now just keep in mind to keep in for for module sizing of your plans to base Garcia Yeah.
Unknown Speaker 35:30
Yeah, that’s just a quick cheat from outside.
Belén Gallego 35:33
Thank you very much. Yeah, that was really quick, but to the point, thank you very much for being here so much about trends. And taking into consideration also, logistics you guys have to think about that stuff. This will be available as well. And last, but certainly not least, Kevin, if you prepare your presentation, and it looks like we have some times for for answers after so do send them through
We can’t hear you, Kevin. Can you try again and see? Because you’re muted in the system, but there we go.
Unknown Speaker 36:10
And now we can Yes, perfect.
Unknown Speaker 36:13
So like I said, thanks, Belen and, and Hannah and Charlie for those insights. I think, from my point of view, it’s always interesting how
Unknown Speaker 36:25
the attitude towards risk is
Unknown Speaker 36:27
always so, or at least insurance has always been so the guys are so adverse to it until they need to claim. So thanks, Charlie for those insights otherwise really, really interesting. So a little bit about FCA. FCS solder is an organization that was started about one and a half years ago. And the aim of FCA is really to to help and to drive business, the growth of the solar market in in an African context. So The the head office of FCA is in Kigali in Rwanda and a number of advisors throughout Africa who try and support the organization on a on a voluntary basis. So, just some some insights from from my side, Charlie and Hannah have sort of touched on these topics as well. So what I’ve just thought is, what are projects doing and what are some clients and some some impacts that we’re seeing right now. So Charlie has alluded to this is that some of the projects are trying to claim force majeure. And we’ve also seen, for example, in Eskom in South Africa, where they wanted to curtail wind farms by imposing the force majeure clause, and they haven’t been too successful in in that at the moment, but it is a consideration. Going forward. And I think that in the future, there needs to be a lot more focus on on these type of type of clauses, and expanding the clauses and expanding on what are the type of things that you know, on a on a back to back basis with the offtake agreements or construction agreements, and how to build that in so there is a little bit of a resilience around these type of these type of events. Hanna has mentioned this as well, but in Asia, most of the capacity is back online. I think what has happened, though, is that obviously with China, the impact of the device has been felt in China first. Initially, we had a lot of supply supply issues. But now we’re starting to see demand issues impacting China where where markets essentially shut down. So there is some impact there which has also been In an advantage in a sense and that the the Asian manufacturers have been able to build up that that capacity. So we asked it starting to see supply chains flowing again. One of the other difficulties at the moment is that although those supply chains are working, and we’re starting to see shipments where although the goods are getting shipped ships passing port so for example where there might have been a shuttle to deliver to to Cape Town, and maybe they end up being delivered to Durban or some other port, which then creates further
Unknown Speaker 39:42
logistic challenges in country
Unknown Speaker 39:45
on the land side, but also with the Slow, slow down, we see that customs and clearing agencies aren’t working to at full capacity SOS has caused some delays in port which has has impacted impacted supply chains. I think what has also been quite interesting is the manufacturers with the supply chain, which geographical diversification and seem to have been slightly less impacted. So I think in the future when you’re looking at your supply chain probably also important to consider manufacturers with some geographical diversification
Unknown Speaker 40:36
Unknown Speaker 40:41
Yeah. Okay. So what are some some things to consider moving forwards?
Unknown Speaker 40:45
Unknown Speaker 40:48
as I said, I think the the contracting side, a lot more focus needs to be paid to this particular aspect. Charlie has mentioned how they like to get involved in early stages of projects, but I think This particular risk mitigation tends to be a late stage engagement. So, you know, in order to to help mitigate risk moving forwards the the the developers or project owners need to pay more attention to to these type of to the contracts in early stages of the project. Once again, companies with graphic diverse magnification, manufacturing facilities
Unknown Speaker 41:31
are probably going to
Unknown Speaker 41:33
help to mitigate risks. So what tends to happen in projects, mostly in the utility scale, not so much in commercial industrial type of projects. But the during the contracting phase, you’d go through stages where you do factory orders, you’d specify which factories which production lines need to be used in that for the manufacturing of that, that specific order.
Unknown Speaker 42:00
So I believe in terms of risk mitigation, what might be
Unknown Speaker 42:05
a consideration is that start to audit and certify multiple factory locations, so that if one factory is impacted, you can shift to another factory without without too much effort. And I think these type of contracts are going to need to be a lot more flexible in how you deal with these kind of delays and events. I think another important consideration just because of how heavily supply chain is reliant on Chinese manufacturer raw materials coming from from outside of China, and components manufactured in China to feed those supply chains. I think a lot more focus needs to be paid to bill of materials and spare parts, where they’re supplied and sourced from in terms of equipment delivered to site I think once again a lot more focus needs to be paid to what kind of spare parts need to be delivered to site in the in the contracting or the in the construction phases, and particularly within a mind of the operation and maintenance phases, making sure that if there are any future events that they are sufficient spare parts on site to make sure that supply chains don’t impact the operation of these power plants. And then, with regards specifically to inverters, historically, centralized inverters have been used on the large power plants. I think that if you look at the trend, I think, string level as string inverters have really started to increase in popularity and property taking around 40% market share of utility scale power plants. And I think in terms of risk mitigation, we’re probably going to start to see especially in an African context, a more heavy move into to string inverters and commercial industrial projects and moving into module level power electronics and things like optimizers and micro inverters. And the reason why this is that it gives a lot more flexibility in the operation and maintenance phase. With a centralized inverter, you might have a one or two mega watt power block, that will go down in the event that there is an issue with that particular inverter. However, when you go to two string inverters, what starts to happen is depending on the size of inverter, and megawatt block might be comprising now of 10 inverters, so, do reducing the impact of those kind of failures. In the event that there is an event where spare parts can’t be delivered to site and then in terms of Module module level power electronics. I think that also gives a lot more flexibility and resolution in commercial industrial type of power plants bankability, I think this is something that is super critical, and probably quite a, I think a something that has not really paid enough attention to. So, we see quite a lot of focus on labels like tier one
Unknown Speaker 45:30
type of manufacturers,
Unknown Speaker 45:32
but if you if you start to delve into the financials of the company, certainly there are companies that are a lot stronger than than others. So, I think it’s it’s starting to become more and more important to consider bankability. Companies that are a lot more financially resilient, are obviously going to be able to stand by the their warranties at a later stage. Whereas companies that are are heavily indebted You might start to see that these kind of events will impact on the financial situation and their ability to serve as a service those warranty contracts in event the day the financials are, are impacted. With regards to operation and maintenance, I think with the move to string inverters in industrial or utility scale projects, it gives a lot more visibility into the power plants with the monitoring platforms and your operation and maintenance services. And if you then move into your commercial industrial type projects, with module level power electronics, it gives a lot more resolution when you’re doing your operation and maintenance services, so where you might have a issue with a power plant, with module level power electronics, you have a very high resolution monitoring platform where you can actually see at a at a module level, what is what is happening in that plant. So what this does is if there are any issues, you can isolate the problem without impacting the entire plant or entire string inverter. What it also allows you to do is in the diagnostic stages, if you pick up problems, your engineers can actually sudden diagnose problems at their desks. And they have a very specific knowledge about what is actually happening in that power plant. So, when you go to do services in their power plant, they know exactly where to go in that in that particular way, which module which position they go to. So, this minimizes time on site and minimizes time when you actually starting to do manual diagnostics in those power plants. And finally, the last thing I think is is we’re going to start to see this has already happened. started to happen. But in times of challenges, we start to see a lot more innovation. So when it comes to the operation and maintenance side of things, we will start to see a shift to higher plant automation, particularly when it comes to things like robotic cleaning, and a lot more artificial intelligence platforms built into the operation and maintenance type of services. The last thing I want to touch on is is mostly in the commercial, industrial and residential type of space. So in the new normal, everybody has got used to online meetings. So where you’d normally have face to face meetings with customers with end users, more and more zoom or online meeting starting to take place. So with the type of design software that we see a lot These design software’s have some kind of a Google API. So when you type in the address already built up, imports a satellite image into the design software. And what we’ve seen is that the, the software companies are starting to work closely with manufacturers are starting to work closer, closer together. So what you’re able to do is, for example, start with a design where a structure company has at a time of design software to do the structural analysis, and then import that that structural design into your your electrical design, then complete your electrical design in the design software. And from the design software once you’ve completed electrical design, export that into some kind of a monitoring platform. So what we’ve not created is in the new normal, we’ve created this process where You can meet with a customer online go through this design process in a very short period of time 45 minutes to an hour. And through this process, you’re building the
Unknown Speaker 50:13
the relationship with a customer that you’d normally do in a face to face meeting so automating this process has now created a value proposition. Rather than meeting the clients within a 4045 to an hour meeting, you actually have a design sitting on the desk followed up probably with a with a sales proposal within a short period of time. I think this is also a processor that’s gonna speed up the process but also reduce the decision making process and lying to end users to make them foster foster decisions. So a much higher reliance on the value proposition rather than the component and the capex cost of projects. Thank you.
Belén Gallego 51:03
Thank you very much, Kevin. So we’ve gone through a lot of topics here today. And I think it’s important to recognize that this is a very complex situation, you know, let me just take that officer, we can see, we have a few questions and how I’d like to go into them. I just like to ask you a question, you know, you know, we’re talking about Africa as if it was the one unified and of course, it isn’t, you know, different countries have different difficulties. And I know many countries, we might be in the situation where this problem is going to be prolonged over time, there’s been talks of, you know, famines in certain areas, you know, it seems like the more remote places, so I suppose my question really to you is like, as a, as a, as a developer, you know, they could you could be in such different places, you know, in Africa, what would be your like, your advice in terms of making sure to stay in by the turn in time, you know, in a In your project, you know, whatever it is, and it could be like in many, many different places. I don’t know if anyone can just is every general but I just like what would be like your first advice? I’m going to open all of your of your actually can’t you guys have to mute yourselves, Charlie as well? We go through there, then I will go through those questions. I don’t know. Because there is there are places is not the same, you know, one place than another. So I don’t know if you guys want to give some general ideas of what we should people focus on.
Unknown Speaker 52:33
I think that is such a such a complex answer. And I think you can take hours to to answer that.
Unknown Speaker 52:41
Yeah, geez. I don’t know. So I think
Unknown Speaker 52:46
I think in terms of what it has highlighted is how much inequality there is in Africa from a social, economic and access to you know, access to services and they’re coming So I think what this has really highlighted is that I think it’s an enabler for renewable energy. So move more to a decentralized type of approach. And we’re going to see a lot more penetration in a particularly distributed generation, rural electrification, with solar and micro wind projects, we’re going to see a lot more embedded generation projects and possibly even the rise of in storage and in an African context, which is going to give I think the biggest concern is resilience around grid operators. So with the embedded generation and the solar assets it gives a lot more resilience and, and less reliance on utilities to supply services. And
Belén Gallego 53:54
it’s a good tip already.
Unknown Speaker 53:55
Yeah. And once you once you
Unknown Speaker 54:01
You know, provide these these energy services to rural communities, what you start to see as well is a lot more access to, to other services such as healthcare to the economy and to to education.
Belén Gallego 54:15
Whatever No, this is a lot of the international finance institutions are like chugging along, like COVID packages for governments that are in line not only with like certain health investments, but also with renewable energy investments. So I’m hoping that some of that we see seeping through, you know, in countries where maybe the right now there’s not a lot of renewable energy, but I was just wondering, you know, whether this is the general consensus throughout the continent, because it may not be. Okay, so let’s go with the questions. Let’s start with those give Kevin a little rest, because, you know, you’ve just been talking so there was a question for you, Charlie, that you’ve also marked here. Actually, you’ve got two questions from se for all. The majority of the discussion has focused on you Deliver the scale solar but I’m also thinking from an energy economics perspective. That’s correct. This is what Kevin was saying. For enterprises operating at smaller scale with my mini micro grids and sh s distributors, and have the supply chain disruptions due to the reliance of Chinese manufactured products make the case for localizing more of the value chain in Africa. I love optimist. You know, like people who see everything as an opportunity. So what, what do you guys think about this?
Unknown Speaker 55:30
I mean, from a promo sort of, yeah, from an insurance point of view, when it comes to micro grids, most micro grids aren’t are insurable. Right? But there’s, there’s there are there are markets that will that will underwrite them. And so, look, we are absolutely seeing a trend to a decentralized, decentralized, move away from utility scale. projects all open another way, an increase in micro grids. There will always be the requirement for utility scale, power generation, whether that be renewable or conventional.
Unknown Speaker 56:08
And there are solutions that are out there.
Unknown Speaker 56:12
What, when it comes to the second question around, you know, reliance and supply chain and and the the want and willingness to try and move away from reliance upon, say China as a manufacturer? I think it’s it is optimistic at this stage. I think I think fundamentally, a lot of this is kind of cost driven. And you, you you would not get the benefits of yet the economies of scale that that a player like China has in terms of manufacturing, falling right down to it right down to the end user and the actual, the actual customer in terms of price per megawatt of electricity generated it. So for the foreseeable, it is going to continue to be a challenge. He’s dominated the market. That’s not to say that there won’t be a move to other countries. I think we’re seeing that and, you know, Kevin and I are both picked up on it on and what they were saying that, you know, places like Vietnam are assigned to see, you know, increased orders, and yet they’re scaling up capacity but capacity takes time to build, you know, and specifically, I’m conscious about generalizing across across Africa, but in order to in order to see the same reflection, there needs to be an increase in in manufacturing capacity, which requires investment, which requires you know, electricity generally it’s a kind of Yeah, is this sort of the cycle which sometimes it takes a major event to break but at the moment, cost is such a huge issue.
Belén Gallego 57:46
Okay, thank you very much. Hey, no question for you all, but this one,
Unknown Speaker 57:52
on the on the second point day, is also
Unknown Speaker 57:56
for for looking at localizing the manufacturing I also got to do a lot of mod, and at the moment is a lot of demand in Africa. Without clear policies or any any here demand forecast. There won’t be any investment from from any of the manufacturers.
Belén Gallego 58:24
Thank you very much. Hey, no question for you what will be the trend in solar module? wp for the next year, I will pass the 400 permanently Is there a large change in dimension compared to Mana 6072 cells? I’m just reading paraphrasing a bit. The price trend we’re talking about? What is the standard module that is applied to thank you.
Unknown Speaker 58:48
I think currently if we if you look at 72 sub modules, which is the most dominant module we normally use in Africa I do think from from last perspective will give the boss the 400 watt Mark permanently. We have stopped all our manufacturing on lower wattage modules. In terms of the sizing of the module, there has been a slight increase, it hasn’t been huge and much wider way the most improvement is is on the efficiency of the product coming out of the wafers at a moment. This there’s always a bit of a lens when designing new modules in order to understand what factory and Apache it’s very easy to say. Let’s move to 500 watt modules. Let’s move to 600 watt modules. And obviously right through the manufacturing from your wife Assad, brought to you in module from past perspective, two different data frames, robustness of the module, everything has to be considered when When launching new modules, and as I think the foreign watch mark is is something of the past. And we’ll we’ll see where the rest of the year takes us. But at the moment, it looks very promising for maybe 500 watt modules to become the norm in the future.
Belén Gallego 1:00:22
Yeah, I had heard about the 500. I think you guys have a launch soon right?
Unknown Speaker 1:00:27
At the moment, they talking into may early June launch. That will be up to 550 watt modules. And we will have 10 gigawatts of manufacturing capacity tools.
Belén Gallego 1:00:39
Excellent. All right. So Kevin, there is a few questions here that you’d like to answer. So I don’t know if you want to just pick one another or like do like a general. try and answer as many as possible in within one answer if you can. I’m asking you too many impossible things today. We can’t hear you again. I don’t know what happened. Raise the phone. Yeah, perfect. Yeah, we can hear you. I’ve
Unknown Speaker 1:01:01
got a mute on my microphone microphones like,
Belén Gallego 1:01:05
it happens to all of us, you know, don’t worry about it’s like technology we’re learning, right? This is like normality.
Unknown Speaker 1:01:13
Yeah, so Okay, so I’m gonna answer this question. This question was, I’m sorry, there’s a number of there’s no no specific name, but the fact of influence emphasizing the importance of bankability and the credit of long term warranties, our credibility of long term warranties, and then looking at back to back performance, warranties buying insurance. Do you think this will happen more and more in the future? And I think that’s a great question. And I think that warranties are something that quite often very misunderstood. I think that the other thing is word required today. I’m talking about now from a module, magic manufacturers perspective. Now. There’s a lot of Third Party insurances that offer performance guarantees. The real issue is understanding the warranty contract because it’s, they do tend to be a little bit vague and they are. Even if you’re buying third party insurances, they they it’s important to understand that because a lot of the insurances will only cover certain events and under very specific conditions. So, I have had instances in the past where
Unknown Speaker 1:02:37
the manufacturers would like to
Unknown Speaker 1:02:41
replace modules under a certain in a certain way there was a warranty that was requested, the modules are requested to be placed or replaced. And in that particular contract, the manufacturer the ability to choose to repair or replace repair Or add additional modules or offer financial composite financial compensation. And in that instance, what they wanted to do was to offer a repeat of the modules. It was quite a technical process. But there was a lot of fighting around that it wasn’t underwritten by third party insurance, and basic three through an arbitration process. Due to the financial stability of the particular company, there was a, they were actually able to negotiate a amicable agreement to replace those modules, which strictly speaking wasn’t under the warranty condition. However, I have seen other manufacturers in exactly the same condition where they’ve either just walked away from the problem or they they choose to repair those modules under that particular so I think the choosing the right supplier and insurance on the warranties is super, super Critical. And I think it’s very, very important to understand those those contracts before you sign the final purchase agreements.
Belén Gallego 1:04:10
Thank you very much, Kevin. Thank you very much. Hi, no, and Charlie, I mean, with PV projects that now last an average 25 years and they can easily get lifetimes for 35 years. It does sound to your point, you know, about making sure that the supplier has the right. Quality and warranties is is very, very important because it’s there for, you know, half a lifetime, so to speak. So I’d like to just thank everyone who’s in the audience there for being here with us. And together Of course, and Hi, no and Charlie for all of you know how, and we’ll see you next time guys. Thank you very much,
Unknown Speaker 1:04:45
everyone, very much. Bye.
Transcribed by https://otter.ai
Additional General Manager