Thesis submitted in fulfilment of the requirements for the degree of Master of Management in Finance & Investment in the Faculty of Commerce Law and Management Wits Business School, Johannesburg 2016 / This thesis reviewed research papers, reports, conference documents and policy documents that looked at financial models used to finance RE projects in Brazil, China, India and South Africa.The comparison between the financing models revealed the following; Both Brazil and China’s financing model is a centralised government led model which might not necessarily work in the South African context. The India decentralised model is similar to the South African model, with the exception that corporate finance is widely used in India and Project Finance in South Africa. Thus there are lessons to be learnt from each country, however no single country financing model was found to be suitable for South Africa. Accordingly, this paper therefore recommends that South Africa’s model be altered to incorporate project bonds. The use of these bonds in the current financial model will ensure that banks are able to lend to projects on short term basis; thus, managing their liquidity and their asset--liability effectively. Further, some institutional investors have shown an interest in funding projects at the construction stage, and the inclusion of project bonds would ensure that more of these investors play a role in financing projects. Key Words GDP-Gross Domestic Product; GW- Gigawatts; DoE-Department of Energy; REIPPPP- Renewable Energy Independent Power Producer Procurement Programme; BEE-Black Economic Empowerment; RE-Renewable Energy; SSA-Sub Saharan Africa; PPA-Power Purchase Agreement; FIT-Feed In Tariff; DFIDevelopment Finance Institution; MDB-Multilateral Development Bank / GR2018

New federal legislation proposes to reduce greenhouse gas (GHG) emissions associated with biofuel production. To comply, existing corn ethanol plants will have to invest in new more carbon efficient production technology such as dry fractionation. However, this will be challenging for the industry given the present financial environment of surplus production, recent profit declines, numerous bankruptcies, and lender imposed covenants. This study examines a dry-mill ethanol firm's ability to invest in dry fractionation technology in the face of declining profitability and stringent lender cash flow repayment constraints. Firm level risk aversion also is considered when determining a firm's willingness to invest in dry fractionation technology. A Monte Carlo simulation model is constructed to estimate firm profits, cash flows, and changes in equity following new investment in fractionation to determine an optimal investment strategy. The addition of a lender-imposed sweep, whereby a percentage of free cash flow is used to pay off extra debt in high profit years, reduces the firm's ability to build equity and increases bankruptcy risk under investment. However, the sweep increases long-run equity because total financing costs are reduced with accelerated debt repayment. This thesis shows that while ethanol firm profits are uncertain, the lender's imposition of a sweep combined with increased profit from dry fractionation technology help the firm increase long-run financial resiliency.