Southern African Power Pool Project Advisory Unit

Transcription

1 Southern African Power Pool Project Advisory Unit Program for Accelerating Regional Transformational Energy Projects AREP Omar Vajeth SAPP PAU: Head and Senior Transaction Advisor

2 SAPP Objectives SAPP was created in 1995 with the following Objectives: to cooperate and coordinate in the planning and operation of the electricity business in SADC Facilitate cross border electricity trading in SADC Promote regional cooperation in power projects development (Generation and Transmission Infrastructure Development) Increase Access to Electricity in Rural Areas Ensure that the region Attracts Investment for large energy intensive electricity users (attractive tariff)

3 SAPP KEY FACTS 12 Countries Approx. 300 Million people Installed Generation Capacity - 62 GW Consumption - 400TWh DR Congo Tanzania Angola Zambia Malawi Namibia Botswana Zimbabwe Mozambique Swaziland South Africa Lesotho

4 SAPP EXECUTES ITS MANDATE VIA A ROBUST and PROVEN MANAGEMENT & GOVERNANCE STRUCTURE SADC - Directorate of Infrastructure and Services Executive Committee Management Committee Coordination Centre Board Planning Sub- Committee Operating Sub- Committee Environmental Sub-Committee Committee Markets Sub- Committee SAPP Coordination Centre

5 PROTOCOL

6 SAPP PAU: A division of SAPP CC Manager Based in Johannesburg Personal Assistant Technical Unit Chief Engineer Chief Market Analyst CC Manager: Support Unit Head and STA: Project Advisory Unit Operations Engineer Energy Trading Officer ITS FAO Transaction Advisor Planning Engineer Energy Market Analyst Messenger Environmental Specialist EO/PC Key EO/PC = Environmental Officer / Project Coordinator ITS = IT Specialist FAO = Finance and Administration Officer = Vacant position Caretaker Accounts Officer Procurement Specialist Financial Controller/Manag er

7 SAPP Membership No Full Name of Utility Status Abbreviation Country 1 Botswana Power Corporation OP BPC Botswana 2 Electricidade de Mocambique OP EDM Mozambique 3 Electricity Supply Corporation of Malawi NP ESCOM Malawi 4 Empresa Nacional de Electricidade NP ENE Angola 5 ESKOM OP Eskom South Africa 6 Lesotho Electricity Corporation OP LEC Lesotho 7 NAMPOWER OP Nam Power Namibia 8 Societe Nationale d Electricite OP SNEL DRC 9 Swaziland Electricity Board OP SEC Swaziland 10 Tanzania Electricity Supply Company Ltd NP TANESCO Tanzania 11 ZESCO Limited OP ZESCO Zambia 12 Zimbabwe Electricity Supply Authority OP ZESA Zimbabwe 13 Copperbelt Energy Corporation ITC CEC Zambia 14 Lunsemfwa Hydro Power Station IPP LHPS Zambia 15 Hidro Cahora Bassa OB HCB Mozambique 16 Mozambique Transmission Compamy OB MOTRACO Mozambique OP: Operating NP: Non-Operating ITC: Independent Transmission Company OB: Observer IPP: Independent Power Producer

8 SAPP Promotion of Energy Trading PREVIOUSLY Bilateral contracts FUTURE Bilateral contracts, Ancillary Services Market Balancing Market Financial Market Market evolution CURRENT Bilateral contracts Intra-day ahead Market (IDM) Day-ahead Market (DAM) Forward Physical Market (Monthly, Weekly)

9 Generation Projects Commissioned in 2016 No Utility Country Name Type Capacity [MW] 1 RNT Angola Cambambe 1 & 2 Hydro RNT Angola Cambambe 3 & 4 Hydro RNT Angola GENERATION PROJECTS COMMISSIONED IN 2016 Cambambe I Rehabilation Hydro 80 4 IPP South Africa OCGT Gas IPP South Africa Renewable Wind IPP South Africa Renewable PV IPP South Africa Renewable CSP IPP South Africa Renewable Other 7 Water Pumped 9 ESKOM South Africa Ingula 1,2,4 Storage NamPower Namibia Ruacana Hydro IPP Mozambique Gigawatt Gas IPP Mozambique Nacala Power Ship Gas 75 Coal 13 IPP Zambia Maamba Colliery TANESCO Tanzania Kinyerezi I Extenstion Gas - GT IPP Zimbabwe Dema Diesel IPP Malawi Diesel Diesel 10 TOTAL 4180 IPPs constituted 54% (2,236 MW) of new generation capacity Renewables contributed 21 % (881 MW) of total capacity

10 Generation Mix in SAPP SAPP Installed Generation Capacity Landfill 0.03% Wind 4.03% Hydro 21.02% Solar PV 2.94% Solar CSP 0.97% Nuclear 3.01% OCGT 1.51% Coal 62.05% Distillate 4.38% Biomass 0.07%

11 Generation Mix in SAPP

12 POWER SUPPLY AND DEMAND IN SADC

13 Projects to be Commissioned [ ] No Country Committed Generation Capacity, MW Total % Share 1 Angola , % 2 Botswana % 3 DRC ,500 2, % 4 Lesotho % 5 Malawi % Mozambiqu % e 7 Namibia , % 8 RSA 1,128 3,037 4,035 2,028 3,044 1,516 14, % 9 Swaziland % 10 Tanzania , , % 11 Zambia , % 12 Zimbabwe , % TOTAL 3,576 5,581 5,764 5,055 5,884 4,341 30, % SAPP will commission an average of 5,000 MW per year in the next 6 years

14 Planned Transmission Projects Feasibility Stage / Project Preparation 1. ZTK 2. ZIZABONA 3. Moz-Malawi 4. MOZISA 5. BOSA 6. ANNA 7. Mal Tanzania 8. STE Pre-Feasibility Stage 1. Botsw - Nam 2. Zambia-Malawi 3. Zambia - Moz 4. Moz-Tanzania 5. DRC - Angola

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16 Regional Project Implementation - Challenges The following comments are based on an initial exposure and review of the current projects that are under development in the SAPP environment. It is not conclusive however comments are based on a comparison to other successful project financings in the region. External Advisors Selection of external advisors needs to be considered carefully (the private sector is extremely good at this) e.g. Auditing firms Private sector developers and banks use them for specific task in a project finance environment such as modeling, auditing or specific financial advisory (such as accounting treatment) and due diligence work. Engineering houses - good at project management, design, and technical due diligence work. Boutique Investment banks/firms have good development experience but need to be considered for depth as experience usually lies in founders Credentials and experience are critical. Conclusion: The development exercise requires the correct team of advisors doing the activities they are good at such as legal, technical, environmental, an financial. This requires strong project management expertise to coordinate the activities between the advisors. Longer term building of internal transaction and development expertise within the SAPP environment will complement these advisory skills. Contract Management is critical Important to manage contracts to ensure that skills are transferred for continuity. Termination and expiry of contracts will lead to project delays. These need to be managed especially in projects with long gestation periods.

17 Regional Project Implementation The project structures being proposed need more innovation in terms of financial engineering: Project finance allows for a great deal of flexibility in financial engineering (private sector developers use this as a key aspect to reduce tariffs, increase returns and to be more competitive): Equity funding and preference share structures Call options in the event that equity is not readily available to a party Various credit enhancement techniques Government support structures Maximize DFI and donor funding while still ensuring commercial debt is possible Designing transactions in a manner that forces debt auctioning to reduce cost The funding sources for public sector projects are different to private sector projects and this brings different credit requirements Allowing private sector partnerships for alleviate funding needs. Risk allocation needs to be discussed and agreed earlier in the project development phase. Lawyers are critical for negotiating, managing and allocating risk across project documentation Engagement with experienced commercially minded lawyers can change the momentum in a deal. SADC has a strong and successful project finance history with many PPP projects closed in places like South Africa, Mozambique, and Zambia in the last three years. SAPP needs to tap into these skills.

18 Project Stakeholders: Luapula PAU Procurement for technical advisor complete Awaiting donor approval to proceed with appointment Environmental shortlisting of consultant complete and awaiting donor approval to launch TOR The financial and legal workstreams have started in parallel Project structuring discussion has started Funding Co-funded by KFW (managed by DBSA) - USD 3.5m IDA USD 4m PAU Scope of work Implementing agent Project Management Legal structuring Financial Structuring Role Sponsors Transaction Advisor Project Party SNEL ZESCO SAPP PAU implementing agent Technical in procurement EOI Legal SAPP PAU Environmental - TBA Financiers Project Management DBSA (KfW)/ WB IDA SAPP-PAU 18 SOUTHERN AFRICAN POWER POOL

19 Project Stakeholders: Kolwesi - Solwesi PAU Funding secured with AFDB IPPF: USD 1.9m Budgeted USD 1m of IDA funding Launch mission completed World Bank approval obtained. Both Technical and ESIA procurement underway Shortlisting complete TOR s issued Bids are expected in the first week of October 2017 Commercial structuring presented to sponsors Legal agreements being drafted Role Sponsors Transaction Advisor Project Party SNEL ZESCO SAPP PAU implementing agent Technical TBA Legal SAPP PAU Environmental - TBA 19 PAU Scope of work Implementing agent Project Management Legal structuring Financial Structuring Financiers AFDB IPPF Project Management SAPP-PAU SOUTHERN AFRICAN POWER POOL

20 Project Stakeholders: Secured donor funding Launch mission complete IDA USD 1m AFDB IPPF USD 1.9m USTDA USD 1.5m Mozambique - Zambia PAU World Bank approval obtained Both Technical and ESIA procurement underway Shortlisting complete TOR s issued Bids are expected in the first week of October 2017 Commercial structuring presented to sponsors Legal agreements being drafted PAU Scope of work Implementing agent Project Management Legal structuring Financial Structuring Role Sponsors Transaction Advisor Financiers Project Management Project Party EDM ZESCO SAPP PAU implementing agent Technical in procurement EOI Legal SAPP PAU Environmental - TBA AFDB IPPF USTDA SAPP-PAU 20 SOUTHERN AFRICAN POWER POOL

21 Project Stakeholders: Zimbabwe Zambia Botswana Namibia (ZIZABONA) Funding is from the AfDB Nepad IPPF- USD.5m Project Scope: Three transmission interconnectors and associated line bays Component A: Hwange-Victoria Falls-Livingstone line Component B: Victoria Falls-Pandamatenga and Component C: Livingstone-Zambezi lines. Component developed together 231km 101km Project Cost: Total Cost USD 223 million Component A estimated as USD 37m Component B estimated as USD 30m Component C estimated as USD 127m 76km Project Status: Consultants were appointed with funding from the AfDB Transaction Advisor (TA), Fitchner to complete scoping and preparation of tender documents for the EPC contractor Fitchner scope of work modified to include the Basic Design Basic design work will be completed by end of October based on data received from Utilities. After the basic design is complete a firmer cost estimate will be derived. Fund raising will be base on the cost estimates Commercial meeting held with all sponsors Project structure discussed Legal structuring for each component to be started Role Sponsors Transaction Advisors Environmental Consultants Financiers Project Management Project Party ZESA (Zimbabwe) ZESCO (Zambia) BPC (Botswana) NamPower (Namibia) Fitchner (current Advisor) Completed by SWECO (ESIA for line in Zambia) African Development Bank (AfDB) Norway/Sweden Trust Fund SAPP CC (via SAPP-PAU) 21 SOUTHERN AFRICAN POWER POOL

22 Funding Sources for Transmission Lines Unlock DFI/concessionary and donor funding first then commercial debt. Transmission lines need lowest-cost funding ECA funding Commercial debt where possible Key next steps Business case needs to be develop for each transmission line Risk Allocations need to addressed Force majuare, termination Critical factor: the transmission line is not dependent on energy charges for cash flow. Irrespective of funding source there will always be a need for firm dependable cash flows. 6

23 Conclusion Simplifying the funding structure will assist us in moving these projects forward Transmission lines do tend to attract public sector funding Grant/Concessionary funding We have good examples of successful Transmission projects globally

24 Thank You