FINANCING OF GEOTHERMAL ENERGY PROJECTS

Transcription

1 FINANCING OF GEOTHERMAL ENERGY PROJECTS : A Case of Geothermal Development Company Ltd. EAPIC September 5-9,2011 BY: George Mwenda Snr. Officer, Business Development; Corporate Planning & Strategy GDC Kenya.

2 Introduction-Overview Geothermal Energy future supply Global Geothermal Power Financing Regional Perspective-E.A. & Africa Kenya GDC

3 Worldwide Geothermal Dev t

4 Worldwide Geothermal Ranking

5 Kenya Geothermal Potential

6 GDC Business Model GDC Surface Exploration GDC Exploration and Appraisal drilling GDC GDC/Private Entity Feasibility Study Production &Development of Steam Supply Sale of Steam Investment by Private Entity/ GDC Private Entity/ GDC Construction and Operation of Power Plant Investment by Private Entity / GDC

7 Financing Plan/ Requirements 7

8 Financing Sources/Options Governments Private Special Purpose Grants AID - Technical Assistance Concessional LOANS Investment Green CDM Advisory Technical Funds Services Assistance Project Preparation / Feasibility Capacity Building (Training) Credit (Very longbelow market interest) Loans (Long, market rate interest) Insurance Multilateral Development Banks Bilateral Financing Institutions AfDB IDA IBRD EIB IFC MIGA France AFD Prorpaco Germany KfW DEG Japan JICA JBIC China Exim Bank USA Exim Bank USTDA USAID OPIC

9 Alternative Sources Governments Taxes, royalties, fees & levies Government Instruments Treasury bills Infrastructure bonds Other bilateral arrangements Private Sector Retained earnings Equity Corporate bonds Commercial loans Commercial loans

10 BEP 4 th Year Build up period GDC will continue to earn revenue 25years after the planning period

11 Financial & Economic Analysis Financial Viability Positive free cash flow IRR > WACC Early Break even Short Payback period Change in steam price with changing cost of debt Economic Viability UScents/ KWh At 15% RoR & 5 MW a well At 12% RoR & 5 MW a well At 10% RoR & 5 MW a well Proj. IRR > Alternative Project IRR Cost of Debt

12 Risk Analysis Country Institutional Project Political Stability Change of Gov. Consistence of policies War & Civil disturbances Expropriation Currency inconvertibility Legal & Regulation Process to pursue claims Foreign Law recognition Arbitration Enforcement of awards Licensing & permitting Policies Repatriation of dividends, profits Taxations Foreign exchange restrictions

13 Risk Analysis Country Institutional Project Off Taker Breach of Contract Transmission Company Completion O & M Power Producer Completion O & M Manufacturer/ Contractor Proven Technologies Guarantees & Warrantees Steam Supplier Completion Guarantee of supply Long term supply & Service contracts Risk Allocation

14 Risk Analysis Country Institutional Project Market Environmental Technology Resource Risk Access Price Environ. Impacts Social Impacts Proven O & M Existence Size UScents/KWh Price of steam at various well outputs At 15% RoR & 0.75% cost of debt At 12% RoR & 0.75% cost of debtl At 10% RoR & 0.75% Cost of debt At 15% RoR & 4 % Cost of debt At 12% RoR & 4% Cost of debt At 10% RoR & 4% cost of debt Well Character (Temp., Press. Flow, Chemistry) Performance with time (Cooling, decline) 1.5 at 15% RoR & 7% cost of debt Average Well output (MW) At 12% RoR & 7% of cost debt At 10% RoR & 7% cost of debt Reinjection

15 Packaging Geothermal Projects to Attract Financing - Kenya Detailed surface study CSR Environ. Baseline Studies GAB Project Preparation ESIA-Drilling Stake holder engagement EMP CSR Geo. Permit Land Access LAND ACQUISITION Exploration, Appraisal & Feasibility EMP CSR Drilling Consultants Feasibility study consultants GAB ENGAGEMENT OF POWER PRODUCER Production drilling & Plant Construction ESIA - Plant EMP Geo. License Plant & steam field consultants PPA, GENERATION LICENCE & STEAM CONTRACT POWER PRODUCERS SOLICIT FINANCING GOK- MAIN FINANCIER FINANCING BY GOK & IPP SOVERIGN GUARANTEES

16 Menengai Phase 1 Project budgetary Costs RESOURCE Dev. CAPEX Steam field and Wellhead - CAPEX CAPITAL INVESTMENT a) Cash Rigs purchase cost 70 Water reticulation system Resource development staff Civil Works - Access roads Civil Works - Sites Drilling costs Well testing Feasibility studies 4 4 Well Head Generating Units Steam Gathering system % Contigency Total cash Cumulative

17 Project Financial and Economic Analysis Million US$ 1,200 1, (200) (400) (600) (800) 2009 Cumulative Cash Flow Cummulative cash flow Expenditure Revenue Highlights Break even - 6 yrs Payback - 12 yrs IRR 7.6% (WACC 7.6%) Projected Tariff US$ 0.09 Projected Tariff US$ 0.09

18 Financing Issues-Summary Financing Financial and Risk analysis Packaging projects

19 THANK YOU