IPP Project Development AFRICA UTILITY WEEK CONFERENCE Yesufu Longe Alonge Head, Power Procurement & Power Contracts And Dr. Nnaemeka Ewelukwa General Counsel & Company Secretary May 13, 2013 1
Outline About NBET NBET in the Transitional Market Transitional Market Trading Arrangement Project Development Stages: Inception to Completion Engaging the Bulk Trader 2
About NBET Established by The Electric Power Sector Reform Act (EPSRA) enacted in 2005 "trading licensee holding a bulk purchase and resale license to engage in the purchase and resale of electrical power and ancillary services from independent power producers and from the successor generation companies... Acts as a broker between power producers and the distribution companies Board inaugurated August 23, 2011 Chaired by Coordinating Minister of the Economy; Minister of Finance 3
NBET s Role in the Transitional Market Sign PPAs with privatised generation companies Assume PHCN obligations in existing PPAs with IPPs Negotiate and enter into PPAs with Greenfield and Brownfield IPPs Sign Vesting Contracts with Distribution Companies Sign power sale agreements (PSA) with eligible customers and international customers 4
Transitional Market Trading Arrangement Existing Existing Existing GenCo1 GenCo2 GenCo3 New IPPs GenCo4 GenCo5 GenCo6 IPPs IPPs IPPs POWER PURCHASE AGREEMENTS PPAs BULK TRADER Additional Capacity Eligible Customers VESTING CONTRACTS DisCo 1 DisCo 2 DisCo 3 DisCo 4 DisCo 5 DisCo 6 DisCo 7 DisCo 8 DisCo 9 DisCo 10 DisCo 11 5
Project Development Stages : Inception to completion Project Feasibility Phase Early Development Phase Project Financing Phase Project Construction Phase 6
Project Feasibility Phase /1 Legislation Legal frame work Institutional framework Initial Authorisation/License/Permits Regulatory Framework Independent regulatory Tariff methodology Transparent Energy Policy Framework Mechanism for transiting IPP power Energy mix Sustainable and consistency 7 7
Project Feasibility Phase /2 Institutional requirement Regulator Off-taker Market and System operators Project Criteria Best feasible location Fuel supply Evacuation Environmental Technology Project Risk Analysis Fuel supply risk Off-take risk Legal risk Regulatory risk Technology and operations risk 8 8
Project Feasibility Phase /3 Feasible Project Manageable Risk Bankable Project 9
Early Development Phase /1 Land Outright purchase Lease Document of Title Evacuation Load flow study Load restriction Reinforcement Approval Fuel Supply/Availability Transportation Price Alternative 10 10
Early Development Phase /2 ESIA TOR Study Panel Approval Generation Licence Application Due diligence Approval Project Company Register Company SPV Co-Sponsors 11 11
Early Development Phase /3 Advisers & Consultants Legal Project Technical Financial Debt Arranger Competitive Procurement EOI Tenders Evaluation Financial Model Cost Components Initial Proposed Leverage Indicative Returns Indicative Tariff Dynamic & Flexible 12 12
Project Financing Phase Equity Strong Sponsors Patient Sponsors IRR & NPV Project for ROI Lenders Agreements ECA, DFI, Commercial Banks, Cash Flow Available For Debt Service (CFADS Lower Tenor than PPA term Lower Risk higher Leverage Project as collateral Lenders Technical Adviser IDC Loan Agreement Equity Support Agreement Equity & Shareholders Agreement O & M Agreement LTSA PPA Grid Connection Agreement Fuel Supply and Transportation Agreements Construction Contract 13
Project Construction Phase Construction Risk Completion risk Material Availability risk Technology risk Cost overrun risk EPC Design, completion & standard of care Fixed price Completion guarantee Performance guarantee Lenders Risk Competent & Reputable EPC Contractor Equity injection follow by Loan drawdown Equity guarantee for Debt & LD Lenders Independent Engineers Milestone payment 14
Engaging the Bulk Trader in the Pre-Transitional Market Due Diligence Application: Collects and verifies key information regarding the project developer and the project. Mandatory Requirements Proof of land ownership or long term lease TCN evacuation study and approval for proposed plant capacity Completed Environmental and Social Impact Assessment (ESIA) compliant with both Federal Ministry of the Environment and IFC/WB standards Fuel Supply Arrangement Firm or proof of engagement with a reputable fuel supplier Additional Project Partners Sponsors, technical and financial partners Status of license application and other permits Project information Capacity, technology, initial timelines 15
Engaging the Bulk Trader: Sample Due Diligence Forms 16
THANK YOU 17