Kosova Lignite Power Investors Conference January 2010
Transaction structure Components A. Construction of a new electric power generation plant, ‘Kosova e Re Power Plant’ (“KRPP”) - Estimated installed initial capacity of 500 MW - Possibility of expanding up to 1000 MW - Limited associated interconnection facilities A. Immediate development of the Sibovc Lignite Field to supply existing plant and KRPP B. Private sector participation in Kosova B
Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 2
Transaction structure Components Kosova A
Kosova B
DiSCo
Domestic Market
Sibovc KRPP 1 KRPP2 Option
Regional Market
Key: Transaction components Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 3
Transaction structure Components
LSA
Kosova A
Kosova B Sibovc
LSA
LSA
LSA
PPA
DiSCo
Domestic Market
PPA
KRPP 1
KRPP2 Option
Regional Market
Key: Transaction components Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 4
MineCo & GenCo
MineCo
GoK
Kosova B
KRPP 1
KRPP2 Option
•
GoK
Sibovc
•
GenCo GenCo
2 companies but one consortium bid No pre-determined corporate structure, but must work to ensure efficient project delivery and operation
Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 5
Main transaction agreements
LSA
MineCo
GenCo
LSA LSA
Kosovo Lignite Power PricewaterhouseCoopers LLP
Kosovo A
Kosovo B1 Kosovo B2 KRPP
Power
PPA1
DiSCo
PPA2 PPA3
January 2010 Slide 6
Transaction structure MineCo: Sibovc lignite field • • • • • • •
Asset / staff / truck & shovel contract transfer Transfer of existing Sibovc SW mining licence Exclusive rights to mining development of Sibovc lignite field GoK contribution: e.g. Bucket Wheel Excavators, Sibovc SW overburden removal spend MineCo will not assume pre-existing environmental / social liabilities Access to Bardh mine for overburden disposal (MineCo responsible for safe operation of spoil heaps and contribution to rehabilitation) Duration of concession (40 years from KRPP COD)
Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 7
Transaction structure MineCo: Contractual & pricing arrangements •
• • •
LSAs – non-discriminatory pricing across generation customers, supply to Kosovo A, B, KRPP 1 and other potential generators serving the domestic market Mining tonnage concession a function of licensed generation 5, 10 or 15 year levellized price per tonne; regulated/indexed price afterwards (for remaining 25-35 years) Will schedule meetings with interested parties to receive indicative market feedback prior to Draft RfP
Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 8
Transaction structure Kosova e Re Power Plant (KRPP) •
Commitment to construct new plant with estimated installed capacity of 500MW for domestic consumption (KRPP 1)
•
Long-term PPA with Distribution & Supply company (DiSCo)
•
On site of Kosovo B power plant
•
To fulfill all EU-mandated environmental requirements and to achieve efficiencies in excess of 38%
•
Proposed option to extend by further 500MW (KRPP 2)
Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 9
KRPP contractual framework Financing Connection Agreement
Licences
O&M Agreement
KRPP
Water Supply Agreement Ash Disposal Agreement Kosovo Lignite Power PricewaterhouseCoopers LLP
Power purchase agreement
Lignite Supply Agreement
January 2010 Slide 10
Transaction structure KRPP – unit size • • •
Trade-off between supercritical favourable efficiency / emissions and commercial / technical viability in context of domestic and regional market Willing to listen to indicative market feedback prior to Draft RfP Draft RfP will include specific required contracted operating and technical characteristics - Rated capacity (MW) - Minimum heat rate, thermal efficiency in excess of 38% - CO2 and other emissions performance (EU Standards) -
CCS ready
Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 11
Transaction structure KRPP – offtake arrangements •
•
Long term PPA with Licensed Distribution and Supply business - Capacity up to 500MW - Duration – 20 years (circa) Kosovo Government support agreement with World Bank PRG / MIGA support - Support framework to extend beyond DiSCo privatisation
Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 12
Transaction structure KRPP – site for construction • •
• •
Existing water supply from Iber-Lepenc canal Existing transmission connections, require expansion Site-sharing synergies with Kosovo B Existing ash-disposal pipeline connection to Mirash mine
New Coal Yard Ash Pile
KRPP
To mine
Kosovo B 1 & 2 Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 13
Transaction structure KRPP – Typical IPP PPA structure
KRPP
Average power price of PPA (€/MWh 2009 prices)
70
60
50
40
Fuel
“Energy charge”
Variable Operations & Maintenance cost Tax
€/MWh
30 Fixed
Operations & Maintenance cost
20
10
“Availability charge”
Capital repayment & return
€/MW
0
Kosovo Lignite Power PricewaterhouseCoopers LLP
Capital repayment & return
Operations & Maintenance cost
Tax
Fuel
January 2010 Slide 14
Transaction structure Kosova B •
Long-term PPA with DiSCo with pre-determined Availability payments and competitively bid energy price (inclusive of LSA price)
•
Long-term LSA with MineCo
•
Immediate revenue source to GenCo
•
Contribution of B assets by GoK in return for equity interest in GenCo
•
Rehabilitation of plant to extend life to ensure EU-compliance and to provide domestic security of supply
•
Offtake arrangements through PPA with provision for rehabilitation expenditure; step-up in Availability payments for expenditure approved by ERO
•
Clearly identified assets, including facilities, PPA and generation licence
•
Existing skilled workforce
Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 15
What does a bid look like: preliminary views
• •
• •
Bid price for KRPP Availability and Energy (including bid price LSA) Bid price for Kosovo B1 and B2 Energy (pre-rehabilitation, including bid price LSA) - pre-determined Availability payment and minimum Energy conversion efficiency Bid price LSA for Kosovo A Pre-determined government stake
Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 16
Bid evaluation criteria
For a given project volume / structure, bidders will be evaluated on: NPV of 20 years’ capacity • Lowest total cost of power supplied from KRPP charge + energy charge * demand • Lowest cost of energy supplied from Kosovo B, NPV of [20] years’ energy charge * demand pre-rehabilitation
• Lowest cost of lignite supplied to Kosovo A
Kosovo Lignite Power PricewaterhouseCoopers LLP
NPV of Lignite price * Kosovo A demand until decommissioning
January 2010 Slide 17
How to win this transaction
• •
Pre-qualify! Engineer a successful bid - Efficient Lignite mining plan and efficient operation - Efficient and effective KRPP construction plan for early and compliant commercial operation - Realisation of operational synergies with B1 & B2 - Efficient and effective B1 & B2 operation - Optimum cost of capital - Integrating value synergies from trading with regional markets through successful development of KRPP 2 option
Kosovo Lignite Power PricewaterhouseCoopers LLP
January 2010 Slide 18