6 distribution+and+generation+ppps+in+the+power+sector+ +uganda+...
TRANSCRIPT
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
1/16
UGANDA:Bujagali Hydropower
Project
A CASE STUDY ON RISKMITIGATION THROUGH
PPP STRUCTURING
November 15, 2011
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
2/16
2
Bujagali Project Brief
250 MW hydropower project to double Ugandas generation capacity
US$900 million non-recourse/largest IPP project financing in SSA
US$700 million long-term debt:
16-year facility from EIB, AfDB, DEG & IDA PROG Covered:Barclays/Absa & Standard Charted
20-year facility from IFC, Proparco & FMO
US$180 million private equity (Blackstone & Aga Khan Foundation) &
US$20 million public equity investment
cont
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
3/16
3
Bujagali Project Brief
30 year BOT concession with availability-based PPA - full & capped
pass-through elements within PPA tariff
Comprehensive government guarantees of the obligations of
government agencies within the concession arrangements
Multi-competency government team negotiated the deal with the
private sector and DFI lenders
cont.
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
4/16
4
Ugandas Project Crisis in 2005
Installed capacity 380 MW, effective output 120 MW and peak demand 260 MW -
40% power shortage
Nearly 100% hydro-power system subject to river hydrology variations andregional drought risks
Power shortage addressed through 100 MW expensive emergency power with anadditional 50 MW on tap - short-term fix at best
Power sector in a weak operational and financial state only 55% of theelectricity generated is commercialized
Average retail electricity tariffs doubled to 17 /kWh despite a large annualtariff subsidy by the government
Unsustainable economic trend if the country is to continue have rapid economicdevelopment and attract foreign direct investments
Are there similarities to the current Nigerian power sector?
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
5/16
5
Similarities between 2005 Ugandan& Current Nigerian Power Sectors
Uganda Nigeria
Regulatory Risk High High
Operational Strength of Sector Weak Weak
Sustainability of Power Tariffs Weak Weak
Unmet Electricity Demand Very High Very High
Level of Investments Low Low
Hydrology (Uganda)/Gas (Nigeria) Risk High High
Fuel Risk Diversification None None
Implementation (Largely Political) Risk High High
Private Sector Equity Interest Low ModerateCommercial Bank Lender Interest None Moderate
Government Commitment High High
World Bank Group & DFI Commitment High High
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
6/16
6
Similarities between 2005 Ugandan& Current Nigerian Power Sectors
Uganda Nigeria
Unmet Electricity Demand Very High Very High
Regulatory Risk High High
Hydrology (Uganda)/Gas (Nigeria) Risk High High
Implementation (Largely Political) Risk High High
Government Commitment High High
World Bank Group & DFI Commitment High High
Private Sector Equity Interest Low Moderate
Commercial Bank Lender Interest None Moderate
Level of Investments Low LowOperational Strength of Sector Weak Weak
Sustainability of Power Tariffs Weak Weak
Fuel Risk Diversification None None
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
7/16
7
Ugandas Privatized Power Sector Structure in 2005
Electricity Regulatory Authority
Electricity RegulatoryAuthority
Uganda ElectricityGeneration Company
Nalubaale & Kira StationsConcessioning
Private Generation IPP(Aggreko, others)
Electricity RegulatoryAuthority
Uganda ElectricityTransmission Company
Transmission operator
System operator
Single buyer
Electricity RegulatoryAuthority
Uganda ElectricityDistribution Company
Generation Sector
Distribution & SupplyConcession (UMEME)
Transmission Sector Distribution Sector
CUST
OMERS
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
8/16
8
Bujagali PPT Contractual Structure
Blackstone
Aga Khan Foundation
GOU
Commercial Lenders:
(Barclays/Standard Bank)
DFI Lenders:
(IFC, EIB, AFDB, Proparco, DEG,FMO, KfW)
IDA PRG
BUJAGALI ENERGY Ltd
Operator:
(Union Fenosa)
EPC Contractor:
Salini/Alstom
Offtaker:
UETCL
GOU Guarantee
(market risk, hydrology, FX,Political risk, subsurface)
EPC O&M
PPA
MIGA
GOU Guarantee
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
9/16
9
Broad PPP Remedies Sought by Uganda to Mitigate Risks
Risks Approach
Regulatory RiskHigh level of sustained commitment byGovernment to sector reform, privatizationand independent regulations
Operational Strength of Sector
Sustainability of Power Tariffs
Unmet Electricity Demand Transparent and politically acceptabledecision on next priority investment
Level of InvestmentsHydrology (Uganda)/Gas (Nigeria) Risk
Comprehensive & unambiguous Governmentunderwriting of certain risks which cannotbe borne by the private sector
Fuel Risk Diversification
Implementation (Largely Political) Risk
Private Sector Equity Interest (a) Clear, inclusive & transparent decision
making by Government,(b) concession & contractual structures that
have been successfully implementedbefore, and
(c) equitable risk allocation to all stake-holders
Commercial Bank Lender Interest
Government Commitment
World Bank Group & DFI Commitment
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
10/16
10
Broad PPP Remedies Sought by Uganda to Mitigate Risks
Risks Approach
Regulatory Risk High level of sustained commitment byGovernment to sector reform, privatization andindependent regulations
Operational Strength of Sector
Sustainability of Power Tariffs
Unmet Electricity Demand Transparent and politically acceptable decision onnext priority investment
Level of InvestmentsHydrology (Uganda)/Gas (Nigeria) Risk
Comprehensive & unambiguous Governmentunderwriting of certain risks which cannot beborne by the private sector
Fuel Risk Diversification
Implementation (Largely Political) Risk
Private Sector Equity Interest
(a) Clear, inclusive & transparent decision makingby Government,(b) concession & contractual structures that have
been successfully implemented before, and(c) equitable risk allocation to all stake-holders
Commercial Bank Lender Interest
Government Commitment
World Bank Group & DFI Commitment
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
11/16
1. Clear & Practical
Policies
2. Sector &RegulatoryFramework
3. SustainedApplication ofRegulations
4. Fuel Supply/Hydrology
5. Power Off-Taker &Demand
8. Procurement &Construction
9. Operations &Maintenance
7. Financing ofInvestments
10. Long-TermImplementation
6. Bankability
11
Evolution of Risk Apportioning in PPP
Public
Private
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
12/16
12
Bujagali: Contractual Structure
O & M contractor:Union Fenosa
EPC Contractor:Salini/Alstom
UETCL
GoU
GuaranteeAgreement
Aga Khan Foundation Blackstone
Implementation
Agreement
Power PurchaseAgreement
O&M Contract
CommercialLenders
Loans
Project AgreementPRG
Other DFIs
7. Financing/Investments8. Procurement/Construction9. Operations/Maintenance10. Long-Term Implementation
7. Financing8. Construction9. Operations/Maintenance10. Long-Term
Implementation
8. Construction Operations/Maintenance
Government ofUganda (GoU)
EPC Contract
Indemnity Agreement
Shareholders Financing
Bujagali Energy Ltd.
1. Policies2. Sector Framework
3. Regulations4. Hydrology5. Off-Taker/Market6. Bankability
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
13/16
13
Was it Worth the Effort ?
Benefits to the country through Governments commitment to PPP
Doubling of Ugandas electricity supply first power in late-2011
Sustainable boost to economic development of a land-locked countrywith limited alternative energy sources
Dedication to sector reform and the BOT structure paid off
Demonstration of private sector development of large scalehydropower investment is possible in riskier investment climate
cont
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
14/16
14
Was it Worth the Effort ?
Private sector investors commitment on the strength of the PPP
Investment of US$20 million pre-financing development capital as part ofUS$180 million in long-term equity investment
US$700 million in ultra long-term debt investment
Nearly on-schedule delivery of the project within expected cost
Proven track record paves the way for other private sector involvement inriskier markets on the basis of a suitable PPP structure
Bold power expansion programs in riskier market places with limited track record are
at least initially going to require a proactive PPP structure to achieve the objectives
cont
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
15/16
15
PPP Implications for Large-ScalePrivate Power Expansion in Nigeria
Public Sector Focus
The next 2 years a cr it ical phase for Nigeria Power
Pros: Large under-served demand, high willingness to pay, ample gas resources to base a large-scale
expansion & significant equity & debt interest for new investments
Cons: Regulatory concerns lead to bankability issues, poorly commercialized sector, weaktransmission network undermines power trading potential & unreliable gas supply chain
Deal with policy implications that the privatization of power sector will end up absorbing significant part of the
limited private sector capacity for power investments in Nigeria privatization will not add significant newgeneration
Specifically target limited number of MW for development in the next 3-5 years
Clearly define contractual & regulatory framework for new private power investments (including FDI). Bujagali-type
PPP contractual structure a must given investment risk vs. generation needs of Nigeria. Next phase could possibly
evolve into a less regimented PPP scheme
Continue rapid strengthening of transmission network in the public sector enable power trade
Guarantee bankability of gas value chain through rapid public (and private) sector investments in key midstream
gas infrastructure and contractual guarantees for the IPPs
Credit guarantees from DFIs not an alternative for implementation of bankable concrete measures by Government of
Nigeria
-
7/31/2019 6 Distribution+and+Generation+PPPs+in+the+Power+Sector+ +Uganda+ +a+Case+Study+on+Risk+Mitigation+Through+PPP+Structuring+ +
16/16
16
Thank You