Chapter 12 HORNGREN ♦ HARRISON ♦ BAMBER ♦ BEST ♦ FRASER ♦ WILLETT The Framework of Accounting.
A Case of Geothermal Development Company Ltd. EAPIC ... · China Exim Bank ♦ USA Exim Bank ♦...
Transcript of A Case of Geothermal Development Company Ltd. EAPIC ... · China Exim Bank ♦ USA Exim Bank ♦...
FINANCING OF GEOTHERMAL ENERGY PROJECTS : A Case of Geothermal Development Company Ltd.
EAPIC September 5-9,2011
BY: George MwendaSnr. Officer, Business Development;Corporate Planning & Strategy
GDCKenya.
Introduction-Overview
Geothermal Energy future supply
Global Geothermal Power Financing
Regional Perspective-E.A . & Africa
Kenya
GDC
Worldwide Geothermal Dev’t
Worldwide Geothermal Ranking
Kenya Geothermal Potential
GDC Business Model
Surface Exploration
Exploration and Appraisal drilling
Feasibility Study
Production &Development of Steam Supply
Construction and Operation of Power Plant
GDC
GDC
GDC
GDC/Private Entity
Private Entity/ GDC
Investment by Private Entity/ GDC
Sale of Steam
Investment by Private Entity / GDC
Financing Plan/ Requirements
7
Financing Sources/OptionsGovernments Private
InvestmentSpecial Purpose Insurance
Grants AID - Technical Assistance Concessional LOANS Green Funds
CDMAdvisory Services
Project Preparation/ Feasibility
Capacity Building (Training)
Technical Assistance
Credit (Very long-below market interest)
Loans (Long, market rate interest)
Mul
tilat
eral
De
velo
pmen
t Ban
ks
AfDB ♦ ♦ ♦ ♦ ♦ ♦IDA ♦ ♦ ♦ ♦ ♦ ♦ ♦IBRD ♦EIB ♦ ♦ ♦ ♦IFC ♦MIGA ♦
Bila
tera
l Fin
anci
ng In
stitu
tions
France AFD ♦ ♦ ♦ ♦ ♦Prorpaco ♦
Germany KfW ♦DEG ♦
Japan JICA ♦ ♦ ♦ ♦ ♦JBIC ♦ ♦ ♦ ♦
China Exim Bank ♦USA Exim
Bank♦
USTDA ♦ ♦ ♦USAID ♦ ♦
OPIC ♦
Alternative Sources
Governments
• Taxes, royalties, fees & levies
• Government Instruments
– Treasury bills
– Infrastructure bonds
• Other bilateral arrangements
• Commercial loans
Private Sector
• Retained earnings
• Equity
• Corporate bonds
• Commercial loans
BEP 4th
Year
Build up periodGDC will continue to earn revenue 25years after the planning period
Financial & Economic Analysis
Financial Viability
• Positive free cash flow• IRR > WACC• Early Break even• Short Payback period
Economic Viability
• Proj. IRR > Alternative
Project IRR 2.00
2.50
3.00
3.50
4.00
4.50
5.00
USc
ents
/KW
h
Cost of Debt
Change in steam price with changing cost of debt
At 15% RoR & 5 MW a well
At 12% RoR & 5 MW a well
At 10% RoR & 5 MW a well
Risk Analysis
Country Institutional Project
Policies
Repatriation of dividends, profitsTaxations
Foreign exchange restrictions
Change of Gov.
Consistence of policies
Political Stability
War & Civil disturbances
Expropriation
Currency inconvertibility
Legal & Regulation
Process to pursue claimsForeign Law recognition
ArbitrationEnforcement of awards
Licensing & permitting
Risk Analysis
Country Institutional Project
Breach of Contract
Off Taker Transmission Company
Completion
O & M
Steam SupplierSteam
Supplier
Completion
Guarantee of supply
Power Producer
Power Producer
Completion
O & M
Risk Allocation
Manufacturer/ Contractor
Manufacturer/ ContractorProven TechnologiesGuarantees & Warrantees
Long term supply & Service contracts
Risk Analysis
Country Institutional Project
Environmental
Environ. Impacts
Social Impacts
Technology
Proven
O & M
Resource Risk
Existence
Size
Well Character (Temp., Press. Flow, Chemistry)
Performance with time (Cooling, decline)
Reinjection
Access
Market
Price
1
1.5
2
2.5
3
3.5
4
4.5
5
1 2 3 4 5 6 7 8 9 10
USc
ents
/KW
h
Average Well output (MW)
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
at 15% RoR & 7% cost of debt
At 12% RoR & 7% of cost debt
At 10% RoR & 7% cost of debt
Packaging Geothermal Projects to Attract Financing - Kenya
CSR
Detailed surface study
Environ. Baseline Studies
GAB
Project Preparation
ESIA-Drilling
EMP
Stake holder engagement
CSR
Geo. Permit
Land Access
Exploration, Appraisal & Feasibility
CSREMP
Drilling ConsultantsFeasibility study consultantsGAB
Production Production drilling & Plant Construction
ESIA - Plant
EMPGeo. License
Plant & steam field consultants
LAND ACQUISITION
ENGAGEMENT OF POWER PRODUCER
PPA, GENERATION LICENCE & STEAM
CONTRACT
POWER PRODUCERS SOLICIT FINANCING
GOK- MAIN FINANCIER FINANCING BY GOK & IPP
SOVERIGN GUARANTEES
Menengai Phase 1 Project –budgetary Costs
CAPITAL INVESTMENTa) Cash
1 2 3 4 5 6
2010 2011 2012 2013 2014 2015RESOURCE Dev.
CAPEX Rigs purchase cost 70
Water reticulation system 6 2 2
Resource development staff 8 8 8 8 8 -
Civil Works - Access roads 4 1 1 1 1
Civil Works - Sites 0.2 0.2 0.2 0.2 0.2
Drilling costs 24 48 90 90 54 -
Well testing 1 2 5 5 3 -
Feasibility studies 4 4 Steam field and Wellhead
- CAPEX Well Head Generating Units - - - - - -
Steam Gathering system 80 80
10% Contigency 4 14 11 18 15 -
Total cash 47 149 120 202 160 -
Cumulative 47 196 316 518 678 678
Project Financial and Economic Analysis
(800) (600) (400) (200)
- 200 400 600 800
1,000 1,200
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
Mill
ion
US$
Cumulative Cash Flow
Cummulative cash flow
Expenditure
Revenue
• Break even - 6 yrs
• Payback - 12 yrs
• IRR – 7.6% (WACC – 7.6%)
• Projected Tariff – US$ 0.09
Highlights
Projected Tariff –US$ 0.09
– Financing
– Financial and Risk analysis
– Packaging projects
Financing Issues-Summary
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