Final Presentation on Power Sector Edit-1

8/2/2019 Final Presentation on Power Sector Edit-1

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Profile of the Country

*The Country : The Peoples Republic of Bangladesh

*Area (without offshore) : 1,47,570 Sq. Km.

*Population : 134 Million

*Per Capita Income : US$ 440

*GDP Growth Rate : 5.8% in 2009.

* Present Installed Capacity : 5166 MW Power

*BPDB : 2522 MW

*IPP : 1596 MW

*Access to electricity : 45%

*Demand : 4200 - 5500 MW

7.0% Average since 1990.

*APSCL : 6062 MW

*EGCB : 190 MW

*Present Available Generation : 3800 4200 MW

*Per capita generation : 175 kwh/ year (FY08)

*Rental : 252 MW


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Present Structure of the Power Sector

BPDB

Generation EGCB

Single Buyer-

BPDBPGCB

BPDBNorth West

Zone

BPDBCentral Zone

BPDBSouth Zone

WZPDCWest Zone

DPDC DESCO REB/PBSs

A PSCL IPPS

Rental

Generation


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Power Utilities Charactererized by PoorFinances, Slow Pace of Reforms

Unviability of the power sector utilities due to

Inadequate cost recovery of operating andcapital costs from user charges

Considerable operational inefficiencies across the value chain, andespecially in the distribution and commercial segment.

Heavy subsidies and cross-subsidies builtinto the consumer tariffs

Inefficient operation of generation,transmission and distribution due to cost-plus approach of determining tariffs asagainst market based setting of tariffs

High T&Dlosses

LowCollection

efficiency

Poor Financial Healthof utilities

Unpaidsubsidies

Lowrevenue


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... the Unviability infusing long term

imbalance in this infrastructure sector

Infrastructure

GrowthaxPayers Users

ProvidingSubsidies

Lowering Input Costs

IncreasingTariffs

... this Sector riddled with structural problems. For an example, BPDB total costof supply is more than its average tariff Tk 2.60 per kWh where as DESCO buyselectricity from BPDB & PGCB (for wheeling charge) at Tk.2.67/kWh and sells

to customer at an average tariff 3.90 Tk. Per kWh


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Opportunities and Challenges


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Major Event in Reform Process

* National Energy Policy : January 1996

* Private Sector Power GenerationPolicy of Bangladesh

* Creation of PGCB (TransmissionCompany)

*

Creation of DESCO(Distribution Company for part of Dhaka)

* Creation of APSCL(Ashugonj Power Station Company)

* Creation of WAPDC (Distribution

Company)

*Regulatory Commission Act : March 2003* Creation DPDC

: 1996

: 1996

: 1996

: 2002

: 2003

: October 25, 2006


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Components of Reforms

*The principal components of the reform have been envisaged asfollowings:

- Segregation of power generation, transmission and distribution

function into separate services.

- Corporatization and commercialization of emerging power sectorentities.

- Effective regulation under Bangladesh Energy RegulatoryCommission (BERC).

- Private sector participation and private public partnership in powersector.


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Components of Reform (Contd.)

- Financial Restructuring and Recovery Plan of the sector.

- Introduction of cost reflective tariff for financial viability of theutilities and promoting efficient use of electricity.

- Development of demand side management (DSM) including energyefficiency measures to conserve energy.

- Development of alternative/ renewable energy resources.

- Capacity building and HRD for sector entities and corporatizedbodies.


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Challenges

Dependency on Gas as primary energy for the electricitygeneration.

Open Markets & Competition

Project Management & Technology.

Risk & Securitization

Reform and Restructuring.

Impediment of supporting infrastructure, such as:

Gas exploration; gas pipe networks; coal Development;

M i T d M t it


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Moving Towards Maturity

Stage 5Stage 4Stage 3Stage 2Stage 1

IndependentPower Plants

Transmission

Transmission

Transmission

Vertically

Integrated

Utilities

Generation

Transmission

Distribution

Multiple

players

Independent

Power Plants

Generation

Multiple

players

Captive Power

Plants

Independent

Power Plants

State owned

generation

Multiple

players

DistributionCompanies

Open Access

Customers

Multiple

players

Captive Power

Plants

Independent

Power Plants

generation

Multiple

players

Distribution

Companies

Open Access

Customers

Power Pools/

Power

Exchanges/

OTC

Distribution

Companies

Vertically

IntegratedUtilities

Generation

Transmission

Distribution


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Ultimate Structure of

Electricity Market

*Single Buyer Model at present

- Single Buyer purchases all the power from generators

- Sells power to different Distribution companies

*Multi-buyer and competitive Pool may be adopted when the marketbecomes matured and stable

*Wholesale Real Time Power Trading


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Key Issues in Investment

Demand supply gap

Health of the power sector

Historical track record in private investments

Export possibility

Scale of opportunities


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Success Factor for Private Investments

Appropriateness of purchase tariff to recover cost of capital.

Financial health of purchaser.

Generation integrated with distribution

Adequacy of payment security mechanisms

Maturity and depth of domestic financial markets/ institutions toraise finances.

Alternative markets availability to the IPPs for sale of power in case

of default by the monopoly buyer.

Could be in the form of direct third party sales to large industrialconsumers.

Trading markets/ entities as demand aggregates for sale to alternatebuyers.

Credit enhancement mechanisms like Letter of Credit, escrow coverand Government Guarantees required as an alternate payment securitymeasure to mitigate payment risks.


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IPP Financing: Basics

As standalone, green-fieldassets, sponsors do not have accessto internally-generated cash flows.

Must raise all of their capital from external sources.

Use project companies to finance illiquid assets with long, butusually limited lives.

For maturity matching reasons, requires long-term debt.

Use of long term debt forces capital providers to make long-termassessment of project, industry, and sovereign risks.

Cash flow based financing.


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Transparent procurement Tariff structure Must be sufficient to meet projects operating costs, debt service, return on equity, and return of equity.

Creditors rights and the efficiency of legal enforcement Common law vs. civil law Strong vs. weak enforcement

Government: Sovereign vs. Commercial Entity

Waiver of sovereign immunity

Concession agreement Off- take agreement/Input supply agreement

Penalty for non-performance, LDs

Termination payments

Credit enhancements

Direct agreement Lenders step-in rights

Assignment of project agreements

Repatriation of loan proceeds Currency convertibility Currency depreciation risk

Lenders Concerns: General


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Local Financing Limitations forIPP Projects

Long term financing needs of infrastructure projects are notbeing meet by commercial banks because of:

Size of projects

Single borrower limits

Industry Concentration

Limited total market capacity Unavailability of long term funds (maturity mismatch)

Unwillingness to lend at fixed interest rates

The ability of banks to extend term credit (beyond about fiveyears) is extremely limited, constrained by dependence uponshort-term deposits. Even in the most developed economies, theability of the banking sector to provide project financing isfacilitated only by the banks access to long term debt in thecapital markets and substantial capital


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IPP Financing: Basics

As standalone, greenfieldassets, sponsors do not have accessto internally-generated cash flows.

Must raise all of their capital from external sources.

Use project companies to finance illiquid assets with long, butusually limited lives.

For maturity matching reasons, requires long-term debt.

Use of long term debt forces capital providers to make long-termassessment of project, industry, and sovereign risks.

Cash flow based financing.


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0

200

400

600

800

1000

1200

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

FiguresinU

S$Million

Foreign

Local

Total

Investments Required in the Generation & Transmision During Planning
http://tariq_presentation/PSMP-2005.xlshttp://tariq_presentation/PSMP-2005.xlshttp://tariq_presentation/PSMP-2005.xls


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Conclusion

* 18,000 MW new capacity will be required upto 2025 as per PSMP.

*The investment (Capital Cost) requirement for generation &Transmission is estimated at 12.035 Billion US$ for base casescenario. Higher economic growth is expected and consequentlyinvestment requirement will be much more. The investmentopportunities in Bangladesh Power Sector are promising forBangladesh Power Sector are promising for Private Sector.


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Final Presentation on Power Sector Edit-1

Documents

Transcript of Final Presentation on Power Sector Edit-1