Afghanistan Power Auction Series (APAS) Public Webinar INVEST Afghanistan: Office of Infrastructure workstream PRIVILEGED AND CONFIDENTIAL
Agenda Introduction to APAS 1 Overview of Hisar-e-Shahi solar PV project 2 3 Traditional Approach vs. The APAS approach 4 Overview of Da Afghanistan Breshna Sherkat 5 Introduction to project documents 6 Next Steps 7 Q&A PRIVILEGED AND CONFIDENTIAL
USAID is committed to helping the Nation of Afghanistan develop its renewables energy sector • USAID is particularly interested in attracting private sector investors to participate in Afghanistan’s renewables energy sector to create lasting impact • USAID supported the 10MW Kandahar solar project . • Afghanistan Power Series Auction (“APAS”) is designed to take lessons learnt from the Kandahar pilot and create a vehicle for Da Afghanistan Breshna Sherkat (“DABS”) to develop the country’s renewable energy market KEY FEATURES OF APAS – allow for submission of firm tariff proposals PPA is drafted after Commercial Principles (“CP”) are pre -negotiated through 1 direct engagement with the private sector, with transaction advisor support – CPs are negotiated through an iterative process between the off-taker, private sector developers interested in participating in the auction, and the ultimate DFI project lenders – CPs are foundational points of risk allocation based on international best practice, whilst proactively incorporating local market nuances, to ensure ultimate bankability Pre-arranging of project financing from multiple Development Finance 2 Institutions (“DFI”) to be made available to auction round winners Pre-arranging of guarantees, credit enhancements, and liquidity facilities 3 Smart structuring of Viability Gap Funding (“VGF”) to de -risk project and 4 enhance asset performance PRIVILEGED & CONFIDENTIAL 3
APAS is a multi-round auction series designed to create a pathway for private sector engagement and investment into Afghanistan’s energy sector Current feasibility assumptions indicate a required tariff higher than the current off-taker ceiling for purchasing power, therefore the Transaction Advisory Team is working with donors to raise viability gap funding VGF used to de-risk project New capacity target (MW by round) • While increasing the project’s financial Hisar-e-Shahi Likely to include other feasibility , these funds are also intended to (solar PV) technologies compensate good performance by the plant (in 250 the form of success-based revenue pay-outs, bulk-dividends, or similar) • Good performance may be measured by comparing a variety of estimated results with actual outcomes like: • Actual energy generated 80 • Debt covenants 40 • Plant availability • As the market is de-risked, available VGF Round I Round II Round III decreases and additional generation technologies (wind, hydro, etc.) will be included in subsequent auction rounds Requirement for VGF decreases as market is de-risked in each subsequent round PRIVILEGED & CONFIDENTIAL 4
The 40MW Solar PV project at Hisar-e-Shahi will represent APAS round 1 Hisar-e- Shahi Project Location • Hisar-e-Shahi is a 207 hectares industrial park 22KM southeast of Jalalabad City in Nangarhar province • The site was selected due to I) RE resource availability, ii) security, iii) potential power load availability, iv) land availability, v) level of commercial activity, vi) consumer ability to pay. • The land is currently owned by the government . There are 295 plots for industries, of which none are currently established due to the lack of electricity • Initial estimates believe that the project will directly lead to the creation of 12,000 new jobs , Hisar-e-Shahi as each factory is likely to employ between 30 to 50 people PRIVILEGED & CONFIDENTIAL 5
Afghanistan Power Auction Series – Roadmap to execution 2020 2019 Auction preparation and market engagement Auction Execution • Drafting of documents using a four way collaboration • Evaluation and announcement of qualified between the developers, government, lenders and bidders donors: • Auction – Commercial principles of risk allocation between the investor and the Government of Afghanistan • Shortlisting of preferred bidders – Drafting of power purchase agreement • Final PPA – Drafting of implementation agreement • Generation license issued • Collaboration will be primarily done through webinars, investor conferences and coordination meetings • Land-lease agreement signed through an open and transparent forum • Final lenders negotiations • Pre-arrangement of financing from multiple Development Finance Institutions to be made available to auction round winners • Pre-arrangement of guarantees, credit enhancements and liquidity facilities • VGF determination and structuring to enhance performance PRIVILEGED & CONFIDENTIAL 6
Da Afghanistan Breshna Sherkat background • DABS is an independent 100% state owned corporation • Ministry of finance is the only shareholder Overview of market • Around 40% of the households have access to grid power, most of which are in urban areas • 80% of the total available power in Afghanistan is imported from the neighbouring countries such as Iran, Turkmenistan, Tajikistan and Uzbekistan though power purchase agreements • Currently a maximum of 1,300MW of energy is available in Afghanistan’s network, out of which 300MW is domestically generated. The rest is imported • Domestic generation capacity is currently modest and largely hydroelectric Electricity Network System • The electricity network is categorized into four networks which supply seven different power grids or “islands” • North East Power System (NEPS ): Connects 17 load centers (Kabul, Mazar- e-Shariff, Jalalabad, etc) with Uzbekistan and Tajikistan through 220kV, 110kV and 35kV lines • South East Power System (SEPS): Connects Kandahar with Kajaki hydro power plant through 110kV line • Herat System : connects the Herat Zone with Iran and Turkmenistan through 132kV and 110kV lines. • Turkmenistan System: Connects Herat, Faryab, JawzJan, Sar-e-Pul and Andkhoy districts through 110kV line. Source: DABS PRIVILEGED & CONFIDENTIAL 7
Recent IPPs signed by DABS No # Capacity Private Sector Companies Status Projects (MW) 1 Kandahar Solar (USAID 10 Jaguar Overseas Ltd., India Under construction (August Subsidy) 2019) 2 Kandahar Solar 15 77 Construction, Turkish (15 Commissioning completed (government subsidy) MW) (May 2019) Current DABS is buying electricity from the IPP 3 Kandahar Solar 15 Zularistan, Afghanistan (15 90% completed (June 2019) (government subsidy) MW) 4 Kajaki Hydro Power 100 77 Construction, Turkish Under construction (early upgrade Project 2021) Current DABS is buying electricity from IPP 5 Bayat Power – 1, Gas Based 40 Bayat Power, Afghanistan Under construction (end of Project, Sheberghan, 2019) Jowzjan Province 6 Mazar Gas Project 50 Ghazanfar and IFC Under construction (end of 2020) Source: DABS PRIVILEGED & CONFIDENTIAL 8
Available, planned and completed solar and wind projects as well as available substations in Afghanistan Link to access: https://drive.google.com/open?id=1LDkPEXv1FwK9lNC0vyje1yH6-7BxJQ6u&usp=sharing Source: DABS PRIVILEGED & CONFIDENTIAL 9
Afghanistan current and future power systems Source: DABS PRIVILEGED & CONFIDENTIAL 10
Traditional approaches to project development often result in loosely defined projects that require significant negotiation to achieve financial close Bilateral negotiations – Single firm participation One firm negotiating bilaterally with the Government, who has limited capacity and experience ; the process is cumbersome due to a lack of reference precedents PPA and Start of Project commercial the Award Negotiations Financing closure docs project template D A C B Project award to financial close; Inefficient m ulti-year engagement can often result in one counterparty walking away from the transaction altogether Barrier Description Implications • Commercial documents and PPA based on few or • The commercial documents and PPA may not be financeable as limited precedent lender requirements are not well understood • A Oftentimes the documents are drafted by a • Private sector feedback is not incorporated. Buy-in is not consultant with minimal engagement with the achieved private sector • • Loosely defined project . Government awards projects Top developers are crowded out, less capable developers create B knowing significant negotiations are necessary uncertainty and risk to project timing and closure • Lack of government experience and quality of • Lengthy negotiations to reach alignment developers C • Hard to discern if the developer is being opportunistic or if its • Government often feel political pressure to move proposed risk allocation is market quickly • Risk appetite of only one firm known D • Lenders are not engaged early enough in the process • Risk profile of the rest of the market may not be understood PRIVILEGED & CONFIDENTIAL 11
Recommend
More recommend
