KUDU POWER PROJECT “NAMIBIA’S FLAG SHIP POWER GENERATION PROJECT” 19 SEPTEMBER 2014
Background Kudu Gas Field was discovered in 1973 by Chevron, The first attempt to commercialize the Kudu gas resource for power generation was mooted shortly after independence. A tripartite agreement between NamPower, Eskom and Shell Exploration & Production Namibia (SEPN) was signed in 1997 to develop a 750MW power station outside Oranjemund, The project has since underwent several structural development changes and faced several delays mainly due to the complexity of this project.
Power Station developers/partners : NamPower 51% CEC Africa 30% Other Equity Partner: 19% (still to be selected) Location of power plant : Uubvlei (25km north of Oranjemund) Technology : CCGT Power Output: 800MW (nominal) Main Off-taker : NamPower Secondary off-takers : Zambia & South Africa
Domestic supply Gas Power Purchase Sales/Supply Agreements Agreement NamPower Upstream Downstream Power Export Namcor (54%) 800 MW CCGT Power Agreements Tullow Oil (31%) Station ITOCHU (15%) KuduPower (Pty) Ltd (NamPower + Partners)
Project infrastructure scheme
PROJECT COMMERCIAL STRUCTURE Kudu Project Commercial Arrangements NamPower & other Lenders equity partners Shareholders Agreements Agreement Financing Power Purchase Agreement Gas Power to Upstream NamPower Sales/Supply KuduPower Namibia Parties Agreement Transmission Agreement(s) Power Export Agreement EPC & LTSA Agreement Contract O&M Operations and OEM & Maintenance Regional Buyers EPC Contractor Company
KUDU REGIONAL COMPETITIVENESS
REGIONAL COMPETITIVENESS o Kudu tariff (2013 estimates) of US$0.10 – 0.13c/kWh is still competitive with any regional new build coming on-stream by 2016 - 2018, o CCGT technology is environmentally clean compared to several planned regional new built that are largely coal- based, o It will possibly be the first CCGT power station of this size in the region, o The economic spin-offs of Kudu is greater in terms of its impact on the monetization of the gas resource in the region
Indicative Regional Perspective of Pricing Trends • Low Tariffs but rising to cost reflectivity Forecast of Industrial Tariffs (2010 - 2020) • Annual increases of 20- 30% 16 • Driven by new 14 investments needed to 12 meet growing demand USc per kWh 10 RSA 8 Average Electricity Price Zambia 14.00 6 12.00 10.00 4 8.00 USD cents/kWh 2 6.00 2006 4.00 2007 0 2.00 2008 - 0 1 2 3 4 5 6 7 8 9 0 1 1 1 1 1 1 1 1 1 1 2 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 Year Source Copperbelt Energy Corporation: 2011 9
LATEST PROJECT UPDATE (AS AT SEPTEMBER 2014)
JOINT DEVELOPMENT AGREEMENT (JDA) o NamPower signed a JDA with CEC Africa in February 2014, o A JDA Steering Committee consisting of NamPower, CEC Africa and KuduPower has been established. o KuduPower Board composition is being finalized, o The third additional equity partner also expected to sign the JDA, and will nominate its representatives to sit on the Steering Committee.
UPDATE ON POWER EXPORT AGREEMENTS Power Export Agreements (PXA) negotiations: Negotiations with CEC Plc: PXA Termsheet with CEC Plc signed in February 2014, Full PXA negotiations expected to commence in due course, CEC Plc committed to off-take about 300MW denominated in US$ Negotiations with Eskom Eskom has been offered 100 - 300MW (denominated in Rands with hedging). Full negotiations have not yet commenced. Transmission interconnection discussions between NamPower and Eskom are quite advanced.
UPDATE ON KUDU TENDERS: Tender evaluation process: o EPC - preferred contractor selected o MLA - preferred bank selected o Strategic Equity Partner - tender evaluation completed o Operation & Maintenance - tender evaluation completed
KUDU PROJECT RISKS Debt • +/- 0.2 B USD required NP • Substantial GRN Equity • Cost reflectivity Minority support required • PPA pass through Equity Financial Regulation Kudu Power Station • Delay • Availability Transmission Fuel • Supply • Long term commitment • Demand • Exports: Force Majeure • Volume • Demand Price • Disasters • Strikes O&M • Volatility Construction • GRN action • Trend • New taxes • Frequency • Delays • Time • Costs Forex • Costs
MAJOR PROJECT RISKS The following are the major risks that have been identified: Foreign exchange exposure Construction time delays and costs NamPower’s export agreements for surplus power from Kudu Gas price slide 15
THE ROLE OF GOVERNMENT NamPower's experience (along with other utilities in the region) is that major power projects are unlikely to move quickly without a substantial commitment from governments. The Kudu Gas to Power Project is a complex and big project which its commercial viability also depends largely on support from the Namibian Government in terms of guarantees to Namcor and NamPower in particular as lead developers. In the absence of the project receiving timely Government guarantees, the project is most likely to be further delayed.
Political stability let to higher economic growth and subsequently an increase in electricity demand, Namibia is still largely dependent on imports, Security of power supply still at risk, Surplus generation capacity in the region on the decline, There is considerable peak power demand challenges in the region, Transmission congestion for imports still a huge challenge Monetising the stranded Kudu gas field will unlock & stimulate further oil & gas exploration.
It will provide secure and adequate generation supply, It will diversify Namibia’s energy mix, It will reduce the over dependence on imports, It will make Namibia to be a net exporter of electricity, It is one of the most efficient non-renewable electricity generation option, It is environmental friendly with lower carbon emissions, It could generate carbon credit revenue
DIRECT & INDIRECT IMPACT FOR LUDERITZ & ORANJEMUND There are several socio-economic benefits: • Employment • Housing/accommodation • Infrastructure expansion & upgrade (e.g. roads) • Increased utilization of harbour facilities at Lüderitz • Secondary industries that will benefit: Tourism Cleaning services, Catering, Trade, Transportation, Maintenance, etc.
INDICATIVE PROJECT TIMELINES o Conclusion of all agreements Nov 2014 o Financial Close: 1 st quarter 2015 o Commencement of construction: 1 st quarter of 2015 o Commercial Operations Date (COD): 1 st quarter 2018
For more info contact: The Kudu Project Office Tel. +264-61-205 2221 Tel. +264-61-205 2214 Fax: +264-61-205 9221 E-mail: kudupower@nampower.com.na For attention: Mr. S. Muyenga-Muyenga Project Coordinator: Stakeholder Management & Project Promotion E-mail: muyenga.muyenga@nampower.com.na Website: www.nampower.com.na
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