RENEWABLE ENERGY WORKSHOP

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Ruby Nash
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1 RENEWABLE ENERGY WORKSHOP Development of Bankable PPAs and Opportunities for Cooperation with ECG GIZ House, Reichpietschufer, Berlin January 18, 2016

2 OUTLINE OF PRESENTATION Introduction and Overview of ECG Ghana s Power Supply Chain Current situation RE Projects in Ghana Structure of Power Project Financing Qualities of a Bankable PPA The Ghana Case Next Steps Opportunities for Cooperation Conclusion

Structure of Power Project Financing Qualities of a Bankable

The Electricity Company of Ghana OVERVIEW OF ECG Is a Private Limited Liability Company Solely Owned by the Government of Ghana Operates in Six

3 The Electricity Company of Ghana OVERVIEW OF ECG Is a Private Limited Liability Company Solely Owned by the Government of Ghana Operates in Six (6) Political Regions Located in the Southern Part of Ghana Has sub-divided its Operational Area into Nine (9) Regions and a Subtransmission Division

(6) Political Regions Located in the Southern Part of Ghana Has

4 ELECTRICITY GENERATION & SUPPLY CHAIN After examining the market, a closer look has to be taken at the value chain Generation Transmission Off-takers End- Users VRA + IPPs **Balance of technologies (thermal, hydro & other RE technologies) System Operator + ETU ECG + NEDCo + EPCL + BCs Residential + Commercial + Industrial Private + GoG

IPPs **Balance of technologies (thermal, hydro & other RE technologies) System

5 Plant non-availability largely due to 1000 Low water levels in dams Fuel supply challenges Obsolete power plants Average Peak Demand - 2,600MW Shortfall in generation capacity Min 140MW Max 860MW CURRENT SITUATION Load Shedding Profile - MW (2015) Power Plant Installed Available MW MW Akosombo Hydro Kpong Hydro VRA Takoradi Thermal Tema Thermal Solar PV Sunon Asogli Cenit Energy Bui Power IPPs Trojan Power 22 8 BXC Solar 20 5 Karpower Ameri Total 3, , January February March April May June July Minimum Maximum Need for additional RE power projects

Hydro 160 108 VRA Takoradi Thermal 792 480 Tema Thermal 242 200 Solar PV 2.5 1.

6 RE PROJECTS IN GHANA 2x20MW 50MW 20MW BIG 2.5MW 150MW Summary of contracted RE projects Solar 497.5MW Biomass 80MW Tidal/Wave 105MW 20MW Avior 155MW 80MW Biomass 20MW Mienergy 20MW BXC 5MW Tidal 20MW TFI 100MW Other key projects Wind 125MW

5MW Biomass 80MW Tidal/Wave 105MW 20MW Avior 155MW 80MW

7 7 STRUCTURE OF POWER PROJECT FINANCING Lenders (Trustees, Banks, etc) Direct Agreements Off-Taker (Utility/ Bulk Customers) Technical Advisors Government Common Terms Agreement Power Purchase Agreement EPC Agreement Project Company Share holders Agreement Shareholders Construction Contractor Fuel/Inputs Supply Contract Supplier O& M Agreement O&M Contractor Sub Contracts Sub Contracts Sub Contracts Subcontractor 2 Subcontractor 1 Subcontractor 3

Company Share holders Agreement Shareholders Construction Contractor Fuel/Inputs Supply Contract Supplier O& M

8 WHAT ARE THE QUALITIES OF A BANKABLE PPA?

9 ISSUES ON BANKABLE PPAs GCSA / PIA / PSA Forex risks Take-or-Pay obligations of PPAs Partial Risk Guarantee Currency convertibility Bank Guarantees

10 QUALITIES OF A BANKABLE PPA 1 Guarantee demand Need to meet the ever growing demand Release suppressed loads Support our neighbours Conducive regulatory and legal framework Role of regulators and policy makers RE ACT 2011 enacted Need for clear policies to send meaningful signals Well established and organized wholesale electricity market framework legislative instruments Supporting distribution and transmission codes for renewables Financial Capacity of the Off-taker Liquidity support (2 months of invoicing) Track record of honouring payments Allocation of all other risks Political, grid, forex risks, increased cost event, take-or-pay

wholesale electricity market framework legislative instruments Supporting distribution and transmission codes for renewables Financial Capacity of the Off-taker

11 QUALITIES OF A BANKABLE PPA 2 Cost-reflective tariffs and clear payment structure Approving of tariffs by independent regulator Periodic tariff adjustment to reflect changes in input parameters Exchange rate fluctuation Feedstock prices Role of Government and Development Agencies Government support agreements Political risks Increase cost event triggers if it leads to increase in costs Termination risks Shareholder s risk Change in law and taxes No duties and taxes on major power generation equipment (e.g. solar panels)

Development Agencies Government support agreements Political risks Increase cost event triggers if it leads to increase in costs

12 QUALITIES OF A BANKABLE PPA 3 Currency convertibility and transferability, etc. Use of market mechanisms to allocate risks Other risk mitigation instruments Partial Risk Guarantees To provide liquidity support Put-Call Option Agreement Identification, allocation and mitigation of risks such as Development and construction risks Operational/Performance risks Guarantee plant and feed-stock availability Liquidated damages Termination risks Force Majeure

liquidity support Put-Call Option Agreement Identification, allocation and mitigation of risks such as

13 NEXT STEPS Preparatory works currently underway to Strengthen ECG as a credible off-taker Strengthening ECG balance sheet to guarantee power purchases as a long term measure Energy Sector Levies Act, 2015 Cash waterfall arrangement Introducing private sector participation in electricity distribution services Making tariffs cost reflective Do competitive procurement Identify project site taking into consideration feedstock supply, etc. Conduct preparatory studies i.e. evacuation, plant design and suitability, availability of feedstock, etc. To obtain highly competitive tariffs All other risks properly allocated Forex, Currency Convertibility and transferability, termination, etc.

reflective Do competitive procurement Identify project site taking into consideration feedstock supply, etc. Conduct preparatory studies i.e. evacuation, plant design and suitability, availability of feedstock, etc.

14 OPPORTUNITIES FOR COOPERATION Target 10% of installed capacity by 2020 Key RE technologies Solar and Wind projects capped 10MW for ECG as embedded plant Hybrid systems (solar-thermal, CSP, combined/multiple renewable schemes) Biomass, biogas, Waste-to-energy are largely being encouraged FIT under implementation Net metering Code developed in draft Pilot underway Saves land, helps to keep farmers in business Stand-alone units for household in Ghana Straight forward PPA processes are being pursued

Waste-to-energy are largely being encouraged FIT under implementation Net metering Code developed in draft Pilot underway

15 CONCLUSION Ghana wishes to prove to the world that it is committed to contracting and implementing bankable PPAs

16 THANK YOU FOR YOUR ATTENTION

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