PPPs in the Energy Sector

1. Co-Generation – Belize Launch/Planning Meeting REETA Project Georgetown, Guyana February 10-12, 2014 PPPs in the Energy Sector T. Williams-Robertson Head, RE/EE Unit Office of Vice-President, Operations February 12, 2014

2. Sector Context • Sector reformed under the Public Utilities Commission Act 1999 (the PUC Act) • State-owned vertically-integrated electric utility monopoly transformed: • privately-owned generation, transmission and distribution company • purchasing electric power from IPPs competing in the generation market environment • Provision of open access to utility transmission system, subject to technical constraints and its licensee’s rights and responsibility to expand the system and control transmission losses • Licences granted for generation/ transmission/ distribution electricity in a specified “authorised area”.

3. Stakeholders • Sugar Producer – factory operations • Newly established IPP to own and operate co-generation plant • Local utility to purchase power • Public Utility Commission • Financiers • Government • Cane farmers

4. Project Objectives • Energy security • Generation of cheaper power • Environmentally-friendly power • from 2010 electricity and steam requirements of sugar factory supplied • improved competitiveness in sugar production • Security for 5,000 cane farmers

5. Project Outputs • 32.5 MW co-generation power plant • Electricity and steam produced for the sugar factory • 13.5 MW of base load power for national grid [in Belize] • Bagasse from factory is primary fuel

7. Project Components • 2* 90 ton/hour standard two-drum, water tube, biomass fired boilers with super heaters • 2 turbo-alternators, (1 x 12.5 MWe and 1 x 15 MWe)  • 1* 12.5 MWe condensing/ backpressure unit • 1*15 MWe condensing/ extracting unit •  2*2.5 MWe medium speed generators • Equipment, vehicles, other • Land = 18 hectares • Project Management/Engineering Services

8. Activities Undertaken/Costs • Project development • Feasibility studies • Legal and taxation advice • Loan facilitation, due diligence and capital raising • Environmental Impact Assessment (EIA) • Request for proposal • Development and negotiation of Power Purchase Agreement (PPA) with utility • Facilitation of award of the EPC contract • Legal representation for all financiers, promoter/parent and for project entity

9. Project Financing • Total Project Cost USD 55 mn • CDB loan USD8.25 million (mn) – 18% • Nederlandse Financieringsmaatschappij voor Ontwikkelingsladen N.V. (FMO) – USD10 + 5 mn • CIFI - USD 6 mn • IIC – USD 6 mn • Parent company equity – USD 18.32 • 65% long-term debt and 35% equity

10. Loan Security • Senior Lenders: • first legal mortgage over fixed and floating assets • debt-service guarantee from parent co. • Loan security really = future cashflow • business as a going concern • ownership/commitment of promoter to sugar operations.

11. Key Requirements • Strong regulatory environment- perceived as fair • Well-crafted/drafted PPA critical: • Framework guaranteeing sale of power to the national grid • Adequate tariff to cover operating costs, debt service, return Power sales under PPA: • 84% of revenue in 2010?? • 80% of revenue in 2011 • Promoter financially able to cover cost overruns and complete project • Transparent procurement of EPC contract • Concessions from Govt. during construction/ initial period of operation • Adequate institutional structures in place

12. Key Success Factors (2) • EPC Contractor’s design assessed by independent international consulting firms for client and financiers • Quality of Project Management and Engineering Consultant • Supervision of construction by independent engineer for Senior Lenders • Co-ordination in prompt decision making/flexibility by senior lenders • Borrower engagement/commitment/open relationship with lenders • Assessment of availability and quality of bagasse supply/stockpile • Adequate grace period cover construction/initial ops.

13. OUTCOMES • First biomass power plant in a CDB BMC • Reduction utility imports/generation/ fossil fuels • % Utility Energy Supply provided: • 2010: 48.2 MWh = 10% • 2011: 70.7 MWh = 14% • 2012: 64.5 MWh = 12% • Power suppliers to utility ranked by cost: • hydro purchases {lowest cost} • bagasse co-gen purchases • power imported from Mexico • utility diesel- generated

14. Outcomes • Reduction in power imports: • 2009: 46% • 2010: 33% • 2011: 14.6% • 2012: 16% • Fx savings • Environmental benefits: • air emissions • wastewater effluent quality

15. Outcomes - Employment • Employment during construction 2009 peak: • 55 full-time by company main contractor • 140 labourers and semi-skilled workers by main contractor • 15 employed by sub-contractors • During operational phase: • 52 persons employed full-time • 30 temporary employees

16. Outcomes – skills enhanced Areas of enhanced worker capacity/training: • pre-commissioning O&M and by EPC contractor and equipment suppliers  • cross-training in sugar factory interface operations  • health safety and environment  • fire fighting training • first Aid;  • chemical handling • Boiler O&M training • water treatment

17. THANK YOU