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Understanding the Role of Banks in the Privatization Process Dr. David Ige Ag. Managing Director Gas Aggregation Company

Understanding the Role of Banks in the Privatization Process Dr. David Ige Ag. Managing Director Gas Aggregation Company Nigeria Limited (GACN). Table of Contents. Gas Supply Availability Commercial Arrangements for Gas to Power Role of Financial Institutions

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Understanding the Role of Banks in the Privatization Process Dr. David Ige Ag. Managing Director Gas Aggregation Company

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  1. Understanding the Role of Banks in the Privatization ProcessDr. David IgeAg. Managing DirectorGas Aggregation Company Nigeria Limited (GACN)

  2. Table of Contents • Gas Supply Availability • Commercial Arrangements for Gas to Power • Role of Financial Institutions • Gas Aggregation Company Nigeria Limited • Contact Details 2

  3. The Gas Resource Base Nigerian Gas Reserves Breakdown Associated Gas = 97TCF Non-Associated Gas = 90TCF Total (P1+P2) = 187TCF Nigeria’s gas potential is enormous. Strategy is to leverage this gas resource significantly for economic growth, with Power Sector being a key part of that agenda

  4. National Aspiration for Gas Mutually-Reinforcing Cycle of Growth (Gas-Power-Industry-Power-Gas) The nation’s gas agenda is robust. It puts gas-to-power at the core, but also envisions an aggressive gas based industrial growth. This in turn will drive further growth of power demand.

  5. Gas Availability to Power Sector About 3bcf/d targeted at Power Sector with existing PHCN plants being cardinal base load consumers of the gas. Additional gas will come from other sources such as Independents etc. 5

  6. Sources of Gas for Potential Investors 3 sources of gas have been identified for potential investors in the Power sector. Most dominant source in the short/medium term is the DSO 6

  7. Table of Contents • Gas Supply Availability • Commercial Arrangements for Gas to Power • Role of Financial Institutions • Gas Aggregation Company Nigeria Limited • Contact Details 7

  8. Commercial Arrangements for Gas to Power • Access to gas supply by power plant developers • All existing PHCN plants have a comprehensive gas supply plan • Framework for gas assures long run availability for subsequent expansions • Bankable Gas Supply Agreements • Pricing Framework • Securitization mechanism for commodity payment default • Fairly standardized terms, enable speedy close-out of negotiations • Gas Transportation • Contract based Gas Transportation services • Finalization of the Gas Transportation Network Code • Development of integrated Gas Transportation Network Redefined the Commercial Framework for domestic gas supply to assure long run sustainability of supply

  9. Table of Contents • Gas Supply Availability • Commercial Arrangements for Gas to Power • Role of Financial Institutions • Gas Aggregation Company Nigeria Limited • Contact Details 9

  10. Role of Financial Institutions • Funding • Access to long term funds • Structured long term debt • Working Capital requirements • Collaboration on loan syndication • Securitization • Understanding transactions of each market segment • Power generation, Transmission and distribution (LV Lines, Transformers, metering) Financial institutions are crucial to the development of the power sector 10

  11. Table of Contents • Gas Supply Availability • Commercial Arrangements for Gas to Power • Role of Financial Institutions • Gas Aggregation Company Nigeria Limited • Contact Details 11

  12. Role of GACN in Domestic Gas Market Was created to manage Domestic Gas Supply obligations volumes Focal point for Gas Buyers to access DGSO volumes for domestic market use Core activities Coordinate process for wholesale gas supply from Producers to eligible Buyers Ensuring a balanced growth of all critical sectors of the economy: Power, Gas Based Industries and Local Distribution Companies Conduct due diligence assessment on eligible Gas Buyers Allocate available gas from the DSO to credible buyers successful on assessment Facilitate the expeditious execution of the gas supply and gas transportation between the buyer, seller and transporter respectively Operational since Jan 2010

  13. Contact Details Address: 1B, Malcolm Fraser Street, Asokoro District, Abuja, Nigeria Telephone: +234 (9) 8759045 Email: info@gacn-nigeria.com Contact Persons: - Management – Tolulope LUKANMBI email: tolulope.lukanmbi@gacn-nigeria.com - Management – Solomon MAKINDE email: solomon.makinde@gacn-nigeria.com

  14. THANK YOU

  15. Back Up Slides 15

  16. DSO Sources of Gas for Potential Investors Major New Gas Supply Projects Breakdown of Gas Supply Plan DSO supply plan comprises existing, many ongoing gas projects and a few major new gas development projects which are about to take off. 70% of this short/medium term plan is targeted at the Power Sector (about 3bcf/d by 2015) 16

  17. Transitional Gas Pricing To assure sustainability of gas supply, a revised transitional pricing structure is in place for gas to Power. Aspiration as market develops is ‘willing buyer willing seller’ prices. 17

  18. Gas Infrastructure Programme for Flexible Supply [5]. QIT-Ajaokuta-Kano Line Over 1000km line to evacuate gas from Exxon to eastern and northern power plants Gas can also be fed from the existing Oben- Ajaokuta pipeline to the North through the Ajaokuta-Kano Pipeline [2]. Ob/Ob – Oben Link Pipeline will bridge the East and West. Excess gas availability in East. Tendering process almost concluded for pipeline • [1] ELPS Expansion to 2bcf/d • ELPS-C capacity is 1000mmcf/d. • Expansion to 2000mmcf/d by 2012 will enable growth of supply to Western Power plants [3]. Link to Eastern Network 2 projects included here – the Northern Option pipe link (NOPL) and the Ob/Ob CPF to NOPL Will enable dry gas specification and capacity boost to over 300mmcf/d to east [3]. Link to Eastern Network 2 projects included here – the Northern Option pipe link (NOPL) and the Ob/Ob CPF to NOPL Will enable dry gas specification and capacity boost to over 300mmcf/d to east Ob/Ob • ELPS-A loping to 600mmcf/d capacity ongoing and on track for end Q1 2011 • Will enable additional supplies from Escravos axis • [4] Offshore Oso to QIT link • Enable additional 300mmcf/d from Exxon by end 2013 • Links Oso to QIT in AkwaIbom 18

  19. Project Agreement PRG Contractual Agreements with no regular Payment flows Contractual Agreements & regular Project Payment flows Payment flows in the event of a Breach of the Power Purchase Agreement Securitization: World Bank PRG Structure PRG Revolving Standby L/C Facility Indemnity Agreement FGN (Ministry of Finance) IDA PHCN / Genco (joint buyers) L/C Reimbursement & Credit Agreement L/C Guarantee Agreement GSA Standby L/C Gas Seller L/C (Commercial) Bank Source: World Bank Presentation

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