Information on Key Projects

1. Information on Key Projects Edward Farquharson 12 December 2006

2. Deliverability Framework • Policy/Rationale • Economic/policy justification • Viability • Technically, contractually, environmentally, socially viable • Supporting infrastructure available/interfaces work/dependencies • Bankability • Contractor interest • Market Capacity • Financing terms and conditions can be met • Credit issues

3. Deliverability Framework • Affordability • Power affordable for end user taking into account capex, opex, cost of finance, term of contract/tenor • Deliverability • Owner has capacity to manage process • Legislation/vires in place/acceptable • Statutory approvals/permits in place • Timescales • Stakeholders

4. Rehabilitation and Expansion Projects

5. Rehabilitation/Expansion Projects Key Issues • Policy objectives/Rationale • Solution to existing underperforming/poorly maintained facilities, but more complex if financing is required. • Viability • Operation • Can be complex due to historical working practises. • Transfer of existing staff. • Capex costs • Environmental investment costs • Unforeseen capex costs • Latent defects • Legacy liabilities • Warranties

6. Rehabilitation/Expansion Projects Key Issuescont’d • Bankability • Ownership • Lenders will not permit splitting electricity sales from old capacity and new = > ownership of the whole plant must transfer to the newly financed entity = > may provide for a capital receipt which can be used to enhance credit quality • Liability • Transfer of existing assets requires satisfactory indemnities in respect of historical liabilities, maintenance shortfalls etc. • Affordability • Affordability to end consumer allowing for capex and O&M costs. • Deliverability • Owner capacity to manage process. • PPA

7. Kariba North Bank Extension Location: Zambia Project Type: 360MW Hydropower expansion Estimated Capital Cost: $300m • Feasibility Study Completed in 2005 by Sinohydro. • PPA with ZESCO yet to be developed. • ZESCO: structure of credit support for ZESCO obligations yet to be developed. • Ownership of extended facility to be determined. • Good potential structuring possibilities around ZESCO onward power sales, natural resource companies and stable environment.

8. Hwange Location: Zimbabwe Project Type: Thermal project rehabilitation and expansion from 320MW to 780MW Estimated Capital Cost: $500m • PPA to be structured with ZESA. Terms to be agreed. • ZESA credit support for long term obligations to be agreed. • Fuel supply to come from Hwange Colliery operated by ZESA Joint Venture. Terms not yet agreed. • Feasibility study required for colliery expansion in order to supply project est. capital cost $30m. Financing availability not yet determined. • Transmission lines to Namibia for onward sales require refurbishment, estimated capital cost $20m.

9. Hydropower Projects

10. Hydropower Projects - Key Issues • Policy objectives/rationale • Significant underutilised natural resources by way of river flows. • Attractive fundamentals in era of high/volatile oil and gas prices. • Low technical risk (once built). • ‘Clean energy’/Renewable. • Viability • Location • Logistics: construction projects requiring mass mobilisation of equipment and manpower in remote locations. • Significant accompanying infrastructure requirements – roads, transmission etc. • Interface risk – availability, timing, costing. • Specific Risks • Geotechnical history of construction time and cost overruns – EPC rare. • Climate: rain volume and regularity, water flow, historic data availability.

11. Hydropower Projects - Key Issues cont’d • Viabilitycont’d • Social/environmental • NGOs • Permitting • EIA scope certainty. • Resettlement • Regulation • clarity, structure, completeness, long term stability. • water use rules. • Timing • Significant development, mobilisation and construction lead times.

12. Hydropower Projects – Key Issues cont’d • Bankability • Long development and construction lead time so significant interest roll up challenge. • Economics require long tenor debt unavailable in commercial markets. • Availability of multilateral funding enhancement mechanisms. • Sensitivity of lenders and investors to environmental issues. • Foreign exchange and interest rate exposure. • Bankability of owner group (if applicable). • Bankability of contractor group. • PPA terms. • Long term bankability of PPA and off-taker. • PRI cover availability. • Arbitration/dispute resolution mechanisms.

13. Hydropower Projects – Key Issues cont’d • Affordability • Affordability to end consumer dependent on potentially uncertain capex and yet to be defined finance terms and costs, especially debt maturity. • Deliverability • Government project team – authority, budget, experience. • Availability and suitability of advisers. • Bidding and evaluation rules and capacity in place, transparency. • Scope boundaries.

14. Inga 1 and 2 Location: Democratic Republic of Congo Project Type: Hydropower rehabilitation 1775MW Estimated Capital Cost: $600m • PPA with SNEL to be developed. Terms yet to be agreed. • Existing scope of MOU between SNEL and Magenergy unclear. • Tender process for remaining units to be clarified. • Ownership post rehabilitation currently believed to remain with SNEL. • SNEL onward sales to neighbouring utilities to be developed. • Transmission line capital costs estimate unclear.

15. OMVG Location: Guinea Project Type: Hydropower new builds 368MW Estimated Capital Cost: Kaleta $190m; Sambangolou $300m • PPA with Senegal, Gambia and Guinea-Bissau DistCos to be developed. Terms yet to be agreed. • Tender process due to be launched in Jan 2007. • Priority project of West African Energy Exchange (EEEOA) and CEDEA. • Related transmission line of 1,677 km through four countries (West African Loop) at estimated cost of $385m to be developed.

16. Kafue Gorge (Lower) Location: Zambia Project Type: 750MW Hydropower new build Estimated Capital Cost: $600m • PPA with ZESCO to be developed. Terms to be agreed. Onward sales to Nampower being finalised. • ZESCO credit support in respect of long term obligations yet to be agreed. • Appetite of natural resource companies for power to be explored. • Feasibility study required for conjunctive operation of plants on Zambezi to be completed. • Tender status unclear. Status of a Chinese or Indian MOU unclear.

17. Thermal Power Projects

18. Key Issues: Thermal Power Projects • Policy objectives/Rationale • Proven technologies, good investor appetite, flexibility of placement near demand, speed of implementation. • Viability • Standardized/modular design and build approaches – reduced capex and time. • Power Purchase Agreement. • Well understood, but term of contract and credit worthiness of offtaker critical. • Security of fuel supply. • Current oil and gas prices challenge competitiveness of new build in developing world. • De-risking any currency mismatch between fuel payments, power sales and debt repayments critical. • Proximity to mines, if coal fired (availability/quality).

19. Key Issues: Thermal Power Projects cont’d • Bankability • Well established financing structures. • Relatively short construction times. • EPC contracts. • Deep and liquid market for debt placement (country risk dependent). • Proven investor appetite and established benchmarks for risk. • Affordability • Exposure to volatility in delivered fuel supply costs. • Shorter construction periods and lower capex component reduce impact of finance terms. • Deliverability • Planning, emissions, noise levels, environmental permits. • Emissions.

20. Kudu Location: Namibia Project Type: 800MW Gas fired new build Estimated Capital Cost: $530m • Plant size developed due to economics of fuel supply, Namibia demand some 80MW. • PPA with Nampower to be developed dependent on ESKOM sales. • Fuel supply from Kudu gas field, timing and price to be agreed. Field operator still to finalise commercial terms. • Transmission line status to ESKOM to be clarified. • Prioritisation by Nampower to be confirmed.

21. Transmission Line Projects

22. Key Issues: Transmission Projects • Policy objectives/Rationale • Need to move power across regions due to hydropower focus, or need to oversize capacity to underpin fuel field development e.g. Kudu. • Requirement for strong government support to ensure viability. • Viability • Physical security of assets over large distances is problematic: affordable insurance package will be key. • Bankability • Is there a role for private sector capital? Is it an interesting asset class? • What sort of return is appropriate for a low risk business in a higher risk environment? • Cross border sovereign issues? • PPAs require structuring similar to tolling agreements. • Financial viability of customer.

23. Transmission Projects – Key Issues cont’d • Affordability • Interdependency with supply and distribution. • Line capacity. • Deliverability • Capacity of transnational groups. • Way leaves/land acquisition – existing routes? • Differing legislation, permits. • Tariff policy.

24. Malawi-Mozambique Transmission Line Location: Malawi-Mozambique Project Type: Regional transmission Estimated Capital Cost: $84m • Complex PPA structure to be finalised, sale from HCB to Malawi ESCOM wheeled through EDM. • Feasibility study status to be confirmed. • Prioritisation of host governments to be confirmed. • World Bank commitment in principle for $62m, terms to be clarified.

25. Zambia-Tanzania-Kenya Transmission Location Zambia-Tanzania-Kenya Project Type: Regional Transmission Estimated Capital Cost: $342m • Nairobi (Kenya) - Arusha (Tanzania): to be public sector funded. • Arusha (Tanzania)-Dar es Salaam: public sector. • Dar es Salaam - Zambia link: funding not yet identified. • Feasibility study underway by Norplan A.S., due to complete in 2007. • PPA structure for sales to TANESCO/KPLC to be finalised.