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PNGBiomassJointVentureASustainableandHighValueCleanEnergyProjectin
PapuaNewGuinea
Lae ChamberofCommerceandIndustryJune2016
• Background
• Market
• ProjectOutline
• FuelSupply
• LandownerOpportunities
• PowerPlant
• Environmental,SocialandEnvironmental
• Timing
• BenefitsforMorobe
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Contents
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Background
• PNGBiomassJVisasustainablepowerbusinessownedbyOilSearchLtd(OSL,strategicinvestor,70%)andAlignedEnergyLtd(AEL,projectdeveloperandoperator,30%)
• WehavebeenworkingcloselywithDepartmentsofForestry,AgricultureandLands;EnergyandPublicEnterprise;CEPA;ICCC;PNGFA;MarkhamlandownersandPNGPowerLimited(PPL)forover5years.OuroperationsandLOengagementcommencedin2010.
• TheJV’sfoundationproject,MarkhamBiomassIndependentPowerProducer(IPP),hasrecentlybeenapprovedafteramulti-yearcompetitivetenderprocess-- PowerPurchaseAgreement(PPA): 25-yeartermwithstate-ownedutility,PPL,signedDec2015aftera4-yearnegotiation process,asPPLdeveloped its“LowestCostDevelopmentPlanfortheRamuGrid”,offering PPLthemostreliable,flexiblegenerationmixandlowestrisk
- BiomassIPP: 15- 30MW(second15MWcalloption byPPL)biomass-fuelled IPPintheMarkhamValleynearLae,PNG’slargestindustrial centre.Firstpowertargetedlate2019
- RamuGrid: LargestandfastestgrowinggridinPNG.BiomassIPPisoneofthreenewIPPsselectedbyPPLfor theRamuGrid(total50MW +)supported withPowerPurchaseAgreements.
- Ramu 2contractorsshortlisted.(120MW)- Gridupgradewelladvanced.
BiomassIPP:“Anall-insolution”Alowrisk,worldclass,sustainablepowerbusinessforPNG
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• Sustainableenergyconcept- In2010weasked:whatwouldbeapowersolutionforPNGthatbenefits boththeenvironmentandPNG?
• Markhamidealsite:firsttreesplantedin2010
• Commitment toPNG- OilSearchendorsedthepowersolutionduetoitsclearPNGbenefits
• Jan2012- Landowneragreements, trialplantationsandservicesagreementwithPNGForestryResearchInstitute
• May2012- MOUsignedwithPPLtoconductaFeasibilityStudywithintenttomovetoaPPA
• Dec2012- PPLcommencedanopen tenderprocess
• PPLcompetitive tenderprocesscommencedDecember2012- PPLcallforEOIsfor30- 40MWatLae- EOIsubmitted- ShortlistedforLae30MWsolutioninMarch2012- March2013:EngineeringProcurementandConstruction (EPC)contractorsselected- Fulltechnicalandfinancial(PPA)proposalsubmitted30th May2013(sixbidders intotal)
• 2.5yearsofnegotiation withPPL- PPASignedinDecember2015
• 6monthsFEEDentrypreparation infirsthalfof2016
Journey:CompetitionandCollaboration
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Market
* CompoundAnnualGrowthRate (CAGR) ofrenewable powerinvestment over 10-years. 27.8%10year CAGRofrenewable power investment inAsia-Pacific, fromUS$12.9Bnin2004toUS$139.4Bnin2014
Source: UNEP,UNRenewable Energy Secretariat (REN 21),2015
• Renewablesinvestmentindevelopingcountries:- Nowmatchesdevelopedcountries(cUS$140billion)
- Butgrowingtwiceasfast(31%versus15%CAGR)*
• RenewablesinAsia-Pacific:- Approx.50%ofglobalmarket(cUS$140billion)
- Fastestgrowthglobally(28%CAGR)
Asia-Pacificlargestandfastestgrowing
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• PapuaNewGuinea(PNG)- LargestPacificisland
- Population over 8million; >850indigenouslanguages
- LongtermrealGDPgrowth6.0-8.0%pa
• Resourcerich- 7%ofglobalbiodiversity;14%ofglobaltunastocks;2.6%ofglobalgoldproduction
- Resources70%ofexportearnings:copper,gold,nickel,silver,gas,petroleum
• Developmentpoor- 156/187onHumanDevelopmentIndex
- 25%ofchildrenunabletoattendschool- 75%dependentonsubsistenceagriculture
• Only13%ofpopulationhaveaccesstoelectricity*
ManypeopleinPNGdon’thaveelectricity
* AEL andPPLdatasuggest penetration couldbeas lowas 6%ofthepopulationSource: WorldBank; AEL
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• PNGhasoneofthehighestpowertariffsglobally- Despitenaturalresources (hydro,biomass, sun,wind,oilandgas)
- Reliability ispoor
• Totalinstalledgenerationisonlyapproximately800MWfor8million+people- Threegrids:PortMoresby,Ramu,Gazelle
- Approximately50%ofgenerationisgridconnectedviaPNGPower
- Remainderoff-grid
• RamuGridisthelargestgridgeographicallyandhasthefastestdemandgrowth
Affordable,reliableelectricityrequired
Source: WorldBank; PNGPowerLimited(PPL);AEL
Generation InstalledCapacity(MW) Mix(%)
Hydro 148 19%HFO 281 36%Diesel 231 29%GasFired 75 9%Geothermal 56 7%Total 791 100%
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BiomassisaProvenTechnology
In California:
• 25 Biomass Plants• Distributed in 20 Counties• Generation Capacity 565MWe
USA Renewable Energy Mix
• Growthdrivers
• Ongridgrowth- Residential: Currentlyalownumberofconnectionsduetoshortageofreliablepower
- Commercialandindustrial:MajorcentressuchasLae
- Resources:Majornewprojects
• Off-gridgrowth- Economically, itslikely30-40%ofthepopulationinremoteareasofPNGwillrequiremini-gridormicro-gridsolutions
- e.g.PVsolar,mini-hydro,cleanburningsolutions
PNGseeksatriplinginelectricitysupply
Source: PNGMedium termDevelopment Plan;ANZ, PoweringPNGintotheAsianCentury, 201511
ProjectnearLaewithPNG’slargestdemand
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RamuGridcloseto50%ofPNG’spopulation
Source: AEL13 Confidential
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ProjectOutline
• Integratedbusiness:fuelsupplyandpowerplant
• 25-yearpowerpurchaseagreement(PPA)inplacewithPNGPower
• 30MWnet(15MW+15MW)biomasspowerstationtoenergizetheRamuGridclosetoLae
• Reliable,sustainablebaseloadpowerfortheindustrialportcityofLae(notdependentonnewloadsorconnections)
• Non-subsidisedcompetitivelypricedpower
• Oneoftheregion’slargestrenewableenergyprojects
MarkhamValleyBiomass:sustainablepower
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Currentunderutilisedkunaigrasslands
FlatalluvialplansintheMarkhamValley
Existinginfrastructure• SealedHighlandsHighway• Underneath132kVtransmissionlineforoperations;and22kVlineforconstruction
• NearErapswitchingstation• 60kmfromLae• ClosetoMarkhamRiver
Existingraintree(exoticweedtree)
Projectideallypositioned:“Allinsolution”Nootherexpenditure needed forgridconnection
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FuelSupply
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Successfultrialnurseriesandplantations
* NurseryphotoascaleIndonesianexample
• Newplantationsareunderdevelopment;335hectaresestablishedtodate
• Planfor16,000to18,000haofnewlygrown,dedicatedfuelwoodplantationsfor30MW(net)
• Shortrotationhighyieldingtreeplantations(EucalyptusandAcacia)
• InitialfuelfromexistingRainTree(introducedexoticweedthatPNGFAseektoremove)
• ForestOperationstobemanagedtoForestStewardshipCouncil- ForestManagementcertificationstandards
• LaeandlocalcommunitynurseriesdevelopedjointlywithPNGFRIandlocallandowners
ConstructionofCentralNursery
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ConstructionofCentralNursery:
• Capacityof8,000,000plantsperannum
• ClonalPropagationusingimportedtechnology
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EarlyFuelfromRaintree
Plantationafter18monthsPlantingoperations
Speciestrials
Plantationsafter2years(left)and3years(right)
Source: Aligned Energy; Poyrygrowthaudits
Pre-investmentinnurseriesandplantations
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LandownerOpportunities
• FormationofBusinessGroup,currentlybeingdevelopedwithLandownersandIPA
• EnablingActiveParticipationintheproject
• Rentalpaymentsbasedonarea
• Royaltypaymentstobebasedonharvesting
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RentalandRoyalty
• Projectwillprovideaminimumof500directFTEjobs,themajorityforlocalstaff
• Projecttoprovidetrainingforestandpowerplantmanagement
• Businessopportunities- CommunityNurseries- Planting- Herbicide- LandPreparation- Maintenance- Harvesting- Transport
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LocalEmployment
• PlantingCropsbetweentreesatestablishment
• Cropsinclude:- Melons- Cucumbers- Pumpkin- Maize
• IncreasedfoodsecurityfortheMarkham
• LocalBusinessOpportunities
• Example:- FromJanuarytoApril2016theGanef ClanmadePGK15,315(net)fromgrowingcucumber,watermelonandcassavafrom6haoftreeplantations
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Intercropping/FoodSecurity
• PNGBiomassprovidesaplatformforlandownerstodevelopotherbusinessopportunities
• PNGBiomassworkingwith:- SPBreweries- Trukai
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AgribusinessOpportunities
• Whentreesgettoacertainsize,typically18to24months,itispossibletograzecattleundertheplantations.
• KeepingthecattlefarminghistoryoftheValleyalive.
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Grazing
• PNGBiomassisworkingwitharangeofproviderstoprovideoff-gridpowersolutionstoMarkhamValleyCommunities,theseinclude:- Biolite (stoves)- AfricanCleanEnergy(stove)- Dlight (solarlightandpower)- SunKing(solarlightandpower)
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LocalOffGridPowerSolutions
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PowerPlantTechnology
Powerplant:Lowrisktechnology
• 15MW(net,18MWgross)thermalpowerplantby2019,scalableto30MW(2x15MWnet,2x18MWMWgross)
• ProvenTechnology>93GWglobally*
• Plantationtruckstologyard,logschipped,mechanisedfuelhandlingandchipping,boilerandsteamturbine
• MeetWorldBankEmissionStandardsandcomplytolocalregulations
• Highreliability
• FinalstagenegotiationswithpreferredEPC(engineering,procurementandconstruction)contractorfromglobaltender
• EPCcontractbackedby7+yearoperationsandmaintenance(O&M)agreement
* UNEP,REN21Report,MarketandIndustryTrends,2014;93GWofbio-powercapacityfromsolid,liquidandgaseousbiomassfuels;ledbyUSA,Germany,China,BrazilandJapan
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Technology
FlowDiagramClean,endorsedbyCEPA(Level2)
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SteelErection
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SteamTurbineGenerator
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BoilerandTurbineBuildingErection
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InstallingBoilerGeneratingBankTubes
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TubularAirheater &EconomiserModules
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ElectrostaticPrecipitatorErection
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FinishedPlant
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FuelHandlingandStorageChipperBuilding,InfeedDeck,KnuckleBoom
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FuelStorageandReclaim
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Environmental,SocialandEconomics
Sustainablepower:CO2 Cycle
• CO2 mitigation:190,000tonnesperannum;4,750,000tonnesoverProjectlife
• Targetingpremiumcarbonmarkets
• WorkingwiththeSouthPoleGrouponafour-phaseprojectdevelopment:- AnalysisofOptions (complete)- Twodrivers: fuelswitchandforestry increaseincarbonstock
- Auditofcurrentdatacollection- Projectregistration- Auditing process
• Environmentally,sociallyandeconomicallysustainable
• Highreputationprojectattractivetointernationalfinanciers(debtandequity)
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• Properaccountingfortheimpactofotheremissions(NOx andSOx)showsthatemissionintensitiesforcoalandHFOaremuchhigherthannormallyquoted
• BiomassisaloweremissionintensityfuelregardlessofwhetherNOX impactsareincluded
• Coalcontains(evenifclean)muchmoresulphurthanotherfuels,andhasSOx emissionsordersofmagnitudeabovenaturalgasorbiomass
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Impact:Biomassisveryclean,andrenewableLowemissionsofSOxandNOx
Impact:Governmentpolicy
• PartofasustainableandlowcostpowerportfoliosolutionfortheRamuGrid
• TheprojectwillmeetadditionalkeyStatePolicyobjectives- NationalClimateChangeCompatibleDevelopmentManagementPolicy- Materialeconomic,socialandsustainabilitybenefitsforlocalcommunitiesintheMarkhamValley,creating~500ongoingjobsintheproject(~5,000nationally)
• StrongsupportandcompliancewithPNGGovernmentPolicyforcreatingruralemployment- Increasesinruralprosperity- Improvementsinagriculturalsector
• TheproposedIPPprojectstronglysupportsthreeofthesevenpillarssetoutinthePNGVision2050:- EnvironmentalSustainabilityandClimateChange- HumanCapitalDevelopment,Gender,YouthandPeopleEmpowerment- WealthCreation
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Parameter Benefit (first30-40MW)
Destinationoffuelpayments Biomass- mostfuelcostsgointothePNGeconomyHFO/Diesel- mostfuelcostsgooffshore
ConstructionphasebenefitstoPNGeconomy K100+Million
OperatingphasebenefitstoPNGeconomy K67millionperyear
Landownerandcommunitybenefits:DirectpaymentsIncludingmultiplierimpactsLocalemploymentboost
Including health,education,roads,power:K6millionperyearK24millionperyear850FTEjobs
PowerpricecostsavingsforCustomers(Over10years)comparedtodiesel/PPLgeneralsupplytariff K900million
Operationsphaseemploymentimpacts:DirectNational(includingmultiplierimpact)
480DirectFTEpositions created intheMarkham4,750FTEpositionscreated(mostlyinMorobeandLae)
CO2 mitigation - peryearoverprojectlife(25years)
190,000 tonnes4,750,000tonnes
Diesel/HFOconsumption avoidedoverprojectlife 10+ millionBarrels
InternationalSustainabilitycertification GovernmentandStakeholderReputationBenefits
Engagement ofmarginalisedgroups JVhashiredwomen,youthsandlandownersforemploymentandparticipation;positivemediaprofile
Source: EconomicsConsultingServices;40MW.30MWIPPreduceslightly,butemploymentremainsatthelevelsforecast
Impact:Social,economicandenvironmental500jobs,Kinapricing,rental,royalties,localbusinessdevelopment
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Timing
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Timing
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Front End Engineering and Design AUGUST 2016
Design and Final Cost JANUARY 2017
Final Investment Decision MARCH 2017
Construction Commences JULY 2017
Construction 24 to 26 MONTHS
Plant on Grid JULY 2019
BenefitsforMorobe
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• Cheapersustainablebaseloadpower- Pricesnotimpactedbyfuturecarbontaxes- Pricesnotimpactedbyfuelimportcostincreases- PricelargelyKinabased
• LongTermLocaljobs>500direct>4000indirect
• LandownerOpportunities
• Foodsecurity(intercropping,cattle)
• Associatedvalueaddedindustries(eg woodproducts)
• BusinessAdvantagebyhavinggreenpower
• ConstructionandSupplyChainOpportunities
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BenefitsforMorobe
• Major Construction Equipment- 1 x 235-ton crawler (5 to 6 months)- 1 x 75-ton crane (6 to 7 months)- 2 x All terrain forklifts (6 to 7 months)- 2 x Man Lifts (6 to 7 months)- 1 x Air Compressor- 1 x Lot Scaffolding- 2 x Gas/Diesel Welders & (2) 8-pack Welders
• 1 x Jobsite Trailer
• 2 x 40 ft. Tool Trailers• Ablutions• 120 peak accommodation plus transport and meals• Consumables
• Boiler start up chemicals• Seismic and water drilling• Foundation drilling and civils• Labour
• Transport and Logistics
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ConstructionOpportunities
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