Banda Gas To Power Project

Banda Gas To Power ProjectPresented By: Prateek GoyalRamswarup BhaskarBackgroundMali, Mauritania and Senegal - face daunting energy challenges Lack of Infrastructure & Low access to energy Constrained GDP.Rely on hydropower and oil-based power - High technical and commercial losses.National power utilities - Financial deficits - Government supportPower Grid of the three are interconnected & countries trade power through a central dispatching center.New gas finds in Mauritania are a potential game changer.Lack of credit worthiness Credit enhance mechanisms to mitigate credit risk

Power sector performance

The ProjectThe PDO - produce natural gas for generation of electricity to reduce the cost and increase the supply for Mauritanian households and industry, and enable regional integration through power exports.The Banda gas field is located approximately 55 km offshore Nouakchott in Mauritania.It includes the production of gas from Banda gas fieldsGenerating power from that gas by dual fuel & CCGT generator; and At last supplying the generated electricity to the end consumer by installing new transmission lines.

Project Description It consists of the following components: The Banda Gas Project: Its an JV. The SPEG Power Project: Its an SPV Existing and new power transmission lines to evacuate power to the delivery points.Banda field shareholders are Tullow (67%), Petronas (15%), Kufpec (13%) and Premier Oil (5%) and Expected Output of gas is up to 70 million standard cubic feet over 20 years.SPEG is SPV incorporated for the purpose of power generation ,The power project include construction of two power plants at Nouakchott(Mauritania) 180 MW dual-fuel thermal gas fired power plant To be commissioned by March 2015 120 MW combined cycle power plant : To be commissioned by mid 2016

The Banda gas field is located approximately 55 km offshore of Nouakchott. Banda field shareholders are Tullow Oil (67%), Petronas (15%), Kufpec (13%) and Premier Oil (5%). Tullow Oil has prepared a field development plan which provides for production of up to 6 mmscfd of gas over 20 years.

SPEG (Socit de Production dElectricit partir du Gaz) is a special purpose vehicle incorporated for the purpose of power generation, transmission and sales of power using Banda gas. SPEGs shareholders are SOMELEC (40%); KG Power, subsidiary of Kinross, an international gold mining company (34%); and SNIM, the national iron ore mining compan (26%).SOMELEC (National Power Utility in Mauritania), SNIM (National Company of Industries and Mines in Mauritania) and Kinross Gold Corporation in September 2012SPEGs shareholders are SOMELEC (40%); KG Power (34%); and SNIM (26%).Power generated by SPEG to SOMELEC will be evacuated through several routes: The North HV line( to Nouadhibou Tasiast, owned and operated by SOMELEC and financed by the Saudi FundThe existing OMVS high voltage transmission line (power plant -short extension), funded by SOMELEC and The South HV line (Mauritania Senegal), to be financed by AFD and IsDB, with a wheeling capacity of about 170 MW to be built in one phase.Project DescriptionTransmission lines

Gas & Power Sales

125 MW of power will be sold in Mauritania: to the mining sector (25 MW to Kinross gold mine and 15 MW to the National Company of Industries and Mines in Mauritania SNIM) and to households and other businesses (95 MW through the National Power Utility - SOMELEC). 125 MW of power will be exported to Senegal and 50MW to Mali.

Funding RequirementsBanda Gas Project:The estimated investment cost is US$650 millionSource of funding: Equity ContributionSPEG Power Project: Total Costs are estimated at US$467.1 million, including (a) US$221.2 million for the 180 MW dual fuel plant financed by SOMELEC, with funds sourced from IsDB and Arab Fund for Economic and Social Development (AFESD) (b) US$217.3 million for the 120 MW CCGT plant financed by KG power and SNIM seek to raise debt at the project company Level from EIB and AfDB.Transmission Infrastructure: This includes North HV line (US$170 million); OMVS line extension (US$7 million)South HV line (US$170 million).IsBD: Islamic Development Bank African Development Bank (AfDB) . European Investment Bank (EIB)This includes (i) North HV line (US$170 million); (ii) OMVS line extension (US$7 million9) which connects the SPEG powerplant to the OMVS substation south of Nouakchott; and (iii) South HV line (US$170 million).

Given the risk perception of investors towards Mauritania, the lack of credit history of the newly formed entity, SPEG, and the weak creditprofile of each of the three public utility power purchasers (SOMELEC, SENELEC, and EDM) the Project would not have been bankable without the intervention of credit enhancement and risk mitigation instruments from IDA and MIGA.

GSA: agreed price of US$12/mmBTU (inflated 2%) between SPEG and Banda.

PPA: SOMELEC agreed to buy from SPEG with a fixed and variable price component

Secondary PPA: SOMELEC to sell power to SNIM, Kinross, SENELEC and EDM.Project Agreement GSA & PPAProject Agreement - IDA

Project Agreement - MIGA

Key Challenges & IssuesThe overall Project risk rating is High.Potential for construction delays.Lower electricity demand than projected.Assessment and Management of Environmental and Social Risks and ImpactsResource Efficiency and Pollution PreventionCommunity Health, Safety, and SecurityLand Acquisition and Involuntary ResettlementBiodiversity Conservation and Sustainable Management of Living Natural ResourcesCash Flow Projectionsspeg.xls

Referenceshttp://www.miga.org/projects/index.cfm?esrsid=117http://www.worldbank.org/projects/P145664?lang=enhttp://documents.worldbank.org/curated/en/2014/05/19490845/mauritania-senegal-mali-banda-gas-power-projecthttp://www.offshore-technology.com/projects/banda-gas-field-development/http://www-wds.worldbank.org/external/default/WDSContentServer/ WDSP/IB/2014/04/23/000414397_20140425183413/Rendered/PDF/PID0Appraisal00s0to0Power0April022.pdfhttp://www-wds.worldbank.org/external/default/WDSContentServer/ WDSP/IB/2014/05/13/000442464_20140513092605/Rendered/PDF/830250PAD0P107010Box385211B00OUO090.pdf

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