KUDU POWER PROJECT

“NAMIBIA’S FLAG SHIP POWER GENERATION PROJECT”

19 SEPTEMBER 2014

Background

Kudu Gas Field was discovered in 1973 by Chevron,

The first attempt to commercialize the Kudu gas resource for

power generation was mooted shortly after independence.

A tripartite agreement between NamPower, Eskom and Shell

Exploration & Production Namibia (SEPN) was signed in 1997 to

develop a 750MW power station outside Oranjemund,

The project has since underwent several structural development

changes and faced several delays mainly due to the complexity

of this project.

Power Station developers/partners:

NamPower 51%

CEC Africa 30%

Other Equity Partner: 19% (still to be selected)

Location of power plant: Uubvlei (25km north of Oranjemund)

Technology: CCGT

Power Output: 800MW (nominal)

Main Off-taker: NamPower

Secondary off-takers: Zambia & South Africa

Upstream

Namcor (54%)

Tullow Oil (31%)

ITOCHU (15%)

Downstream

800 MW CCGT Power

Station

KuduPower (Pty) Ltd

(NamPower + Partners)

Gas

Sales/Supply

Agreement

Power Purchase

Agreements

NamPower

Domestic supply

Power Export

Agreements

Project infrastructure scheme

PROJECT COMMERCIAL STRUCTURE

4

Kudu Project Commercial Arrangements

NamPower& other

equity partnersLenders

Shareholders A

greement

Financing A

greements

O&

MA

greement

Operations and Maintenance

Company

OEM & EPC Contractor

EPC & LTSA

Contract

Gas Sales/Supply Agreement

UpstreamParties

KuduPower NamPower

Power PurchaseAgreement

Regional Buyers

Power Export

Agreem

ent

Transmission Agreement(s)

Power to Namibia

KUDU REGIONAL COMPETITIVENESS

REGIONAL COMPETITIVENESS

o Kudu tariff (2013 estimates) of US$0.10 – 0.13c/kWh is still

competitive with any regional new build coming on-stream

by 2016 - 2018,

o CCGT technology is environmentally clean compared to

several planned regional new built that are largely coal-

based,

o It will possibly be the first CCGT power station of this size in

the region,

o The economic spin-offs of Kudu is greater in terms of its

impact on the monetization of the gas resource in the region

9

Indicative Regional Perspective of Pricing Trends

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

US

D c

en

ts/

kW

h

Average Electricity Price

2006

2007

2008

Forecast of Industrial Tariffs (2010 - 2020)

0

2

4

6

8

10

12

14

16

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Year

US

c p

er k

Wh

RSA

Zambia

• Low Tariffs but rising to

cost reflectivity

• Annual increases of 20-

30%

• Driven by new

investments needed to

meet growing demand

Source Copperbelt Energy Corporation: 2011

LATEST PROJECT UPDATE

(AS AT SEPTEMBER 2014)

JOINT DEVELOPMENT AGREEMENT (JDA)

o NamPower signed a JDA with CEC Africa in February 2014,

o A JDA Steering Committee consisting of NamPower, CEC

Africa and KuduPower has been established.

o KuduPower Board composition is being finalized,

o The third additional equity partner also expected to sign the

JDA, and will nominate its representatives to sit on the

Steering Committee.

UPDATE ON POWER EXPORT AGREEMENTS

Power Export Agreements (PXA) negotiations:

Negotiations with CEC Plc:

PXA Termsheet with CEC Plc signed in February 2014,

Full PXA negotiations expected to commence in due course,

CEC Plc committed to off-take about 300MW denominated

in US$

Negotiations with Eskom

Eskom has been offered 100 - 300MW (denominated in

Rands with hedging). Full negotiations have not yet

commenced.

Transmission interconnection discussions between

NamPower and Eskom are quite advanced.

UPDATE ON KUDU TENDERS:

Tender evaluation process:

o EPC - preferred contractor selected

o MLA - preferred bank selected

o Strategic Equity Partner- tender evaluation completed

o Operation & Maintenance- tender evaluation completed

KUDU PROJECT RISKS

Kudu Power Station

Fuel Transmission

Construction O&M

Demand

Forex

Force Majeure

Regulation

• +/- 0.2 B USD

required

• Substantial GRN

support required

• Supply

• Long term commitment

• Delays

• Costs

• Disasters

• Strikes

• GRN action

• New taxes • Frequency

• Time

• Costs

• Volatility

• Trend

• Demand

• Exports:

• Volume

• Price

• Delay

• Availability

• Cost reflectivity

• PPA pass through

Debt

NP Equity

Minority Equity

Financial

slide 15

MAJOR PROJECT RISKS

The following are the major risks that have been identified:

Foreign exchange exposure

Construction time delays and costs

NamPower’s export agreements for surplus power from

Kudu

Gas price

THE ROLE OF GOVERNMENT

NamPower's experience (along with other utilities in the

region) is that major power projects are unlikely to move

quickly without a substantial commitment from

governments.

The Kudu Gas to Power Project is a complex and big project

which its commercial viability also depends largely on

support from the Namibian Government in terms of

guarantees to Namcor and NamPower in particular as lead

developers.

In the absence of the project receiving timely Government

guarantees, the project is most likely to be further delayed.

Political stability let to higher economic growth and

subsequently an increase in electricity demand,

Namibia is still largely dependent on imports,

Security of power supply still at risk,

Surplus generation capacity in the region on the decline,

There is considerable peak power demand challenges in the

region,

Transmission congestion for imports still a huge challenge

Monetising the stranded Kudu gas field will unlock &

stimulate further oil & gas exploration.

It will provide secure and adequate generation supply,

It will diversify Namibia’s energy mix,

It will reduce the over dependence on imports,

It will make Namibia to be a net exporter of electricity,

It is one of the most efficient non-renewable electricity

generation option,

It is environmental friendly with lower carbon emissions,

It could generate carbon credit revenue

DIRECT & INDIRECT IMPACT FOR LUDERITZ & ORANJEMUND

There are several socio-economic benefits:

• Employment

• Housing/accommodation

• Infrastructure expansion & upgrade (e.g. roads)

• Increased utilization of harbour facilities at Lüderitz

• Secondary industries that will benefit:

Tourism

Cleaning services, Catering, Trade, Transportation,

Maintenance, etc.

INDICATIVE PROJECT TIMELINES

o Conclusion of all agreements Nov 2014

o Financial Close: 1st quarter 2015

o Commencement of construction: 1st quarter of 2015

o Commercial Operations Date (COD): 1st quarter 2018

For more info contact:

The Kudu Project Office

Tel. +264-61-205 2221

Tel. +264-61-205 2214

Fax: +264-61-205 9221

E-mail: kudupower@nampower.com.na

For attention: Mr. S. Muyenga-Muyenga

Project Coordinator: Stakeholder Management & Project Promotion

E-mail: muyenga.muyenga@nampower.com.na

Website: www.nampower.com.na