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7/29/2019 Session 2 - Mr. Anousak Phongsavth, Ministry of Energy and Mines, Lao PDR
1/23
Kathmandu, NEPAL
February 6th, 2013
1
Anousak PHONGSAVATH
Deputy Director General
Institute of Renewable Energy Promotion
Ministry of Energy and Mines. Lao PDR
E-mail: [email protected]
Public Sector Led Mini GridPrograms and Policiesin Lao PDR
7/29/2019 Session 2 - Mr. Anousak Phongsavth, Ministry of Energy and Mines, Lao PDR
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Country overview: Lao PDR
Terrain Land locked
70% mountainous
Population 6.3 million, 1.2 million HHs
73% in rural areas
Energy Resources Hydropower (18,000 MW
potential, excluding Mekong river)
Solar and biomass
2
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Government has systematically advanced the process ofindustrialization and modernization of Lao PDR followingthe liberation in 1975
1986 - policy to steer from centrally planned system to market basedeconomy. Subsequently Govt. introduced development programsanchored by ambitious targets
National Growth and Poverty Eradication Strategy (NGPES)
Periodic National Socioeconomic Development Plans (2001-2005-2010)
Targeted poverty alleviation projects in 47 poorest districts
Graduate from the least-developed country grouping by 2020
3
Country overview
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Policies and Priorities for the Power Sector
Provide reliable, affordable and sustainable electricityto sustain economic growth and poverty alleviation
Hydropower development
Sustain economic growth
export for revenue earning
Expand access to electricity services
to 70% of households by 2010
to 85% of households by 2015
to 90% of households by 2020
4
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Utility-driven grid-based electrification,
complemented by off-grid program
0%
10%
20%
30%
40%
50%
60%
70%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1993 1995 1997 1999 2001 2003 2005 2007 2009*
Rateo
fElectrification
EdL Connections Non-EdL Connections Rate of Electrification
15%
65%>83% in
2012
7/29/2019 Session 2 - Mr. Anousak Phongsavth, Ministry of Energy and Mines, Lao PDR
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Rural Electrification
- key drivers of our success to date
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- Sustained national commitment with substantial financial support byGoL
- Utility-driven grid-based electrification, complemented by off-gridprogram
- Substantial financing platform
- Program planning and prioritization to maximize social impact
- Targeting the poor and being gender sensitive
- Reducing investment and operating costs
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1. Off-Grid Programme
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SHS Users pay for
first installation andmonthl
Village Electricity Managerwho manage SHS
PESCOs
Users pay for
monthly only
Village Electricity Managerwho manage Village
Hydro
Hire Purchase Model
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Implementation and Management
system
Users
VEMs
PESCOs
VEAC
PDEM
IREP/VOPS
MEM
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Solar Home
Systems
Solar Home System is
very widely use inisolated villages ofLao PDR and todaypeople are wellacknowledge.
Systems:20, 30, 40 and 50 Wp
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Objectives:
Government has a target to electrify 90% of
households by 2020 To meet this goal MEM is evaluating micro hydro options
This technology is useful for villages where EdL grid willnot reach
How can the private sector assist when thesystems are not commercial?
MEM has been evaluating a range of structures
One solution is a Public Private Partnership (PPP)
2. Micro Hydro Public Private Partnership
(PPP)
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MEM selects an
Investor-Operator to
build/operate electric
power system
Stakeholders and roles
MEM
Investor-
Operator
International/Local
Electricity
users
REF
The Investor-Operator builds the
system, supplies electricity to
users and collects fees from users
REF funds the
availability of
electricity at theaffordable tariff
Advisors
Investor-Operator
deposits collected
fees in REF
Donors
Donors fund
REF
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How the PPP will work
How a partner will be selected
Operating the systems
Building the systems
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How roles are shared between partners
Selecting a system design
- MEM can provide assistance(e.g. capacity building) toinvestors;
Constructing a system- Building a system that works on
time;
Operation and maintenance
- Ensuring that the terms agreedto with MEM on quality andavailability are met;
- Collect user fees on behalf ofREF
Transfer the system to MEM atend of the project (e.g. 10
years)
Assign exclusive legal rights
Agree to lease the systems frominvestors for the length of theproject
Make funding available from REF Assist in raising finance for a
percentage of construction costs
Pay a regular lease fee for a
verified, working system Guarantee certain extreme risks
E.g. in case of war, disaster, etc
Assume responsibility at the end ofthe project (e.g. 10 years)
Investor-Operator responsibilities Government responsibilities
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How the PPP will work
How a partner will be selected
Operating the systems
Building the systems
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Phase 1: complete sites selection.
Phase 2: commences once funding and decisions are finalized
Project phases
Selection of a partner through a competitive tender
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Phase 1: Preparation Phase 2: ImplementationGovernment
decisions,
funding
mobilized
Constructionand operation
Selectwinninginvestor
Negotiatecontractualterms
Short listinvestors
Structure atransaction
AssessPPPoptions
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Phase 2 in detail
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Shortlist investors
Negotiate contractual terms
Select winning investor
Investor-operators submit their qualifications covering financial and
technical experience.
Those that meet MEMs minimum criteria will qualify to proceed.
Construction and Operation
Legal contracts will govern all aspects of the PPP: the phases (Building,Operating, Leasing and Transferring the infrastructure); the allocation
of risks; the outputs (power spec); tariffs; subsidies; etc.
Negotiations will be held in parallel among all bidders. A single agreed
set of documents will be used for bidding, with no negotiations taking
place after bid submission.
Investor-operators submit binding bids, signaling acceptance ofcontractual terms, system design, and support from REF.
A winner will be selected objectively: whichever compliant bid requires
the least support from REF will win.
Winning bidder raises finance and constructs the system.
REF pays the investor-operator a monthly lease payment as and when
the service meets the terms specified in the agreements. Otherwise,lease payments will not be made.
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How the PPP will work
How a partner will be selected
Operating the systems
Building the systems
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MEM anticipates three sources of funding for constructing the
systems Investor-operator equity (e.g. 25% plus)
Local bank debt (e.g. 25% plus)
REF quasi-equity or subsidy (e.g. 50% max)
Are investors
Comfortable with this financing structure? Able to raise the required equity and bank debt?
Government is keen for banks to lend
What support will investor-operators need to access bank financing?
Building the systems
Total construction cost
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How the PPP will work
How a partner will be selected
Operating the systems
Building the systems
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User fees are not expected to impact the investor-operators bottom line
MEM understands this risk is too great for investors to bear Hence the partnership involves MEM leasing systems from investor-
operators for the life of the project
An agreed lease fee will be paid to operators from REF for a workingsystem
This forms the financial bid the investor-operators submits
User fees will be collected by investor-operators and flow to REF
An affordable social tariff will be agreed with all stakeholders before
systems are constructed
E.g. US$0.1 per KWh
A tariff covering all the full cost of the system would be too high
Estimated by MEM at US$0.5 US$0.9 per KWh
Cashflow once operations begin
Investor-operators are primarily relying of MEM lease payments
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Operating the systems
Investors will be eligible forlease payments As long as the agreed power
service is being provided The service will be
independently verified to Ensure minimum standards
are met
Determine the cause of any
issues This verification will need to
be organized at the villagelevel A transparent dispute
resolution mechanism willalso be needed
The investor-operator will beresponsible for maintenanceand collections
Although expensive, thiscould be done from Vientiane
A cost effective alternativewould be to employ villagersin the district
How comfortable are investorsrecruiting locally?
MEM may be able to suggestpotential partners
Verification Maintenance
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22 of 8
Images of Off-Grid Electrification
Lao PDR
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THANK YOU
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