Issues on Electricity Reforms in Jordan

Transcription

1 Issues on Electricity Reforms in Jordan Eng. Azmi Al-Said Khreisat Arab Energy Club Meeting Abu Dhabi(January /2013)

2 Background

3

4 BACKGROUND Organizational Structure of the Electricity Sector Minister of Energy & Mineral Resources Ministry of Energy & Mineral Resources Chairman ( JEA) Supervisory role IDECO Established in Electricity Distribution. in Northern Jordan. JEPCO Establishment in Electricity Distribution in Central Jordan. Established in Generation & Transmission Whole of Jordan. Electricity Distribution outside concession areas Organization & Co-ordination of technical matters of the sector. Electrical interconnection with the neighboring countries.

5 BACKGROUND General Electricity Law (GEL) Number 10 of 1996 opened the power generation sector to private investors National Electric Power Company (NEPCO) to replace JEA. In 1999 General Electricity Law No.(13) issued to ensure a suitable environment to encourage private sector investment in developing electricity projects.

6 BACKGROUND NEPCO was restructured by dividing it into three companies as follows: National Electric Power Company (NEPCO): responsible for transmission activities and interconnection with neighboring countries, Central Electricity Generating Company (CEGCO): responsible for electricity production from existing power stations. Electricity Distribution Company (EDCO): responsible for distribution of electricity in the concession areas (mainly for the southern & eastern areas and Jordan Valley).

7 BACKGROUND New Structure of Electric Power Sector Government Ownership Private ownership G CEGCO IPPs T NEPCO NEPCO D JEPCO IDECO EDCO IDECO JEPCO

8 Privatization of the Power Sector in Jordan

9 Privatisation of the Sector The GoJ set the following objectives for the privatization: Establishing an appropriate structure for the electricity sector that is viable in the long term. Continuing to improve sector efficiency for the long term benefit of consumers. Promoting competition in order to achieve the required efficiency improvements. Maximizing proceeds of privatization. Assisting the sector to access additional sources of finance

10 Privatisation of the Sector In December, 2001 advisers were appointed to advise the Government of Jordan on the development and implementation of a privatization strategy leading to the sale of controlling Government interests in CEGCO, EDCO, and IDECO.

11 Privatisation of the Sector The General Electricity Law was reviewed and amended and a new law was issued in June The main features of this law are the following:- Ministry of Energy and Mineral Resources assumes policy role. Separate Generation, Transmission and Distribution (Implemented). Single Buyer model to transition to bilateral contract market. Independent Electric Regulatory Commission. Distribution and retail tariffs which reflect the real cost of electricity generation, transmission and distribution.

12 Privatisation of the Sector Licensing regime. According to the law a separate license is granted to each activity within its businesses, as the following: Separate T (Transmission), SO (System Operation), BS (Bulk Supply). Currently NEPCO has only one license Separate N (Network Services), and S (Retail Supply) within Distribution (currently only one license). G (Generation).

13 Privatisation of the Sector Electricity Regulatory Commission (ERC) (independent body): was established in 2001 and is responsible for: setting electricity tariffs, subscription fees and costs of the necessary services, issuing licenses to the companies generating, transmitting and distributing electricity, monitoring their compliance with the conditions stipulated in these licenses ensuring that electricity companies are providing high quality safe services to end users. provides dispute resolution to complaints submitted by consumers

14 Privatisation of the Sector Competition in Generation - Single Buyer CEGCO AL-Samra IPP s Interconnection PPA Contracts Purchase/Sales Contracts With Syria and Egypt Gas Supplier NEPCO-SINGLE BUYER Bulk Supply Tariff EDCO IDECO JEPCO Industrial Consumers Distribution Tariff Customers Customers Customers

15 Privatisation of the Sector Stage 2(future) Wholesale Competition CEGCO Al-Samra IPP s Interconnection ISO/MO EDCO IDECO JEPCO Eligible Customers Consumers Consumers Consumers

16 Privatisation of the Sector Implementation of Privatization Strategy consists of two sub phases: Phase (2-a): involved preparing the contractual documentation required for the privatization. Phase (2-b): implementation

17 Privatisation of the Sector Generation Sector Structure Shareholders Agreement Government Implementation Agreement Investor(s) 49% 51% Fuel Supply Agreement Power Purchase Agreement ( include gas tolling Arrangement) Fuel Supplier CEGCO NEPCO

18 Privatisation of the Sector EDCO and IDECO Position in Distribution Sector Structure Investor Other shareholders NEPCO Bulk Electricity Regulated IDECO/ EDCO Customers Tariff Supply

19 Privatisation of the Sector Sale of CEGCO & IDECO & EDCO In 2007 CEGCO was sold :- 51% from its share to private sector. 9% shares to the Social Security Corporation. 40% the Government of Jordan. Distribution Companies were sold :- 100% of the Electricity Distribution Company (EDCO). 55.4% of the Irbid District Electricity Company (IDECO) balance was publicly listed.

20 IPP PROJECTS IN JORDAN

21 Electricity Demand Growth in Jordan Average annual growth rate during the period ( ) - Peak load 6.4% - Generated energy 6.7%

22 Typical IPP Project Development Cycle ( feasibility study, Size, location Technology, etc) Pre Qualify Applicants Finalize Agreements Obtain Permits. Define The project Request Proposals Allocate the risks (project finance IPP s is all about the proper allocation of risk) Evaluate Proposals ( meet technical Requirements terms& conditions, Satisfactory financing, Rate of Return,Tariff) Gain Financial close. Construct Facility Prepare (Draft) Project Agreements Select Sponsor Operate Facility

23 IPP Projects Key issues for developers and investors Existing power demand (short to long term ). Fuel supply to site and its availability. Sustainable tariffs. Government policy regarding private sector participation. Legal framework for implementing IPPs. Political will to enforce contracts. Profitability potential. Grid location and grid capacity. Land Availability. Environmental impact of the project. Water supply. Bankability (ability to secure funding from lenders).

24 IPP Projects Project Financing? The financing is not primarily dependent upon the credit support of the sponsors or the value of the physical assets involved. Reliance instead is placed on performance of the project itself (i.e. project assets documents and cash flows). Risks are allocated to the party best able to manage the risk. Asset owned by special purpose company (SPC) financed by private equity and long term debt. Require large amounts of long-term debt to keep tariff low not always available in local bank market Project financing only available for feasible projects

25 IPP Projects Risk Allocation Sponsors Project completion within budget & Schedule Project Operation = > generate project cash flows Government Political risk Foreign exchange (availability & convertibility) Expropriation Guarantee performance obligations of power purchaser Power Purchaser Fuel price variation. Long term power purchase Mutually agreed restoration costs. Fuel Supplier Fuel Availability Fuel Specifications

26 IPP 1 AL MANAKHER ( Amman East)

27 Almanakher IPP Project Description Capacity: 370 MW Technology: Combined Cycle Fuel: natural gas as primary fuel and diesel as secondary fuel Estimated cost: MUS$ 300 BOO Bases Availability: 90% Equity / Debt : 25%:75% Site: East of Amman ( m2) near to main NG pipeline. Operation : 2009 This project is connected to National Grid through a construction of 400KV substation and overhead lines by NEPCO

28 Almanakher IPP Tendering Process The Government retained K & M Engineering as a Consultancy Firm for the first IPP project in 2004 Qualified firms :- AES Corporation. International Power Plc. Mitsui & Co. Ltd. Siemens Project Ventures GmbH. Unit International S.A. Xenel Industries Ltd./ Gama Enerji A.S. Tractebel (GDF Suez).

29 Almanakher IPP Proposals were received on 21/12/2005 as follows:- Consortium of (unit international, Siemens project Ventures GmbH, Consolidated Contractors International Co. S.A.L.) Consortium of (AES Oasis Ltd, Mitsui & Co. Ltd). Consortium of (Xenel Industries ltd, Gama Enerji A.S.) AES- Mitsui was ranked the first bidder on 4/4/2006. Six negotiation rounds for project agreements were held to discuss the project agreements during the period(april- October/2006) The Consortium established the Jordanian Company under the title of (AES- Jordan). On 25/2/2007 all the project agreements were signed and the license was issued from ERC. The duration of the license agreement is 25 years.

30 Almanakher IPP Financing Sources

31 Almanakher IPP Overview of Tariff Tariff consist of two parts Tariff = Capacity charge + Energy charge - Capacity charge (CC) = fixed capacity charge (FCC) + Fixed O& M charges (FOMC) [ JD/kW/month]. - Energy charge (EC) = fuel charge (FC) + variable O & M charge ( VOMC) [JD/kWh]

32 Almanakher IPP Project Agreements East Gas Co. GPA Government FAJR Co. Gas Supplier IA Arab Bank GSA NEPCO ( Purchaser) LA PPA AES- Jordan PSC ( Operator) LA Lenders ( JIBIC SMBC, World Bank, OPIC) ERC LA Jordan Water Authority WSA CC AES, Mitsui (Sponsors) Contractors Land & Survey Department LLA

33 Second IPP project (QATRANA IPP)

34 Al Qatrana IPP Project Description Capacity: 373 MW (Siemens 94.4V Gas turbine) Technology: Combined Cycle Fuel: natural gas as primary fuel and diesel as secondary fuel Cost: About MUS$ 460 BOO Guaranteed Availability: 90% Site : Qatrana Area( South of Amman near the road between Aqaba & Amman) Equity / Debt: 25%:75% Operation 2010/2011 This project is connected to National Grid through a construction of 400KV substation and overhead lines by NEPCO

35 Al Qatrana IPP The Government of Jordan (GoJ) 15/09/2007. qualified (11) firms on Suez Energy International Union Fenosa Generation International Power + Saudi Oger Mitsui & CO. ltd KEPCO Siemens AES Oasis Ltd Malakoff Cop. Jordan Dubai Energy & Consolidated Contractors Company consortium Mitsubishi Corp. & Gama Energy Consortium GE Infrastructure

36 Al Qatrana IPP Proposals received on 29/4/2008 as follows:- Consortium of (AES+ Tohoku MItsui.) Consortium of ( International Power + Saudi Oger+ Hanwha). Consortium of (Mitsubishi + Gama + Enara). Consortium of (Kepco + Xenel). Kepco + Xenel was ranked the first bidder on 17/07/2008.

37 Al Qatrana IPP Financing Sources SOURCES Islamic Development Bank (IDB) Value ( MUS$) 80 (17.4) Korean Exim bank (KEXIM) 200 (43.5) Paribas Bank of France (BNPP) 40 (8.7) Shareholders 140 (30.4)

38 Third IPP project

39 IPP 3 :Project Description K & M Engineering was appointed in Request for Prequalification was issued in August Capacity: MW for base Bid MW for additional optional Bid. Technology: Diesel Engine Technology Fuel: HFO/NG/Diesel BOO Issued RFQ (20 December 2010). Proposals : May 2011 & Financial close : First quarter of 2013 Site : Near Amman East Area Operation Date : Phase 5 Feb. 2014, Phase 2 5 July 2014,Phase 3 15 Sep This project will be connected to National Grid through a construction of 400KV substation and overhead lines by NEPCO

40 KEPCO + Mitsubishi was the first ranked bidder. IPP 3 Project Description Qualified Companies Saudi Oger Ltd/ Samsung KEPCO + Mitsubishi Sithe Global Power Ventures LLc ACWA Power + Man AES+ Athen holdings BV Jordan Dubai Capital +MLAKOOF, Consolidated contractors Group. Offers received Saudi Oger Ltd/ Samsung KEPCO + Mitsubishi ACWA Power + Man Saudi Oger Ltd/ Samsung was disqualified, the other offers were ranked KEPCO + Mitsubishi ACWA Power + Man

41 Fourth IPP project

42 IPP 4 :Project Description Capacity: 241 MW Technology: Gas Turbine Fuel: NG/Diesel/HFO BOO Awarded to the Consortium of AES & Mitsui in March 2012 Proposals : Financial close : First quarter of 2013 Site : Near Amman East Area Operation Date : 1 June 2014

43 Thank You