DBDP: Experience of Similar
Hydropower Projects in Developing
Countries
Presentation at the U.S.-Pakistan Diamer Basha Dam Project (DBDP)
Business Opportunities Meeting
October 8, 2014
Washington, DC
by:
Mr. Suman Babbar, Senior Advisor, Finance
and
Mr. Norman A. Bishop, Senior Advisor, Hydro
USAID/Energy Policy Program – Pakistan
USAID/EPP Implementing Partner:
Advanced Engineering Associates International, Inc. – AEAI
Presentation Topics
• A Look at Similar Large Hydro Projects
Constructed and under Construction:
Financing Features
1
• Case Studies: Nam Theun 2, Bujagali,
Others
• Financing of Large Hydro – Key Takeaways
• Conclusions and Recommendations: The
Way Forward for DBDP
1
Features of World’s Largest Hydro Projects
The world’s largest hydro projects (> 4,000 MW) were publicly funded.
2
DBDP &Name
Hydro Projects
>3,000
MW under
Construction
Country
River
Expected
Expected
Name
3
Country
River
Installed
Completion Yr.
capacityMW
(MW) Est.completion
1. Baihetan
China
Jinsha
14,000
2019
2. Belo Monte
Brazil
Xingu
11,233
2015
3. Wudongde
China
Jinsha
10,200
2015
4. TaSang
Myanmar
Salween
7,110
2022
5. Ethiopian
Ethiopia
Blue Nile
6,000
2018
Renaissance
6. Diamer Basha
Pakistan
Indus River
4,500
2020
7. Dasu Dam
Pakistan
Indus River
4,320
2019
8. Jirau
Brazil
Madeira
3,750
2015
9. Myitsone
Myanmar
Irrawaddy
3,600
2017
10. Rogun
Tajikistan
Vakhsh
3,600
2015
11. Santo Antonio
Brazil
Madeira
3,580
2015
12. Boguchany
Russia
Angara River
3,000
2013
Dam
13. Guanyinyan
China
Jinsha
3,000
2015
14. Lianghekou
China
Yalong
3,000
2015
Some Recent Hydro Projects with
PPP Structure
4
.
Case Studies
Private Sector
• Nam Theun 2 Hydropower Project (PDR of Laos)
-1070 MW
5
• Bujagali Hydropower Project (Uganda) – 250 MW
Others
World Energy Council, 2014: Based on public information not
validated by the entities.
6
• US$ 1.45 billion, 1070 MW project in Lao PDR
• NT2 primarily exports electricity to EGAT of Thailand,
with about 5% for domestic use
• Original concession awarded in 1993
• Asian financial crisis: project put on hold (1997-2000)
• Preparation resumed in 2001
• Due diligence undertaken
• About 4 years’ preparation time (2001-2005)
• Financial close: June 15, 2005
• Project completed on budget and schedule
• Operational since 2010
NT2 - Financial Structure
The finance plan comprises 27
financial institutions:
• 5 MLAs
• 4 ECAs
• 2 BLAs
• 7 Thai banks
• 9 international banks
7
Debt Tenor
• USD 16.5 yrs, repayment in 12 yrs
• THB 15 yrs, repayment in 10.5 yrs
Bujagali Hydropower Project (250 MW)
•
•
•
•
•
•
8
•
•
•
BOOT project on the Nile River in Uganda
Run-of-the-river
Project cost at approval: US$798 million
Debt: Equity ratio of 78:22 leverage
Equity: Sithe Global Power - 58%; IPS (Kenya) - 31.5%;
Government of Uganda - 10.5%
WBG investment:
− IFC: $100 million A Loan and up to $30 million C Loan
− IDA: $115 million Partial Risk Guarantee (PRG)
− MIGA: Up to $115 million MIGA Guarantee
Other lenders: EIB, AfDB, Proparco, AFD, DEG, KfW, FMO;
commercial banks (Absa Capital, Standard Chartered Bank)
under IDA PRG
Transmission line: Financed by AfDB and JBIC
Formal inauguration: October 8, 2012
Other: Belo Monte – Salient Financing Aspects
9
• 11,233 MW hydro project in Brazil
• Limited recourse financing
• Energy auction April 2010 – concession
awarded to consortium led by Norte Energia
• Eletrobras (state-owned utility holding company)
the largest shareholder
• Financing structure Equity: 20%, Debt: 80%
• Equity to be provided by winning consortium
• Debt – BNDES loan of $10.8 billion
• Completion guarantee by the consortium
Other: Three Gorges - Salient Financing Aspects
• 1993 –China Three Gorges Corporation created
• 1996 - China State Development Bank loan of
$3.6 billion
10
• Support from Three Gorges Construction Fund
and revenue from Gezhouba Hydro
• 2002 – China Yangtze Power Company created
• 2003 – IPO by CYPC
• ECA support from most of the developed
countries and Brazil
• Revenue levy dedicated to Three Gorges
DBDP: Best Value Analysis
Objective
• Use Value Engineering (VE) to improve DBDP’s best value for least cost
without changing project function (# MW and projected energy):
− Reduce costs, schedule and construction risk
− Seek project revenues at earliest date to reduce escalation and IDC
− Reduce financing cost
− Obtain the best overall value for the money spent
11
− Minimize possibility of project budget cost increases
Methodology
• Analyze each element of the project: VE analysis conducted on each
element and its relationship to the precedent element
• Cost basis critical path method scheduling: to analyze the cost for each
schedule task
• A risk assessment performed: to understand how each element or task
affects others over time until final project commissioning
Financing of Large Hydros: Key Takeaways
• In most cases an anchor financier: e.g.,
₋ BNDES (Brazilian Development Bank) for large
private hydros
₋ World Bank for Dasu
12
• Long tenor funding mobilized
• Key role played by Export Credit Agencies
• Varied approaches to equity financing
• Effective management of social and environmental
aspects critical
Diamer Basha Dam Project: The Way Forward
Key Supporting Factors for Development
• GOP fully committed
• Strong economic rationale –
− Power generation, flood control and irrigation
− Improved downstream generation
13
• Ongoing infrastructure development
• Existing framework for private sector participation in power
generation
• GOP open to flexible approach to attract private sector
participation during dam construction
Conclusions and Recommendations:
The Way Forward for DBDP
Needs:
• A dedicated, qualified implementation team,
preferably via a separate corporate entity
14
• Excellent project and construction management
team capabilities, experienced in large hydro
projects
• Compliance with international social &
environmental standards
Conclusions and Recommendations:
The Way Forward for DBDP
15
Needs, cont.:
• A clear national financing strategy defined,
prioritizing all national infrastructure projects
competing with DBDP
• Financing advisors with international experience
hired
• An anchor financier identified
• A clearly articulated incentive framework
implemented to encourage private participation
Thank you!
16
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Source: The Financing of Water Infrastructure - A Review of Case Studies
by Chris Head for The World Bank, 2005