Initial Results for the Investment Prospectus Peter Hoogland March 2014 2 PRESENTATION outline What is an Investment Prospectus The Financial Model that underpins the Investment Prospectus Interim Output ID: 919179
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Slide1
Universal Access Roadmap and Investment ProspectusInitial Results for the Investment Prospectus
Peter Hoogland, March 2014
Slide22PRESENTATION outline
What is an Investment Prospectus?
The Financial Model that underpins the Investment ProspectusInterim Output from Chin and Kayin States
Slide3What is an Investment Prospectus?
3
It is
the basis for raising funds to achieve a reliable financing flow so that the entire electrification rollout can be achieved in a single co-ordinated, least cost program
It gives donors, government and investors a coherent plan that identifies
their role and contribution.
It will
accelerate the current rate of
connections
by ensuring full alignment between the least cost plan, its implementation and the funding and
financing
It will
show
stakeholders how
their development objectives
will be achieved.
Slide44
Grid Rollout Plan for Kayin and Chin States
Kayin
Chin
Total new connections to 2030
300,495
101,800
Grid percentage
99.9%
97%
Mini-grid percentage (Diesel based)
0.02%
2%
Individual system (Solar Home Systems)
0.01%
1%
Average cost of connection/household
815,100 kyat
1, 211,000 kyat
Initial
assumption of equal number of connections in each
year…
2015
2016201720182019Total (in first 5 yrs)Kayin20,03320,03320,03320,03320,033100,165Chin6,7876,7876,7876,7876,78733,935
Source: interim results of geospatial analysis by Earth Institute
Slide5Financial Model
Overview of the financial model…
5
Existing Infrastructure (Cash Costs)
GenerationTransmissionDistribution
New Infrastructure (full economic costs)
Generation &Transmission
Distribution Rollout (All costs)
Capital cost/connection
Operating cost/connection
Return on capital (financing cost)—interest rate
Return of capital (depreciation)—useful life
Total Annual Costs
Generation
Transmission
Distribution
Costs are for total sector
Forecasts and
A
ssumptions
Number of connections pa
Average consumptionGrowth rates in connections and consumptionAdditional Distribution Infrastructure (full economic costs)33kV lines=Cost/kWh
Slide66
Transmission:
Distribution:
Generation:
Costs are a blend of cash costs with full economic costs…
Existing Infrastructure
Cash costs only
Replicates current practice
New Build Infrastructure
Full economic costs including financing and amortisation of loans
Ensures sector is financially sustainable over time
+
Slide77
Initial Investment Needs for Rollout in Chin and Kayin
Initial Investment needs for the distribution rollout for Kayin and Chin for the first 5 years is:
Kayin
Kyat Millions
Chin
Kyat Millions
LV lines initial cost
9,866
3,343
Service and meter initial cost
19,733
6,685
Transformer initial cost
22,492
10,036
MV lines initial cost
18,304
5,231
Mini Grid and Individual HH systems 346
4,020
Less: Connection Charges (50,000 kyat/connection)
5,008 1,697Total65,76327,618
Slide88
Total Sector-wide Unit Costs
2015
Kyat/kWh
2016
Kyat/kWh
2017
Kyat/kWh
2018
Kyat/kWh
2019
Kyat/kWh
Distribution
Rollout Financial
Costs
34
33
33
33
32
Distribution O&M costs44444LRMC of additional 33 KV distribution1010101010LRMC of additional transmission
15
15
151515LRMC of blended generation45464849
50
Total Sector wide Unit Costs
108
108
109
110
111
Assuming all distribution rollout investment needs are financed by concessional loans at 3.5% interest and 30 year term
Slide9These annual costs must be funded by matching annual revenueRevenue comes from:Customers through tariffs
Customers through connection chargesAny difference—the Funding Gap—must be met by subsidies or grantsTo estimate revenue in our Financial Model we have developed two tariff scenarios:
The Government Proposed tariff; andThe Benchmark tariffRevenue9
Slide1010
Initial tariff scenarios using for funding gap analysis
Unit
2013
Current
Kyat/kWh
Govt
Proposed
Scenario
Kyat/kWh
Benchmark
Scenario
Kyat/kWh
Household
first 100kWh/month
35
35
60
> 100kWh/month
35
5090Business first 5000kWh/month75100120> 5000kWh/month100
150
180
Benchmark tariff scenario is used for modeling purpose only.
Slide1111
Benchmark residential tariff against neighboring countries
Slide1212
Benchmark business tariff against neighboring countries
Slide13Funding Gap for the First 5 Years: Interim Results
13
Proposed
Tariff Scenario
(million kyats)
Benchmark Tariff Scenario
(million kyats)
Kayin
State
12,145
3,439
Chin State
4,920
1,989
Slide1414
Funding gap using concessional finance: Kayin
Slide1515
Funding gap using concessional finance: Chin
Chin 2015-2020
Slide16If the distribution rollout was financed by grants—with no interest cost and no obligation to repay—then unit costs would be around 30 % lower than using concessional loansIf the distribution rollout was financed by commercial loans—high interest rate and short tenor—then unit costs could be double that of concessional loans
The funding gap is sensitive to the cost of financing
The Cost of Financing Matters….16
Slide17Next steps…
17
We will gather data for the remaining states and refine cost information
We will fill the funding gap(Budget funds and grants)
Final Prospectus for entire country
Syndicate the concessional finance
Sources include World Bank,
ADB
Source
Amount
Government
kyat
Donor grants
Kyat
Concessional finance
(WB, ABD
etc
)
kyat
Customers—tariffs
and connection charges
kyatThe Prospectus
Slide18Peter Hoogland36-38 Young StreetSydney, NSW 2000
AustraliaPeter.Hoogland@castalia-advisors.comwww.castalia-advisors.com
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