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Universal Access Roadmap and Investment Prospectus Initial Results for the Investment Prospectus Peter Hoogland, March 2014.

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Presentation on theme: "Universal Access Roadmap and Investment Prospectus Initial Results for the Investment Prospectus Peter Hoogland, March 2014."— Presentation transcript:

1 Universal Access Roadmap and Investment Prospectus Initial Results for the Investment Prospectus Peter Hoogland, March 2014

2 2 PRESENTATION OUTLINE What is an Investment Prospectus? The Financial Model that underpins the Investment Prospectus Interim Output from Chin and Kayin States

3 What is an Investment Prospectus? 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.

4 4 Grid Rollout Plan for Kayin and Chin States KayinChin Total new connections to ,495101,800 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 kyat1, 211,000 kyat Initial assumption of equal number of connections in each year… Total (in first 5 yrs) Kayin20, ,165 Chin6,787 33,935 Source: interim results of geospatial analysis by Earth Institute

5 Financial Model Overview of the financial model… 5 Existing Infrastructure (Cash Costs)  Generation  Transmission  Distribution 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 Assumptions  Number of connections pa  Average consumption  Growth rates in connections and consumption Additional Distribution Infrastructure (full economic costs)  33kV lines = Cost/kWh

6 6 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 +

7 7 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 cost9,8663,343 Service and meter initial cost19,7336,685 Transformer initial cost22,49210,036 MV lines initial cost18,3045,231 Mini Grid and Individual HH systems 3464,020 Less: Connection Charges (50,000 kyat/connection) 5,0081,697 Total65,76327,618

8 8 Total Sector-wide Unit Costs 2015 Kyat/kWh 2016 Kyat/kWh 2017 Kyat/kWh 2018 Kyat/kWh 2019 Kyat/kWh Distribution Rollout Financial Costs Distribution O&M costs44444 LRMC of additional 33 KV distribution10 LRMC of additional transmission15 LRMC of blended generation Total Sector wide Unit Costs Assuming all distribution rollout investment needs are financed by concessional loans at 3.5% interest and 30 year term

9  These annual costs must be funded by matching annual revenue  Revenue comes from: ­Customers through tariffs ­Customers through connection charges  Any difference—the Funding Gap—must be met by subsidies or grants  To estimate revenue in our Financial Model we have developed two tariff scenarios: ­The Government Proposed tariff; and ­The Benchmark tariff  These annual costs must be funded by matching annual revenue  Revenue comes from: ­Customers through tariffs ­Customers through connection charges  Any difference—the Funding Gap—must be met by subsidies or grants  To estimate revenue in our Financial Model we have developed two tariff scenarios: ­The Government Proposed tariff; and ­The Benchmark tariff Revenue 9

10 10 Initial tariff scenarios using for funding gap analysis Unit 2013 Current Kyat/kWh Govt Proposed Scenario Kyat/kWh Benchmark Scenario Kyat/kWh Householdfirst 100kWh/month > 100kWh/month Businessfirst 5000kWh/month > 5000kWh/month  Benchmark tariff scenario is used for modeling purpose only.

11 11 Benchmark residential tariff against neighboring countries

12 12 Benchmark business tariff against neighboring countries

13 Funding Gap for the First 5 Years: Interim Results 13 Proposed Tariff Scenario (million kyats) Benchmark Tariff Scenario (million kyats) Kayin State12,1453,439 Chin State 4,9201,989

14 14 Funding gap using concessional finance: Kayin

15 15 Funding gap using concessional finance: Chin Chin

16  If 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 loans  If 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  If 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 loans  If 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

17 Next 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 SourceAmount Governmentkyat Donor grantsKyat Concessional finance (WB, ABD etc) kyat Customers—tariffs and connection charges kyat The Prospectus

18 Wellington Level 2, 88 The Terrace PO Box Wellington New Zealand Sydney Young Street Sydney, NSW 2000 Australia Washington 1747 Pennsylvania Ave NW Suite 1200 Washington DC 20006, USA New York 200 Park Avenue Suite 1744 New York, NY 10166, USA Bogotá Carrera 7 No Torre 1, Oficina 1424 Bogotá Colombia Paris 7 Rue Claude Chahu Paris France Peter Hoogland Young Street Sydney, NSW 2000 Australia Contact Us


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