Session 2 - Mr. Anousak Phongsavth, Ministry of Energy and Mines, Lao PDR

7/29/2019 Session 2 - Mr. Anousak Phongsavth, Ministry of Energy and Mines, Lao PDR

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Kathmandu, NEPAL

February 6th, 2013

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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


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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

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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

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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



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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


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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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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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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?


Total construction cost


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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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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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Images of Off-Grid Electrification

Lao PDR


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THANK YOU

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Documents

Session 2 - Mr. Anousak Phongsavth, Ministry of Energy and Mines, Lao PDR