Technical considerations for

Power Purchase Agreements

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Background

Fundamental shift in Gx asset creation in Africa

Private sector replacement of traditional Utility BOO

Special Purpose Vehicles (SPVs)

Project Finance

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Power Purchase Agreement Bankable

Balanced

Enduring

Background

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Setting the scene

Seller

Buyer Aurecon

A bit of context… • Policy, legislative, regulatory environment • Upstream (fuel), Gx, downstream (Tx, Dx, Retail) • Supply and demand forecasts • Baseload, mid-merit, peaking • Tariff • Willing to pay (Buyer) • Willing to sell (IPP) • Technology • Location • Understand Buyer/Seller needs

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Introduction to Power Purchase Agreements

• Agreement for sale and purchase of power (*) • Buyer or Off-Taker (Utility, Industrial Consumer) • Seller (Independent Power Producer, IPP) • Buyer primary roles • Take (reliable) energy • Make payment • Seller primary role • Make available capacity (MW) and energy (MWh) • Develop, fund, build, operate, maintain and decommission

(*) + Lender

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Technical Inputs • Specifications, testing and commissioning • Capacity, energy, availability (performance) • Tariff structure, grid connection and metering • Dispatch, O&M considerations • Integration with other project agreements

Financial • Term, currency, indexation, local content / participation • Tariff calculation, commercial damages Legal • Termination / transfer, warranties, remedies on default,

environmental (eg. carbon liabilities)

Key inputs

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Conversion technology • Gas turbines • Reciprocating engines • Traditional Rankine cycle

(Gas boiler and steam turbine) Cycle technology • Open cycle • Combined cycle

Gas power generation overview

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Gas power generation overview

TYPICAL COMBINED CYCLE (CC) CONFIGURATION

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Technology Intro Typ OC Size, MW (#)

Typ Efficiency OC/CC(*)

Recips Proven! 1 – 50 45 / 50+

Aero/Sml 1980’s 5 – 40 40 / 51

“E” class 1980’s 40 – 200 35 / 52

“F” class 1990’s 250 - 320 37 / 56

Advanced (G, H, J)

2000’s 300 – 450 40 / 60

(#) CC = ~+50%

(*) LHV Net

PPA considerations

• Dispatch • Grid evacuation • Environment • Redundancy • Modularity • Phasing • Gas availability

Technology selection

Technical considerations

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Configurations / options

Technical considerations

Config / Option Advantages / Applications Disadvantages Open Cycle (OC) • Peaking / mid-merit

• Low specific capex • Quick to market • Operationally flexible

• Lower efficiency

Combined Cycle (CC)

• Baseload / mid-merit • Efficient use of gas • Lower $/MWh (high C.F.)

• Longer to market • Longer start & ramping times

Options (power, flexibility)

• GT Power Augmentation • OC/CC selection (diverter valve and bypass stack) • Supplementary firing, fresh air firing • “Dual Fuel” (eg. Diesel back-up) • Ancillary services

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Ambient conditions

Performance considerations

PPA • Contracted capacity • Reference conditions • Dispatch and forecasting • Testing and

commissioning • COD • Tariff (energy component) • Grid rules

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Part load (turndown)

Performance considerations

PPA • Tariff (energy component) • Dispatch and forecasting • Commissioning and

ongoing testing • Technical specifications

(capability)

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Degradation

Performance considerations

PPA • Achieved capacity • Tariff (energy component

and any carbon related costs)

• Dispatch and forecasting • Ongoing testing

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• Ramping • Startup / shutdown (GTs) • Open cycle

• 10 - 25 mins • Combined Cycle

• Cold / Warm / Hot • 180 / 90 / 40 mins

• EOH penalty • Correction factors • Startup, interruptions, etc

Performance considerations

PPA • Dispatch and forecasting • Tariff (energy, starting

costs, fixed / var O&M components)

• Ongoing testing • Operating procedures • Grid rules

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• Technology curve (GTs) • Class, materials evolution • Continuous improvements

• Maintenance is cyclical • Equivalent operating hours (EOH) • Factorised for starts, trips, etc • [ABAC, AABAAC, etc] • EOH 8,000hr, 12,000hr, + • A = minor insp’n (<1 wk) • B = hot gas path insp’n (2-3 wk) • C = major overhaul (5-6 wk)

PPA • Dispatch and forecasting • Planned outages

(maintenance) and forecasting

• Tariff (energy, starting, fixed / var O&M components)

• Ongoing testing • Operating procedures

O&M considerations

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• Contractual • Long term service agreements • Defects and warranties • Balancing OEM, project and PPA

requirements • Technology transfer • Refurbished / rotational spares • Non-OEM refurbishment

• Fiscal • LTSA is/can be a very high cost component

O&M considerations

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• Fuel Supply Agreement • Take/Pay, Capacity/Energy • Responsibilities, warranties • Default and remedy provisions

• Grid Connection • Timely connection • Availability

• EPC Agreement • Performance, schedule, warranty

• O&M Agreement • Availability, degradation

PPA • Dispatch and forecasting • Minimum off-take • Planned maintenance • Tariff (energy component

flow-through) • Deemed energy • Legal provisions (FM,

default, warranties)

Other agreements

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Want more information?

Contact

Ashley Grohn Power Generation Leader +27 12 427 2323 Ashley.Grohn@aurecongroup.com

Read more on our website!

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