GET FiT East Africa Program

Key design principles and implementation modalities

Climate Investment Fund Panel
Istanbul, 7 November 2012

Jan Martin Witte, KfW Entwicklungsbank

OUTLINE

1.

Key components of GET FiT Program

2.

Principles of FiT Premium Payment Mechanism

3.

Management and Governance of FiT Premium Payment Mechanism

4.

Business Plan and Cost-Benefit Analysis

UGANDA SECTOR OVERVIEW

Generation shortfall in post-Bujagali/ pre-Karuma
environment
Generation capacity (excl HFO based thermal generation) vs peak
demand
2000
1800
1600

MW

1400
1200
1000
800
600
400
200

30

20

28

29
20

27

20

20

26

24

25

20

20

23

20

20

22

21

20

20

20

20

19

17

18

20

20

20

15

16
20

14

20

20

13

20

20

12

Biomass

Baseload

Existing large hydro

Existing small hydro

Planned large hydro

Peak demand (base case)

In order to avoid load-shedding or procurement of expensive emergency generation

capacity between 2014 and 2019, Uganda will have to bring at least 150MW on-stream
within next 3-5 years
If HPP Isimba/ HPP Karuma are delayed, the demand to bring additional capacity online
is even greater
3

KEY CHALLENGES FOR LEVERAGING INVESTMENT

REFiT Levels and Political/ Offtaker-Risks

Comparatively low REFiT tariff schedule (in some cases below levelized cost of

electricity) undermines profitability of new investments

Liquidity crisis at UETCL has undermined investor confidence (demand for offtaker guarantees)
General image of Uganda as a risky investment destination, resulting in
expensive and high spreads for debt finance
No PPA has been concluded since launch of new REFiT in 01/2011, despite

significant pipeline of ready-to-build projects

GET FiT TOOLBOX

Three key components

FiT Premium
Payment
Mechanism

Results-based subsidy designed to cover gap between current REFiT

levels and the Levelized Cost of Electricity (LCOE), enhancing
projects financial viability (focus of this presentation)

World Bank /
MIGA
Guarantees

PRG Facility offered by the World Bank / MIGA to address political and
offtaker risks (outside focus of this presentation)

Private Debt/
Equity Facility

Facility (led by DB, open to other banks and investors) will offer debt
and equity instruments to private developers (no exclusivity, outside
focus of this presentation)

OUTLINE

1.

Key components of GET FiT Program Uganda Pilot

2.

Principles of FiT Premium Payment Mechanism

3.

Management and Governance of FiT Premium Payment Mechanism

4.

Business Plan and Cost-Benefit Analysis

5.

TA Facility

FiT PREMIUM PAYMENT MECHANISM

Subsidy Determination

Current REFiT Tariff

GET FiT Premium

Payment Period

(US$/kWh)

(US$/kWh)

(Yrs)

Hydro (9><=20 MW)

0.079

0.02

20

Hydro (1 ><=8MW)

0.082 0.092

0.02

20

Hydro (500kW><=1MW)

0.109

Not included

20

Bagasse

0.081

0.01

20

Biomass

0.103

0.01

20

Biogas

0.115

No subsidy required

20

Landfill gas

0.089

Not included

20

Geothermal

0.077

Not included

20

Solar PV

0.362

No subsidy required

20

Wind

0.124

Not included

20

Technology

Note: The subsidy determination was done based on the 20 year PPA projects receive from UETCL.

FiT PREMIUM PAYMENT MECHANISM

Output-Based Disbursement

1. Calculate the Net Present Value (NPV) of tariff subsidy over the duration of the 20-year

PPA RE projects will receive from UETCL (plus potential adjustments for hydrological
risk and cap on capacity factor).
2. Disbursement in two stages:

Stage 1: 50% of NPV of subsidy to be disbursed at Commercial Operation Date of

the project

Stage 2: 50% of NPV of subsidy to be disbursed against electricity delivered to the

grid (parallel to UETCL PPA), reduced to five-year payment period.

FIT PREMIUM PAYMENT MECHANISM

Selection Criteria

Financial and
Economic

RE projects need
to demonstrate
financial and
economically
sustainability
Compliance with
least-cost
development path
for the Ugandan
power sector

ESG

RE projects need
to comply with
KfW/ World Bank
Environmental
Social and
Governance
(ESG)
requirements

Call for
Proposals

Legal

RE projects need
to comply with all
necessary legal
and financial due
diligence
standards (KYC
rules, etc.)

RE projects need
to respond to the
call for proposals
run by KfW/ ERA

OUTLINE

1.

Key components of GET FiT Program Uganda Pilot

2.

Principles of FiT Premium Payment Mechanism

3.

Management and Governance of FiT Premium Payment Mechanism

4.

Business Plan and Cost-Benefit Analysis

10

GET FIT IMPLEMENTATION STRUCTURE

Complementing existing sector structure

Private Finance
(Debt+Equity)

Pays REFiT

From:
-GET FiT Private Facility
-Commercial Banks
-DFIs
-Equity Funds
-Others

IPP

Pays Premium on
REFiT to close gap
between REFiT and
LCOE

KfW
GET FiT Facility
(1USc-2USc/ kWh, depending on technology)

Delivers
power

Guarantee for
UETCL offtaker
risk

UETCL
PPA

Owns
100%

(20 years,
Standardized PPA,
based on REFiT

Government
of
Uganda

IDA-Loan for of
guarantee volume
and Indemnity
Agreement

World Bank PRG

(offtaker risks and political
risks)

GET FiT Project

Agreement
between GoU and
DPs

FIT PREMIUM PAYMENT MECHANISM

Governance arrangements

OUTLINE

1.

Key components of GET FiT Program Uganda Pilot

2.

Principles of FiT Premium Payment Mechanism

3.

Management and Governance of FiT Premium Payment Mechanism

4.

Business Plan and Cost-Benefit Analysis

13

FiT PREMIUM PAYMENT MECHANISM

Indicative RE Pipeline Uganda

Project name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

Siti 1
Siti 2
Muzizi
Kikagati
Mount Elgon
Mubuku III
Kakaka
Nengo Bridge
Lubilia
Nyamagasani
Rwimi
Kymabura
Kinyara Sugar
Kakira Sugar
SCOUL Sugar
Alam Group
Tilda Rice
UgandaSolarOne
Equator Solar

Technology
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Biomass
Biomass
Biomass
Biomass
Biomass
PV
PV

MW
planned
5,0
16,5
20,0
16,0
10,0
9,0
8,0
6,5
4,0
3,0
5,6
8,3
20,0
20,0
5,0
5,0
1,0
2,0
2,0
166,9

Investment
size (USDm)
19,0
36,0
60,0
48,0
30,0
25,2
28,0
18,2
14,0
9,0
15,9
24,9
60,0
60,0
15,0
15,0
3,0
6,0
6,0
493,2

Start of
construction
2013
2014
2014
2013
2014
2014
2014
2013
2014
2014
2013
2014
2014
2013
2014
2014
2014
2013
2014

Start of
operation
2015
2016
2016
2015
2016
2016
2016
2015
2016
2016
2015
2016
2015
2014
2015
2015
2015
2014
2015

Yearly output
(MWh/MW)
5.000
4.200
6.700
7.500
3.840
5.000
4.000
5.000
6.750
6.500
5.000
5.000
3.500
3.500
3.500
3.500
3.500
2.100
2.100

FiT PREMIUM PAYMENT MECHANISM

Disbursement profile (with cap 60% on capacity factor)
30,0

Public facility payments (USDm)

25,0

20,0
15,5
20,1
15,0

10,0

10,1

5,0
3,2
-

2012

2013

Calculation based on 2% discount factor.

10,1

10,1

9,2

6,0
4,0

0,8
2014

2015
FiT premium support

2016
COD grant

2017

2018

2019

2020

FiT PREMIUM PAYMENT MECHANISM

Relative contribution (burden-sharing) (with cap 60% on
capacity factor)
100,0

Total payments to IPP (USDm)

80,0

GET FiT contribution

represents less than
7% of overall
cashflow to projects

30%

25%

70,0
60,0

20%

50,0
15%

40,0
30,0

10%

20,0
5%
10,0
-

0%
20122013 201420152016 20172018 20192020 202120222023 20242025 202620272028 20292030 20312032 203320342035 20362037
Public facility payment
Base FiT
Burden sharing (rhs)

Note: Dark blue represents GET FiT contributions; light blue represents contributions from UETCL / Ugandan rate payers.
Calculations based on 2% discount factor.

Burden sharing

90,0

35%

FiT PREMIUM PAYMENT MECHANISM

Impact on demand-supply balance

Biomass
Existing small hydro
Peak demand (base case)

Baseload
Planned large hydro

30

20

29

20

28

20

27

20

26

20

25

20

24

20

23

20

22

20

21

20

20

20

19

20

18

20

17

20

16

20

15

20

14

20

20

20

13

2000
1800
1600
1400
1200
1000
800
600
400
200
0
12

MW

Demand-supply balance (including GET FiT, excluding thermal

power)

Existing large hydro

GET FiT portfolio

FiT PREMIUM PAYMENT MECHANISM

Contribution of GET FiT pipeline to serving demand

Closing the gap

1.800
1.600
1.400

GWh

1.200
1.000
800
600
400
200
0
2012

2013

2014

GET FiT portfolio (firm energy)

2015

2016

2017

2018

2019

Gap (pre HFO based thermal generation)

2020

FiT PREMIUM PAYMENT MECHANISM

Development of average generation production costs

Development of average generation costs

Average generation costs (USDc/kWh)

11,0
10,5
10,0
9,5
9,0
8,5
8,0
7,5
7,0
2012

2013

2014

2015

2016

Excluding GET FiT

2017

2018

2019

2020

Including GET FiT

2021

2022

BACKUP

SELECTED SPECIFIC INVESTMENT COST DATA

Costs vary significantly but are generally very high
A.

Completed Projects Uganda

No.
1
2
3
4

SHP
SHP
SHP
HPP

B.

Planned Projects Uganda

No.
1
2
3
4
5
6

SHP
SHP
SHP
HPP
HPP
SHP

C.

GET FiT Pipeline Uganda

No.
1
2
3
4
5
6
7
8
9
10
11
12

Siti 1
Siti 2
Muzizi
Kikagati
Mount Elgon
Mubuku III
Kakaka
Nengo Bridge
Lubilia
Nyamagasani
Rwimi I
Kymabura

D.

Planned projects in Rwanda

No.
1
2
3
4
5
6
7
8
9
10
11
12
13

Project
Giciye I
Rukarara
Rukarara II + Rubyiro III
Musarara I or Gaseke
Mukungwa III or Nyundo
Akanyaru
Ntaruka B
Koko
Mukungwa IV
Ntaruka A
Nyiramuruta
Rwondo
Nyabarongo

D.

Planned projects in Kenya

No.
1
2
3
4
5
6
7
8
9

Project
Ishasha
Bugoye
Mpanga
Bujagali

Project
Buseruka
Nyagak I
Nyagak III
Karuma
Isimba
Nyamwamba

Project

Project
Yala
Kamari
Tagabi
Gura
North Mathioya 1
North Mathioya 2
North Mathioya 3
South Mathioya
Maragua
Kipkurere
Kipchoria

Installed capacity
6.6MW
13MW
18MW
250MW

Cost per Kw** (in US$)

$2.500
$3.461
$2.100
$3.520

Commissioning
2011
2011
2011
2012

Developer
Ecopower
Tronder
SAEMS
BEL

Country
Uganda
Uganda
Uganda
Uganda

Installed capacity
9MW
3.4MW
4.4MW
600MW
120MW
14MW

Cost per Kw** (in US$)

$3.000
$3.100
$3.500
$3.666
$2.800
$2.900

Commissioning
2012
2012
2016
2019
2018
2015

Developer
Hydromaxx
WENRECO
UEGCL
UEGCL
UEGCL
SAEMS

Country
Uganda
Uganda
Uganda
Uganda
Uganda
Uganda

Installed capacity
5MW
16,5MW
20MW
16MW
10MW
9MW
8MW
6,5MW
4MW
3MW
5,6MW
8,3MW

Cost per Kw** (in US$)

$3.800
$2.181
$3.000
$3.000
$3.000
$2.800
$3.500
$2.800
$3.500
$3.000
$2.839
$3.000

Commissioning
2015
2016
2016
2015
2016
2016
2016
2015
2016
2016
2015
2016

Developer
VS Hydro
VS Hydro
UEGCL
Tronder
Mt. Elgon Hydro Company
Kasese Cobalt Company
Greenewus
Jacobsen Elektro
Lubilia Kawembe Hydro
LTL Holdings
Ecopower
Ziba

Country
Uganda
Uganda
Uganda
Uganda
Uganda
Uganda
Uganda
Uganda
Uganda
Uganda
Uganda
Uganda

Installed capacity
4MW
9MW
2MW
0,438MW
2,5MW
4MW
5MW
1MW
1MW
2MW
1MW
1MW
17MW

Cost per Kw** (in US$)

$3.000
$2.600
n.a.
n.a.
$3.000
$3.250
$4.500
n.a.
n.a.
$5.000
n.a.
n.a.
$4.700

Commissioning
2013
2011
2013
2012
2013
n.a.
n.a.
n.a.
n.a.
2014
n.a.
n.a.
n.a.

Developer
RW Mountain Tea
Ecopower
BTC, RECO
GIZ, SOGEMR
GoR, SOGEMR
MININFRA
GoR
REGREPOWER
MININFRA
BTC
MININFRA
MININFRA

Country
Rwanda
Rwanda
Rwanda
Rwanda
Rwanda
Rwanda
Rwanda
Rwanda
Rwanda
Rwanda
Rwanda
Rwanda
Rwanda

Installed capacity
4MW
1MW
1MW
5MW
2MW
2MW
2MW
2MW
2MW
3MW
3MW

Cost per Kw** (in US$)

n.a.
n.a.
$2.400
$3.130
$3.000
$3.000
$3.000
$2.500
$2.500
n.a.
$2.400

Commissioning
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

Source
n.a.
Unilever
Unilever
KTDA
KTDA
KTDA
KTDA
KTDA
KTDA
n.a.
Eastern Produce Kenya

Country
Kenya
Kenya
Kenya
Kenya
Kenya
Kenya
Kenya
Kenya
Kenya
Kenya
Kenya

ALTERNATIVE FINANCING MODELS

GET FiT leverage ratios generally outperform those of other
financing modalities
GET FiT
Leverage Factor of Fit Premium Payments versus conventional concessionary financing instruments
Muzizi HPP
installed capacity in MW
investment costs in USD million

20
60

PPP structure:
government: 30%, grant
private investor: 70%

18 USD million
42 USD million

leverage factor grant to private funds

2,33333333

GET FiT approach

private investment
FiT Premium Payment (NPV)
leverage factor grant to private funds

60
12
1

Kikagati HPP
installed capacity in MW
investment costs in USD million

16
48

PPP structure:
government: 30%, grant
private investor: 70%

14,4 USD million

33,6 USD million

leverage factor grant to private funds

2,33333333

GET FiT approach

private investment
FiT Premium Payment (NPV)
leverage factor grant to private funds

48
23,2
1

2,06896552

Kinyara Sugar Biomass

installed capacity in MW
investment costs in USD million

20
60

PPP structure:
government: 30%, grant
private investor: 70%

18 USD million
42 USD million

leverage factor grant to private funds

2,33333333

GET FiT approach

private investment
FiT Premium Payment (NPV)
leverage factor grant to private funds

60
6,8
1

8,82352941

IPP w concessional debt financing

20% equity
80% debt
IRS (NPV) to achieve 4% IR
leverage factor grant to private funds

12 USD million
48 USD million
13,1 USD million
1 4,58015267

IPP w concessional debt financing

20% equity
80% debt
IRS (NPV) to achieve 4% IR
leverage factor grant to private funds

9,6 USD million

38,4 USD million
10,5 USD million
1 4,57142857

IPP w concessional debt financing

20% equity
80% debt
IRS (NPV) to achieve 4% IR
leverage factor grant to private funds

12 USD million
48 USD million
13,1 USD million
1 4,58015267

IPP w 50% subsidy

private funding
donor subsidy
leverage factor grant to private funds

IPP w 50% subsidy

private funding
donor subsidy
leverage factor grant to private funds

IPP w 50% subsidy

private funding
donor subsidy
leverage factor grant to private funds

30 USD million
30 USD million
1

24 USD million
24 USD million
1

30 USD million
30 USD million
1

IMPACT OF GUARANTEES ON EQUITY IRR

Planned guarantee facility should have significant moderating
impact on target IRR

30%

25%

Equity IRR

20%

(10.0)%

15%
25,0%
10%

11,4%
15,0%

5%
3,6%
0%
Target EIRR

Target reduction due

to GET FiT guarantees

Revised WACC

Actual WACC
Actual WACC @ base
increase due to top-up
FiT

RETAIL TARIFFS

Charge

Domestic

Commercial

Medium
Industrial

Large
Industrial

Street Lights

Average

524.5
(USDc 21)

487.6
(USDc 19)

458.9
(USDc 18)

312.8
(USDc 12)

488.7
(USDc 19)

Peak

550.9
(USDc 22)

518.6
(USDc 21)

375.4
(USDc 15)

Shoulder

487.6
(USDc 19)

458.9
(USDc 18)

312.8
(USDc 12)

Off-Peak

380.8
(USDc 15)

376.3
(USDc 15)

256.6
(USDc 10)