Rehabilitation of Kosovo A

1
Rehabilitation of Kosovo A
2
Topics

• Present Status of Kosovo A
• Short term Emergency Revitalization project for
  Unit A3
• Medium term KEK Financial Recovery Plan
• Medium term EAR Funded MEM Techno-Economic
  Feasibility Study
• Medium term Rehabilitation of Kosovo A, Funding

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Present Status Kosovo A Units
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Short term Emergency Revitalization project for
Unit A3

• No life extension
• Based on A3/A5 either/or availability
• Estimated Capital Cost 10.5M
• Payback period 3.97 Years
• Tender Process Launched
• Estimated Contract Signing 1st August 2005
• Estimated Completion Date 23rd December
  2005

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Short Term A3 Revitalization Option 1 Provide
cover using imports

• This option considers that in the event that
  unit A5 trips or is taken off for planned
  maintenance, replacement energy will be provided
  by importing power under contract until repair
  work is affected.
• Planned Outages
• It is envisaged that the total planned outage
  duration for unit A5 will be 93 days in 2006.
• The average cost of power imports is estimated
  to be of the order of 39.6/MWhr, based on data
  for import costs faced by KEK in the full year
  2004.
• It will be necessary to import power for an
  average of 20 hrs per day, it will not be
  necessary to import during the night time valley.
• Cost 110MW X 93 Days X 20 Hrs X 39.6 8.10M
• Unplanned Outages
• Analysis of the forced outages experienced
  during 2004 and 2005 to date indicates an average
  forced outage duration of 7 days per month, or 63
  days per year for the 9 months that unit A5 is
  projected to run in 2006.
• Cost 110MW X 63 Days X 20 Hrs X 39.6 5.49M
• Total Cost for Option 1 is 13.59M per annum.

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Short Term A3 RevitalizationOption 2
Revitalisation of Unit A3

• This option would involve investment in unit A3,
  with unit A3 and unit A5 being run on an
  either/or basis as available.
• Capital Cost
• On the basis of a detailed tender specification,
  information provided by the Original Engineering
  Manufacturer (OEM) and experience of past
  refurbishment programs suggests a cost of 10.5M.
• Cost 10.5M
• Average Marginal Operating Cost
• Analysis of daily generation cost information
  for the A station indicates a marginal
  operating cost of 24 per MWhr. This includes
  coal, staff, consumables, oil derivatives and
  maintenance overhead.
• Cost 110MW X 156 Days X 24Hrs X 24 9.88M
• Emergency power imports during unit start up
• Unit A5 is predicted to trip once a month during
  its 9 months of annual operation in 2006. The
  start-up time for unit A3 to reach full load is
  estimated to be 12 hours. Power will have to be
  imported to maintain supply during these periods.
• Cost 110MW X 9 trips X 12Hrs X 39.6 0.47M
• Additional Oil Derivative Costs during unit start
  up
• Unit A5 is predicted to trip once a month during
  its 9 months of annual operation in 2006. The
  additional start-up costs (fuel oil for
  combustion support) for unit A3 are estimated at
  66K per start up.
• Cost 9 trips X 66,000 0.59M
• Total Cost for Option 2 is 21.45M.

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Short Term A3 RevitalizationAnalysis

• Annual cost of Option 1 is 13.59M annual cost
  of Option 2 is 10.95M. The annual saving if
  Option 2 is chosen is projected to be 2.64M.
  This suggests a payback period for the capital
  cost of Option 2 as 3.97 years.
• A sensitivity analysis shows that if the price of
  imports reduces to 34.5 per MWhr (the lowest
  single price achieved in 2004/5) the pay back
  period increases to 11 years, if the price of
  power imports increases to 44 per MWhr (the
  average achieved so far in 2005) the payback
  period reduces to 2.56 years. If the power import
  cost increases to 65 per MWhr (the highest
  single price seen in 2004/5) the payback period
  reduces to 0.95 years.

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Short Term A3 RevitalizationAnalysis
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Short Term A3 RevitalizationAnalysis
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Medium term KEK Financial Recovery Plan

• Three Scenarios were assessed
• 51
• 240 with Imports
• 240 with Investment (Rehab of A and Advance of
  Coal Field Development)
• Plan envisages rehabilitating 2 units at a
  projected capital cost of 110M (Life and
  Capacity extension)
• Associated Coal Field Development costs are
  (over) Estimated at 92M
• 240 with investment was a clear winner.

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Medium term KEK Financial Recovery Plan
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Medium term EAR Funded MEM Techno-Economic
Feasibility Study

• Need for a bankable study
• Provide greater detail and analysis than the KEK
  FRP
• Which units are feasible to rehabilitate?
• What is the specific cost per unit?

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Medium term Funding of Rehabilitation

• Own Funded
• Not possible even if western utility collection
  rates secured immediately
• Commercial Borrowing
• No commercial banks will lend to KEK at this
  point, achievable only by 2008 (Incorporation,
  Financial Recovery etc.)
• Donors
• Donor conference suggested, major topic will be
  generation
• Donors and Investors mix
• Possible on different units

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Medium term Mixing Donors and Investors

• Three units should be capable of refurbishment
• Subject to outcome of EAR Techno-Economic
  Feasibility study
• KEK FRP envisages 2 units refurbished
• Third unit (or its output) potentially available
  for Investors /Privatization
• Investors in Region appear keen to secure long
  term power positions
• Conduct a tender!

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Medium Term Tender Possible Outline

• Bidders would be required to invest a minimum of
  150M to refurbish 3 units in Kosovo A over 2
  years. (The units, investment and timescale will
  be further clarified following completion of the
  techno-economic feasibility study presently
  underway at Kosovo A).
• Bidders would be required to carry out the work
  to a proper standard and to hand over the
  refurbished plant to KEK.
• Bidders would in return be given a concession in
  the form of a power purchase agreement (PPA) for
  a 15 year period for 600-900GWh of energy per
  annum. (The term of the PPA and the amount of
  energy contracted will also be clarified
  following the completion of the aforementioned
  study at Kosovo A).
• Bidders would be requested to submit a price
  offer for this energy.
• The winning bidder would be selected on the basis
  of the highest price quoted for the energy.
• Bidders would initially be vetted and
  pre-qualified to ensure their financial
  credentials and technical ability to carry out
  the necessary refurbishment.
• Following prequalification, a two-stage process
  is envisaged with the top 3 bidders getting an
  opportunity to re-bid and increase their price
  offer.

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Summary

• 2 Units are presently operable in Kosovo A
• KEK (with funding from the KCB) is revitalizing
  (No Life or Capacity extension) a third unit (A3)
  at a cost of 10.5M
• The KEK FRP envisages 2 Units in Kosovo A being
  rehabilitated (Life and Capacity extension)
• A significant funding gap exists
• An ongoing techno-economic feasibility study will
  better define the options and costs
• Donor funding and/or Investor funding is possible