Globeleq 2004 Annual Report to Stakeholders

Globeleq 2004 Annual Report to Stakeholders
Generating Power for Emerging Markets
Corporate
Profile
Globeleq is an operating power company solely focused on the emerging markets
of Africa, the Americas and Asia. We safely provide clean, reliable electricity, creating
sustainable returns and supporting the development of the electric power sector
in our markets. With shareholder equity of over $500 million, we own more than
2,800 megawatts (MW) of generation capacity in 15 countries. Globeleq was
formed in 2002 when CDC Group plc, the UK-based private equity investor in
emerging markets, contributed both equity capital and its portfolio of power assets
to the new enterprise. CDC’s portfolio of approximately $2 billion is managed
by Actis, the private equity fund manager specializing in emerging markets.
Contributing to the
Greater Good
At Globeleq, we are committed to making a positive difference in the
communities and societies we serve. We operate ethically and responsibly in
compliance with all applicable laws, and we strive for international best practices
in all areas of our business. We believe we can most effectively sustain our business
by managing our activities with concern for all of those who have a stake in our
success, including employees, investors and local communities.
Equity Megawatts
Employees
3,500
700
3,000
600
2,500
500
2,000
400
1,500
300
1,000
200
Assets ($ millions)
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
500
100
0
$200
$0
0
2002
2003
2004
2002
2003
2004
2002
2003
2004
Letter from
the President
T
hree years ago, we set out to create a company that would do well by
doing good. Our goal was to build a commercially and financially
successful power company that would be a foundation for continued
growth and investment in the electric power sector in the emerging markets. We
have achieved that goal. While many energy companies were retreating from the
emerging markets, we saw an opportunity to bring new investment to Africa, the
Americas and Asia. Capitalizing on the unprecedented availability of good assets
at attractive prices and the best talent in the international power business, we built
an operating power company with a specific emerging markets focus.
Since April 2002, we have acquired more than 2,000 MW of generation capacity, purchasing projects in South Africa, Tanzania, Bangladesh, Bolivia and Egypt.
We are contributing to the goal of our shareholder, CDC, of investing in emerging
economies to create wealth and alleviate poverty. We forged a distinct identity for
Globeleq, building an independent company with a focus on majority ownership
and long-term operation of the assets in which we invest. In early 2004, we began
operating as a separate company with an independent Board of Directors.
We significantly advanced our strategy in 2003 and 2004, making key acquisitions in Asia, the Americas and Africa, beginning commercial operation of our
gas-to-electricity project in Tanzania and divesting non-strategic minority assets.
Globeleq will continue to grow, building our portfolio through acquisitions
and the development of new power projects. We plan to more than double our
operating capacity over the next two years and are seeking strategic partners to
invest alongside us.
We are building our business on the financial strength of CDC and the
strength of our own performance. We will attract capital by creating commercially successful, sustainable businesses, delivering on our promises
and demonstrating that Globeleq – and our investors – can continue
to do well by doing good.
Globeleq will continue to grow,
building our portfolio through
acquisitions and the development
of new power projects. We plan to
more than double our operating capacity over the
Robert C. Hart
President and
Chief Executive Officer
next two years and
are seeking strategic
partners to invest
alongside us.
2004 Annual Report
Africa
Business
Country
Fuel
Globeleq
Project
Equity
Ownership
MW
MW
Controlled Assets
Kelvin Power
South Africa Coal
95%
600
570
Sidi Krir
Egypt
Natural gas
61%
685
418
Songas
Tanzania
Natural gas 60%
115
66
Minority Investments
Azito Cote d’Ivoire Natural gas
11%
288
32
Tsavo Power 22
Controlled Asset
Minority Asset
Kenya
Fuel oil
30%
74
O
f all the people worldwide who today have
no access to electric power, one-third live
in Africa. The problem is most acute in
sub-Saharan Africa where more than 500 million
people – 77 percent of the population – live without
electricity. According to World Energy Council
estimates, Africa needs more than $600 billion of
investment in its power sector over the next 25 years.
Globeleq Africa is poised to play a pivotal role in
meeting this critical challenge.
2004 Annual Report
A
f
r
i
c
a
Globeleq Expands in East and North Africa
The Songas project has put Tanzania’s
natural gas resources to productive use,
reducing the country’s dependence on
hydroelectric generation and its need
for expensive imported liquid fuels.
Globeleq expanded in East and North Africa during 2004 with the successful
completion of its gas-to-electricity project in Tanzania and its first ventures in
Egypt and Uganda.
• We began commercial operation of the Songas gas-to-electricity project in
July, putting Tanzania’s natural gas resources to productive use and positioning
Tanzania to become an important regional energy producer.
• We entered North Africa with the acquisition of a majority interest in the
685 MW Sidi Krir power station in Egypt.
• We signed a concession agreement to manage and operate Uganda’s electricity
distribution system, our first investment in that country.
Songas Completion is a Triumph for Tanzania
The Songas gas-to-electricity project is providing far-reaching benefits to
Tanzania’s power sector, natural gas market, economy and people. Songas, which
has over 100 employees, provides a reliable supply of clean, efficient electricity
produced from indigenous natural gas. It sells power under a long term contract
to TANESCO, Tanzania’s national electricity company.
We acquired majority control of Songas Ltd. in 2003 during the early stages
of construction, led the project to successful completion and now operate the
Songas facilities. The project includes a natural gas processing plant on Songo
Songo Island, a 225 kilometer (140 mile) gas pipeline and the 110 MW Ubungo
gas-fired power plant, which has the capacity to supply 30 percent of Tanzania’s
total electricity requirements. An expansion project currently underway will
increase the plant’s capacity by 50 percent.
The natural gas infrastructure built by Songas can supply enough gas to meet
increasing electricity demand for the next five to ten years. The pipeline that
carries the gas from Songo Songo Island to the power plant in Dar es Salaam
also supplies natural gas to industrial and commercial customers.
The Songas Project has put Tanzania’s natural gas resources to productive
use, reducing the country’s dependence on hydroelectric generation and its need
for expensive imported liquid fuels. The project also positions Tanzania as an
important regional energy producer with the potential to export electricity and
natural gas.
Acquisition in Egypt Marks Entry into North Africa
Sidi Krir Generating Company operates a 685 MW, natural gas-fired power
plant west of Alexandria, Egypt, on the Mediterranean coast. The plant, which
began commercial operation in 2002, produces power for the Egyptian Electricity
June 20
01
CDC names Robert Hart
CEO-designate of company that
would become CDC Globeleq
2004 Annual Report
December 20
01
CDC increases investment in Dominican
Republic’s power sector
Holding Company under a long-term power purchase agreement (PPA). The
acquisition of the majority interest in Sidi Krir, completed in December 2004,
marked our entry into North Africa. Sidi Krir has over 100 employees.
Concession to Operate the Ugandan Distribution System
Umeme Limited, jointly owned by Globeleq and Eskom Enterprises, has a
concession to manage and operate the electricity distribution system in Uganda.
Umeme is committed to investing in the existing distribution network to provide
safer, more reliable electricity to customers.
Plant Refurbishment Completed in South Africa
Acquisition of a majority interest in
the Sidi Krir plant, which produces
power for the Egyptian Electricity
Holding Company under a long-term
power purchase agreement, marked
Globeleq’s entry into North Africa.
Globeleq owns the Kelvin Power Station, which supplies electricity to
Johannesburg, South Africa. Kelvin, which is fueled by local South African
coal, has more than 230 employees.
In December 2004, we completed a three-year, $25 million refurbishment
program at Kelvin. This extensive refurbishment increased the plant’s capacity and
significantly improved its environmental performance.
Minority Investments
An extensive refurbishment at
the Kelvin power station in South
Africa increased the plant’s capacity,
Kenya: We own a 30 percent interest in and are an active co-manager of Tsavo
Power Company Ltd., which owns and operates the 74 MW Kipevu II power
plant at Mombasa, the major port serving Kenya and the region. Tsavo sells
all of its power to KPLC, the Kenyan state-owned utility under a long-term PPA.
Cote d’Ivoire: In West Africa, we hold an 11 percent interest in Azito Energie,
located near Abidjan, the capital of Cote d’Ivoire. Azito Energie owns a 288 MW
power plant fueled by natural gas from the nation’s offshore gas fields and a
transmission line. It sells electricity to the Government of Cote d’Ivoire under
a long-term agreement.
and significantly improved its
environmental performance.
Expanding “the African Power company”
With investments across the continent, Globeleq is “the African power company.”
We are continuing to expand our operations in East and South Africa and are
seeking acquisitions in both North and West Africa.
02
02
March 20
December 20
CDC builds
position in Latin
America with
acquisitions in Peru,
Chile and Argentina
CDC Globeleq
announces investments in Tanzania
and South Africa
2004 Annual Report
Americas
Business
Country
Fuel
Globeleq
Project
Equity
Ownership
MW
MW
Controlled Assets
Compañía Boliviana Bolivia
Hydroelectric
100%
204
de Energía Eléctrica and natural gas
(COBEE)
Minority Investments
Edegel
Peru
Hydroelectric 16%
1,015
and natural gas
Controlled Asset
Minority Asset
204
162
EGE Haina
Dominican Republic
Coal and fuel oil
21%
634
132
Compañía de Electricidad de San Pedro de Macorís
Dominican Republic
Fuel oil
35%
298
104
San Isidro
Chile
Natural gas 17%
370
63
Puerto Quetzal Power
Guatemala
Fuel oil
25%
234
59
Compañía de Electricidad de Puerto Plata
Dominican Republic
Fuel oil
48%
67
32
Empresa Energética Corinto
Nicaragua
Fuel oil
30%
71
21
Jamaica Private Power Company
Jamaica
Fuel oil
16%
60
10
Orzunil
Guatemala
Geothermal
14%
24
3
I
n the Americas, liberalization of the electricity
markets is well underway, driving rapid development of the power sector. These markets have seen
strong increases in installed capacity, service quality and
reliability. Although access to electricity is high in the
region, robust growth in demand continues to drive the
need for new long-term investments throughout the
Americas. The World Energy Council estimates that
nearly $750 billion will be needed through 2030. The
retreat of many international power companies to their
core businesses closer to home has reduced competition,
making for attractive opportunities.
2004 Annual Report
A
m
e
r
i
c
a
s
Globeleq Enhances Position in the Americas
Globeleq advanced its strategy for the Americas during 2004 with the acquisition of a large Bolivian generator and the sale of three investments.
• We acquired one of Bolivia’s largest generation companies in April. Compañía
Boliviana de Energía Eléctrica’s (COBEE) important position in Bolivia’s electric
sector and the country’s robust regulatory structure makes the acquisition an
excellent strategic fit.
• We sold our investments in St. Lucia, Dominica and Argentina to focus on
businesses that better fit our strategy for the region.
Bolivian Acquisition is a Prototype
Globeleq acquired one of Bolivia’s
largest generating companies in 2004.
COBEE’s important position in
Bolivia’s electric sector and the
country’s robust regulatory structure
makes the acquisition an excellent
strategic fit.
As Globeleq’s only majority-owned investment in the Americas, COBEE is
central to our strategy for the region. COBEE serves the capital La Paz and
surrounding areas with 204 MW of generation capacity, most of it hydroelectric.
Also known as the Bolivian Power Company, COBEE, which has been
privately owned since its founding nearly 80 years ago, has a strong presence
and local character in Bolivia. With a strong local management team and about
200 employees, COBEE has a long and stable history of operating to very high
standards. In many respects, it is a prototype of the businesses we plan to own
in the Americas, and it is located in the type of market where we want to invest.
Bolivia is an emerging economy where we can make a difference. It offers a
stable electricity market patterned on the Chilean model, one of the oldest and
most successful in the world. The country has good prospects for the future, and
we view it as a very promising market for building a sustainable, commercially
successful business.
As a long-term operator, our focus following the COBEE acquisition turned
to integration of the business. We collaborated with the COBEE management
team on the operation of the business and have tapped their expertise and talent
for various efforts around the region.
Minority Investments Provide Window to Markets
Globeleq’s significant minority
investments in the Americas include
a 21 percent stake in Haina, the
largest power generating company
Globeleq’s significant minority investments in the Americas, which total nearly
600 equity MW, provide both financial and strategic benefits. Although our longterm goal is the majority ownership and operation of assets, our investments in
Peru, Chile and the Dominican Republic make a positive contribution to earnings
and provide a valuable “window” into markets that are of strategic interest to us.
in the Dominican Republic. Haina
provides more than 20 percent of
the country’s electricity.
03
2004 Annual Report
03
April 20
December 20
South African regional
office opens in Johannesburg
Acquisition of
two power plants
in Bangladesh
completed; CDC
Globeleq’s first majorityowned investment in Asia
With a strong local management
Peru: We own a 16 percent interest in Edegel S.A., the largest private generator
in Peru. Edegel has more than 1,000 MW of capacity, most of which is hydroelectric. Our stake represents 167 equity MW.
Chile: We also own a 17 percent interest in San Isidro, a gas-fueled, combined
cycle plant with 379 MW of generating capacity, located near Santiago. Our stake
in San Isidro, which started operations in 1998, represents 63 equity MW.
Dominican Republic: We have investments in three generating companies
including a 21 percent interest in EGE Haina S.A., the largest power generating
company in the country. Haina has 12 coal and diesel generating plants totaling
approximately 600 MW and providing more than 20 percent of the country’s
electricity. The majority of Haina’s plants have been built or refurbished over
the last several years.
team and about 200 employees,
COBEE has a long and stable history
Working to be a Positive Force
of operating to very high standards.
Operationally, we are committed, in the Americas and elsewhere, to being
a positive force in building strong electricity markets.
In the Dominican Republic, where we have minority ownership positions in
three generating companies, we have worked with other investors, the government
and the international development community toward a more functional, robust
electric sector. We have seen early signs of economic stabilization, including a significant improvement in exchange rates during 2004, and we are optimistic about
continued progress.
Growth Plans for the Americas
In South America, Globeleq is focusing on countries where market forces
determine prices for generation. Chile was a pioneer in establishing a competitive
electricity market. Other nations throughout the Americas, including Bolivia and
Peru, have patterned their markets on the Chilean model. With the acquisition of
COBEE, Globeleq now has investments in all three of these countries.
Elsewhere in the Americas, Globeleq is interested in much of Central America,
which offers increasingly stable markets where our investments can make a difference. We currently have minority positions in diesel generation in Nicaragua, and
diesel and geothermal generation in Guatemala.
04
04
January 20
April 20
Board of Directors named
to run CDC Globeleq as
a separate and independent company
Acquired COBEE,
one of the largest
generation companies in Bolivia
2004 Annual Report
Asia
Business
Country
Fuel
Globeleq
Project
Equity
Ownership
MW
MW
Controlled Assets
Meghnaghat
Bangladesh
Natural gas
100%
450
450
Haripur
360
360
Minority Investments
Lanco Kondapalli Power India
Natural gas
25%
355
89
Ace Power
Sri Lanka
Fuel oil
29%
50
15
Asia Power
Sri Lanka
Fuel oil
10%
51
5
Controlled Asset
Minority Asset
Bangladesh
Natural gas
100%
O
f all the regions where Globeleq does business, Asia is the most diverse. Extending
from Pakistan in the west to the Philippines
in the east, it encompasses densely populated countries
like China and India as well as nations the size of a
large city. According to World Energy Council estimates, more than one billion people in Asia live without
access to electricity, and more than $3 trillion of new
electricity investment will be needed by 2030. In South
Asia, 800 million people, or 60 percent of the population, live in areas where electricity is not available.
Because of the acute need, Globeleq has placed the
highest priority on investments in South Asia.
2004 Annual Report
A
s
i
a
Globeleq Establishes Presence in South Asia
Globeleq acquired its first majority-owned investment in Asia and sold a
minority investment in the Philippines while managing minority investments
in India and Sri Lanka.
• We acquired two state-of-the-art power plants in Bangladesh in December 2003,
establishing a meaningful presence in South Asia.
• We sold our minority interest in a generation plant in the Philippines in March
2004 to focus on investments that offer majority ownership and operating control.
Bangladesh Acquisition is a Defining Step
The 360 MW Haripur plant (below)
and the Meghnaghat plant, together
provide 25 percent of the generating
capacity of Bangladesh. The acquisition of these plants in December 2003
represents Globeleq’s first majorityowned investment in Asia.
The Haripur and Meghnaghat power plants, acquired in December 2003,
provide 25 percent of the generating capacity of Bangladesh. These plants give
Globeleq a significant presence in a country that needs substantial investment in
its electricity sector. As our first majority-owned investment in Asia, this acquisition is a defining step in our plan to build a strong and sustainable business in
the region.
The modern, combined cycle gas turbine generators located near the capital
city of Dhaka provide clean, efficient and reliable power. Haripur, a 360 MW
plant, started generating power in 2001. Meghnaghat, a 450 MW plant, became
operational in late 2002. Together they have improved reliability of supply to the
national electric grid, reducing power outages.
We have a strong team of 70 employees in Bangladesh who delivered exceptional operational and financial performance during 2004. The plants exceeded
availability forecasts every month and provided substantial contributions to
Globeleq’s net income. Because we have a significant stake in the power sector of
Bangladesh, we are positioned to work as a partner with the government in meeting the nation’s needs for reliable electricity. The Bangladesh Ministry of Energy
and Natural Resources estimates that the country will need to double generation
over the next seven years to meet rising demand and replace 30 to 40 percent of
its current generating capacity.
Minority Investments
India: We own a 25 percent interest in Lanco Power Limited, known as
Kondapalli, which operates a 355 MW combined cycle plant that began
commercial operation in 2000. Kondapalli sells all of its capacity and energy to
APTransco, the state-owned power transmission company under a long-term PPA.
04
2004 Annual Report
04
June 20
September 20
Company
name changed to
‘Globeleq,’ reflecting
independence while
maintaining link to
shareholder, CDC
Globeleq agrees to
purchase Egyptian
generator Sidi Krir
Sri Lanka: We own a 29 percent interest in Ace Power and a 10 percent interest
in Asia Power. Ace Power includes two separate project-financed generation companies; each developed, constructed and now operates a 25 MW oil-fired power
plant. Asia Power owns a 51 MW plant that began commercial operation in 1998.
The Ace companies and Asia Power sell electricity to the state-owned utility,
Ceylon Electricity Board (CEB).
Building a Business that Fills a Need
The 450 MW Meghnaghat plant
(above) and the Haripur plant are
modern, combined cycle gas turbine
generators that have improved the
reliability of electricity supplies in
Globeleq has a strong commitment to the development of the power sector
in South Asia where the need for investment capital is greater than in other parts
of the region. We are focusing on Bangladesh, India, Pakistan and Sri Lanka. We
also are looking at selected countries in Southeast Asia that offer high growth,
functioning electricity sectors and improving regulatory regimes.
We are pursuing additional investments that offer majority ownership, operating
control and a sizeable stake in a power sector. By establishing a meaningful presence,
we can forge direct partnerships with governments and establish a dialogue about
their power needs. This ongoing dialogue produces a pipeline of new investment
opportunities that will help stimulate economic development and alleviate poverty.
To date, we have established our initial presence in Asia by acquiring commercially viable power projects from companies that were seeking to exit the region.
We will build on our presence in the region with additional acquisitions and the
development of new power plants.
Bangladesh, reducing power outages.
04
04
October 20
December 20
Songas project dedicated by President of
Republic of Tanzania
Globeleq enters North
Africa with close of
Egyptian acquisition
2004 Annual Report
Globeleq Ltd
a Bermuda Limited Company
Canon’s Court
22 Victoria Street
Hamilton HM12
Bermuda
Globeleq affiliated companies
may be contacted at:
Houston:
Globeleq Inc.
1400 Post Oak Blvd., Suite 700
Houston, Texas 77056 USA
T +1 713 355 3450
F +1 713 355 3847
London:
Globeleq Advisors Ltd
2 More London Riverside
London, SE1 2JT
United Kingdom
T +44 (0) 20 7 234 5400
F +44 (0) 20 7 234 5486
www.globeleq.com
[email protected]
Globeleq and its associated symbols are trademarks of Globeleq Ltd