PROJECT & TRADE FINANCE Feasibility Modeling CASE LIBERTY POWER TECH LTD.
Transcription
PROJECT & TRADE FINANCE Feasibility Modeling CASE LIBERTY POWER TECH LTD.
PROJECT & TRADE FINANCE Feasibility Modeling CASE LIBERTY POWER TECH LTD. Liberty Power Tech Ltd: Project Financing in Pakistan A review of the Liberty Power Tech Ltd (LPTL) project and Financial Model Presentation by: Lauri Puro Financial Analyst Wärtsilä Development & Financial Services Power Plants Email: [email protected] © Wärtsilä Project & Trade Finance - March 29th 2011 Development schedule of Liberty Power tech Ltd. March-09: Financial Close Finalization of loan docs and other Project Agreements Feb-09: Shareholders’ agreement signed, Initial equity funding Feb.08: Tariff Approval Jul-08: PPA and IA signed 2007 Aug.2007: EPC commitment from project company Dec-08:Fuel supply agreement signed Wärtsilä development offering: Dec-10: Project COD Mar/Apr-09: 1st facility drawdown 2008 Aug-08: EPC signed Dec-09: O&M negotiations started 2009 Jun-09: EPC Starting Date 2010 Construction Mar-09: Performance bonds and L/Cs opened Site identification together with the sponsors Tariff determination and approval with NEPRA – National Electric Power Regulatory Authority Organizing the needed permits, such as the Environmental License and the Construction & Operation permit Contract negotiations, including IA (Implementation Agreement), PPA (Power Purchase Agreement), EPC (Engineer, Procure & Construct), FSA (Fuel Supply agreement), O&M (Operations & Maintenance), Financing Agreements, etc. Arranging equity financing Arranging debt financing © Wärtsilä Project & Trade Finance - March 29th 2011 Project Summary Sponsors / Shareholders Liberty Mills Ltd.40% / Mukaty Family 39% /Soorty Enterprise 10%/ Wartsila 11% Offtaker National Transmission and Dispatch Company Limited Fuel Supplier Shell EPC Contractor Wärtsilä Finland Oy and Wärtsilä Pakistan (Pvt.) Ltd. O&M Contractor Wärtsilä Financiers Syndicate of 17 Pakistani banks, lead arrangers Allied Bank Ltd and Meezan Bank Ltd. Project Cost 231.4 MUSD ( ~180 MEUR) Capital Structure 75% debt 25% equity Project Size 200 MW (Gross ISO) 194.65 MW (Net) Technology Combined Cycle / 4 stroke Diesel Engine Equipment 11 RFO Diesel Engines, 11 Heat Recovery System Generators, 1 Steam Turbine and other allied electrical and mechanical equipment Project Site Faisalabad Commercial Operations Date December 2010 PPA duration 25 years Levelized Tariff 12.5374 Cents/kWh (as per tariff approved by NEPRA) Equity IRR 15% approved by NEPRA DSCR Min 1.37x, Ave. 1.46x © Wärtsilä Project & Trade Finance - March 29th 2011 Total Project Costs ($ ‘000) Project cost item EPC Contract Value 177 249 Taxes and duties 9 084 O&M Mobilization 2 750 Land and infrastructure 1 651 Staff housing colony 1 675 Non EPC Costs 3 244 Start-up and utilities 922 Insurance 2 393 Development Costs 1 964 Financing charges and fees 4 200 Interest during construction (IDC) Total Project Cost © Wärtsilä Project & Trade Finance - March 29th 2011 26 282 231 415 Financing Plan Total senior debt, 13 850 M PKR (173.6 MUSD) comprises two components: – 89% of senior debt, facility, is structured as a sharia-compliant sukuk bond – 11% of senior debt is structured as conventional long-term debt – Both facilities have the same terms and conditions Features of the sukuk-bond: – – – – A corporate bond that complies with Sharia Islamic law The bond holder holds an ownership to the project while the bond issuer commits to repurchase the project at bond maturity Meanwhile, the bond issuer pays quarterly “rent” to the bond holder for using the asset The net effect of Sukuk bond cash flows (rents + repurchase) equal those of a conventional bond (interest + principal) Max. tenor 12 years door-to-door – 24-month availability period for facility drawdown (“Musharaka contribution”), drawdown schedule is linked to EPC payment schedule – 10 year repayment term from project COD (“Sukuk redemption”) © Wärtsilä Project & Trade Finance - March 29th 2011 Allied Bank Limited Meezan Bank Limited Project security package Security Package: All project agreements including PPA, IA, FSA, O&M, EPC, Government of Pakistan Guarantee All permits, licences, insurances, and intangible assets such as all bank accounts EPC Contractor Bonds and O&M Guarantees Pledge on all tangible assets such as mortgages on land lease, plant, equipment and shares of equity © Wärtsilä Project & Trade Finance - March 29th 2011 Project structure of Liberty Power Tech WDFS ESC: Wärtsilä Finland Oy Equity % Local sponsors: Liberty Mills & Mukaty family 100% Equity & Sponsor Support Sukuk bond Wärtsilä EPC EPC Contract CSC: Wärtsilä Pakistan Ltd. O&M Contract Wärtsilä Pakistan Ltd. Liberty Power Tech Debt Syndicate of 17 banks led by Allied Bank Wärtsilä O&M Power Purchase Agreement Off-taker: National Transmission and Dispatch Company Fuel Supply Agreement Permits, Tariff Approval Implementation Agreement National Electric Power Regulatory Authority (NEPRA) Letter of Support Sovereign Guarantee Government of Pakistan © Wärtsilä Project & Trade Finance - March 29th 2011 Shell Power Purchase Agreement Power Purchase agreement (PPA) is the legal contract between LPTL (electricity generator) and National Transmission and Dispatch Company (NTDC, Power Purchaser) Power tariff to be paid by NTDC to LPTL is defined through the following approval process: 1. Pre-qualified IPP project presents their costs (capital costs and operational costs) to the National Electric Power Regulatory Authority (NEPRA) 2. NEPRA approves the project budget and determines a power tariff that the project is allowed to charge from the power purchaser Capacity payment – a fixed charge for each kW of capacity available to generate electricity – Includes compensation on debt service, return on equity, working capital and fixed operational expenses Energy payment – a variable charge for each kWh of energy dispatched – Consists of a fuel component, and variable O&M component – Terms, indexation and adjustments are defined in the PPA PPA determines the roles and responsibilities of the parties in detail, including – Construction, commissioning and operation – Termination due to the project company or power purchaser – Force Majeure protection – Protection for change in tax and change in law – LDs for i) delay, ii) lack of output – Resolution of disputes © Wärtsilä Project & Trade Finance - March 29th 2011 EPC Contract EPC = Engineering, procurement & construction is a full-scope turnkey delivery of a power plant to the customer Engineered equipment supply contract (ESC) executed between LPTL and Wärtsilä Finland Oy in August 2008 Construction supply contract (CSC) executed between LPTL and Wärtsilä Pakistan Ltd in August 2008 Total value of EPC: $177.2 MUSD EPC contract stipulates the following issues: – Specified plant output, efficiency, guaranteed COD (Commercial Operations Date) – Emission levels and compliance with relevant emission limits – LDs for i) delay, ii) lack of output, iii) lack of efficiency – Warranty period – Detailed procedure for establishing COD – Force Majeure protection – Change in Law protection – Limits of liability – Governing Law – Dispute Resolution © Wärtsilä Project & Trade Finance - March 29th 2011 O&M Agreement Entered into between LPTL and O&M contractor (Wärtsilä Pakistan Ltd) O&M contractor has the full responsibility of the operations and maintenance of the plant including: – Day to day operations by Wärtsilä personnel – Scheduled and unscheduled maintenance – Administration, HR and training of personnel – Purchasing and management of spare parts inventory and tools – Logistics and security O&M contractor guarantees: – Plant availability – Rate of fuel consumption – Rate of lube oil consumption Fixed tariff over contract period (5+5 years) with two components: – Fixed charge: Rp/Month (unrelated to plant dispatch) – Variable charge: Rp/MWh (Payable per each MWh dispatched) © Wärtsilä Project & Trade Finance - March 29th 2011 Insurance Construction Phase Marine cargo loss Loss of revenue (Following marine incident) Contractors’ all risk (CAR) Loss of revenue (following CAR event) Third party general liability Operating Phase All risks insurance – fixed assets Consequential loss following all risks event Machinery breakdown Consequential loss following machinery break-down Third party general liability Workers comp, social security, employers liability, vehicles © Wärtsilä Project & Trade Finance - March 29th 2011 Project Proforma PROJECT SUMMARY SHEET 1 ASSUMPTIONS General Timing Project Name Project Location Plant Configuration Date Liberty Pakistan 11*18V46 20.10.2008 Model Status Investment Start Construction Period Project Start (COD) Project End Project Lifetime Version 6 Includes specified ageing Includes decresing L/C demand Year Months Year Year Years Funding Check Balance Check Debt Repayment Depreciation 2009 24,0 2011 2034 25,0 OK OK OK OK Financing Assumptions Debt Financing Equity Financing 75,00% Equity - Pari Passu 25,0 % Equity - Pari 1 Passu Equity - First In Senior Loan Funding Portion Funding amount [---------------------------- Senior loans ----------------------------] Local Loan 100,00% 0,00% 0,00% Real Project IRR Simple IRR Tariff Variable Expenses Fuel Component Fixed Expenses Capital Component Total Tariff % % Nominal 16,6 % 15,9 % Technical Performance 16,6 % 15,9 % 2011 Net Capacity Load Hours Load Factor Annual Off-Take Capacity Factor Levelised Average USD/MWh PKR / kWh USD/MWh PKR / kWh 7,8 0,62 7,8 0,62 128,9 10,28 129,3 10,32 5,8 0,46 5,8 0,46 42,7 3,41 31,9 2,54 185,2 14,78 174,8 13,95 MW h % MWh % Plant Efficiency (Net) % Fuel Consumption - HFO Fuel Consumption - LFO Fuel Consumption - Gas Lubes Consumption g/kWh g/kWh MMBtu/MWh g/kWh Average 195,0 5 256 100,0 % 1 024 920 60,0 % 195,0 5 256 100,0 % 1 024 920 60,0 % 45,8 % 45,3 % 182,6 0,0 0,0 0,7 184,3 0,0 0,0 0,7 Investment Summary Capital Expenses EPC Contract ESC Taxes and Duties O&M Mobilisation Land and Infrastructure Independent Engineer Other costs Staff Housing Colony Non EPC costs Start-Up and utilities Legal, Lender's and Consultants Cost Insurance Emergency/safety spare parts off-shore Development costs Other costs Other costs Other costs Other costs Project Contingency USD k 155 059 9 084 2 750 1 651 0 0 1 675 3 244 % 67,0 % 3,9 % 1,2 % 0,7 % 0,0 % 0,0 % 0,7 % 1,4 % USD/kW 969,12 56,78 17,19 10,32 0,00 0,00 10,47 20,28 922 0 2 393 0 1 964 0 0 0 0 0 0,4 % 0,0 % 1,0 % 0,0 % 0,8 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 5,76 0,00 14,96 0,00 12,27 0,00 0,00 0,00 0,00 0,00 0 0 0 0,0 % 0,0 % 0,0 % 0,00 0,00 0,00 0 0 0 4 200 26 282 0,0 % 0,0 % 0,0 % 1,8 % 11,4 % 0,00 0,00 0,00 26,25 164,26 231 415 100,0 % 1 446,34 Other costs Working Capital Fuel and Lube Storage Other costs Other costs Debt Service Reserve Financing Charges and Fees Interest During Construction TOTAL PROJECT COST Financing % 2,42% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% Base interest rate Spread Total interest rate 15,50% 3,00% 18,50% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% Senior Loans Direct Investment Shareholder Loan 3rd Party Sub-Loan Total Financing 75,00% 25,00% 0,00% 0,00% 100,00% Loans Local Loan 0 3rd Party Sub-Loan Equity Total Financing 57 854 231 415 USD k 173 561 0 0 0 0 Years Years Years Years 2,0 0,0 10,0 12,0 2,0 0,0 10,0 12,0 2,0 0,0 10,0 12,0 2,0 0,0 10,0 12,0 2,0 0,0 10,0 12,0 % % % % 15,5 % 0,0 % 3,0 % 18,5 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % 0,0 % Minimum Average Year 1 Times Times Times Gearing 1,37 1,46 1,37 2,0 0,0 10,0 12,0 2,0 0,0 10,0 12,0 2,0 0,0 10,0 12,0 2 1 1 1 1 0 0 0 0 Repayment Type (1 or 2) (1=E/P;2=Mortgage) PSRA and POA (months) Year 1 L/C PSRA demand 4,5 Working capital loan Interest Rate Commitment Fee WC loan utilization 17,50% Enable Working Capital1Loan Enable Working Capital Loan 0,00% Disable Working Capital Loan 100,00% 0,00% 8,40% Debt Equity Ratio USD k 177 249 9 084 2 750 1 651 0 0 1 675 3 244 922 0 2 393 0 1 964 0 0 0 0 0 0 0 0 0 0 0 4 200 26 282 231 415 18 466 878 Operating expenses Variable costs Variable O&M fee Chemical costs for water treatment Lube oil cost Total Variable O&M cost Fixed costs Fixed O&M fee Insurance cost Chemical costs for water treatment General and administration cost Total fixed cost EUR/MWh 30,00 5,0 % 6,0 % Operation Corporate tax rate Minimum tax Carry-forward allowed Dividend tax rate 0,0 % 0,0 % 5 Years 7,5 % USD/MWh 6,08 0,38 1,32 7,77 EUR k / year PKR k / year USD k / year 2 352 2 393 0 96 136 1 205 3 557 5 950 Working capital Receivables Capacity Charges Energy Charges - Var O&M Energy Charges - Fuel Sales Tax on Fuel 30 30 30 15,00% Days Days Days % Payables Variable Charges Fixed Charges Fuel Charges 30 30 0 Days Days Days Fuel Inventory Advance payment to fuel supplier Lubes Inventory Operating Account Construction Import duty on plant & equipment With-holding tax on local part of EPC PKR/MWh 30 0 30 110% Days Days Days of next month Fuel and lubes Shareholder Loan Construction Period Additional Grace Period Repayment Period Loan Tenor Debt Service Coverage Ratio 2,0 0,0 10,0 12,0 Taxes and Duties Facility Base Rate Swap Fee Spread Total Interest Rate 2,0 0,0 10,0 12,0 Project cost USD k EUR k EPC Contract 22 191 120 542 Taxes and Duties O&M Mobilisation Land and Infrastructure Independent Engineer Other costs Staff Housing Colony Non EPC costs Start-Up and utilities Legal, Lender's and Consultants Cost Insurance Emergency/safety spare parts off-shore Development costs Other costs Other costs Other costs Other costs Project Contingency 0,00% Other costs Working Capital Fuel and Lube Storage Other costs Other costs Debt Service Reserve Financing Charges and Fees Interest During Construction Total Project Cost 1186,74 USD/kW 173 561 57 854 0 0 231 415 0 0 PKR k Construction Period Grace Beyond Construction Repayment Period Loan Tenor (years) Interest earnings Interest Earnings on Cash Interest Earnings on PSRA USD k 3rd Party Sub-Loan Up-front fee Commitment fee Annual fixed charge Investment Returns Shareholder Loan Tax depreciation (1=S/L; 2=Reducing balance) 2 Reducing Balance Initial tax depreciation 50,0 % Reducing balance tax depreciation 10,0 % © Wärtsilä Project & Trade Finance - March 29th 2011 56 000 PKR/ton 43,04 MJ/kg Lube oil price Lube oil density Lube oil consumption 134,00 PKR/litre 0,89 grams / litre 0,70 g/kWh Base 25714,57 Plant performance Plant capacity factor 60,00% Macro workings Year USD k USD k HFO price Lower heating value 173 561 57 854 0,75 Average 41 070 57 854 0,42 Target Equity IRR ROE component 15,00% not linked not linked Rs/kW/h Plant net output Plant net heat rate (EPC new and clean) Sludge Ageing Simple IRR IDC OK 15,9% Year 1-5 0,50% Average Plant net life-cycle heat rate 46,99% 195,00 MW 7 662 kJ/kWh 2,00% Year 6-10 Year 11-15 Year 16-25 1,00% 1,50% 2,00% 45,33% 7 941,31 kJ/kWh