PPP Models in Power - IFC

IFC‟s Experience Investing in

PPP Models in the Power Sector

Public-Private-Partnership Conference By: Tonci Bakovic

Lagos – Nigeria November 2011

Disclaimer The findings, interpretations, and conclusions expressed in this presentation are entirely those of the author and should not be attributed in any manner to the International Finance Corporation or to the World Bank Group or to members of its Board of Executive Directors or the countries they represent.

-This presentation cannot be quoted without permission-

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Mexico’s PPP Model Classic Single Buyer Model Objective: Let Private Sector take financing and construction risk

IPP1 IPP2

Green = Private Black = Public

Single Buyer (Guarantees Off-Take)

CFE

State1 State2

IPP3

Staten

IPPn

Industry

No Private Disco

59% of Consumption Private Industry

T Bakovic

Pidiregas – Mexico     

Competitive Bid for lowest construction price Private Bidder takes financing and construction risk Project pays itself back via guaranteed off-take with Single Buyer (CFE is owned by Gov) Discos remain in State hands CFE is also State Genco Pidiregas = Proyectos de Impacto Diferidos en el Registro de Gastos 3

Turkey’s PPP Model Phasing out the Single Buyer, Introducing a Balancing Market, Privatizing Distribution Objective: Encourage private sector to sell into Balancing Market while privatizing discos

State Owned Gencos

Phasing Out Single Buyer - Old BOT Projects (Guarantees Off-Take)

TETAS

IPP1

Green = Private Black = Public

Balancing Market (~20% of transactions)

BM

IPP3 Generation G Share 2010

T

Private Bilateral Cont

D1

D

Cogen

D2 Private Bilateral Contract

Industry

* Old BOTs

   

State D2 State Dn

IPP2

IPPn

State D1

Gov supports the creation of a credible Balancing Market (BM) Encouraging Auto-Producers (Cogen) to Inject into the Grid New generation gets built on a merchant basis and sells to BM Meanwhile distribution gets privatized

4

State Ds Industry

40% of Consumption Private Industry

Traders T Bakovic

2 Discos Private (19 in privatization process)

India’s PPP Model Hybrid Single Buyer Model and Power Exchange Objective: Encourage private generation Single Buyer Mega Projects

Fed Gencos State Gencos

Green = Private Black = Public

IPP1

(Guarantees Off-Take)

PTC

State2

Private Power Exchanges (~2% of transactions) (Pre-Pay Before Trade)

IPP2 IPP3

State1

Staten

IEX

Staten

PXI

Industry

Private Bilateral Cont.

IPPn

D1

Cogen

D2

“Franchise” Model: Locality/Region operation, within State distribution concession, awarded to private operators based on loss reduction and collection improvement targets.

38% of Consumption Private Industry

Traders T Bakovic

2 Discos Private (others franchising some localities)

Private Bilateral Contract

Industry  Gov supports the creation of private power exchanges mainly to encourage captive generation (cogen) to inject into the grid  Companies must prepay 2-days before transacting on exchange  Distribution “franchising” model gets implemented by some states given difficulties implementing privatization 5

Brazil’s PPP Model No Single Buyer (competitive auction scheme) Objective: Introduce competition and encourage investment Green = Private Black = Public

One Standard Contract Resulting from Auction

D1 IPP1

D2

IPP2  Discos auction blocks of demand every 6 months  Discos put 2 months of expected payments in bank scrow account  Market admin facilitates auction  Generators bid for incremental blocks (pay as bid)  Auctions are for short-term contracts (1 year), 3 year, 5 year and 10 year  Gov and private companies compete in the bids  Gov gets all the environmental licenses for the hydros to be auctioned (if any)  Auctions for „old energy‟ and „new energy‟ separately  No Spot Market –all power contracted

60% of Discos Private

D3

IPPn

Dn Fed Gencos State1

State Gencos

State2

T Bakovic

Staten Private Bilateral Contract

IPP

6

Industrial

44% of Consumption Private Industry