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PROTOTYPE FOR ю SPGP PROJECTS

Small Power

Generation

for Industrial Applications Technical and Economic Feasibility Assessment Small Power Generation Plant

Small Power Generation Plant solution (SPGP) continues to be an important segment of Electrical Energy production. The increasing demand for energy has to be satisfied while considering the impact on the global environment. SPGP plays an important role in industrial applications. Small size cogeneration plants sited close to industrial energy consumption can deliver power with high fuel efficiency and low emissions, and with modest space requirements. C&RD can offer to its customers complete solutions from feasibility studies to the actual turnkey cogeneration plant construction, aftermarket services and customized financial solutions. Two

major economic incentive stigated us to this initiative, the state optimal commitment and parallel guarantee to achieving 40,000MW goal by 2020 in Nigeria, new investment will need to multiply exponentially and secondly, Nigerians have demonstrated their willingness to pay for reliable electricity service, as seen by the ubiquity of back-up generators across the country..,avoiding the structural complexity of building large scale power plant; SPGP offers a flexible, realiable, close to consumer option that can be multipled in multiple units and easily transformed to negbourhood service station in industrial hubs national wide.

Prepared by: Submitted to:

Craig & Rupert Denis Limited Brainstorm utilities limited

123610 Russia, 8th Floor, suite 841-843,

Krasnopresnenskaya nab.,12 Moscow No.: 50/52 Broad way street,

Email: crd.wwemdd@gmail.com Lagos Island, Lagos

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List of contents

1. The C&RD Initiative: An Overview 1.1). A small power generation plant Opportunities for PH

2. Energy Situation

Technical Analysis

3. Installation Site

4. Utility Grid Connection Proximity and Requirements

5. Land Requirements for 6 MW Small Power Generating Plant

6. Preliminary System Design .

. Gas Market Identification.

. 7.1. Macro Economic Scenario.

. 7.2. Power Demand: Base Case.

. 7.2. Power Demand : High and Low Cases.

. 7.5. Total Gas Demand.

8. Project Economic feasibility assessment . 8.1.) Project Capital requirement

9. Plant Operations and Maintenance Cost 9.a.) Diagram of Turbine generator T-6-2U3

10. Economic Analysis .

. 10.1. Project Costs

. 10.2. "Base Case" Economic Analysis

. 10.3. "Base Case" Economic Analysis Methodology

. 10.4. Results of "Base Case" Economic Analyses

. 10.5. Base Case Economic Analysis Results - 20 Year Financing Option Down

. . Payment Net Present Value Generation Cost Benefit/Cost Ratio Payback Period

. 10.6. Economic Incentives

11. Alternative Finance and Funding Scenarios 11.1.) Economic Value And Value-Added Benefits

12. On-Site EnergyConsumption/Sales 12.a.) Generation Tariff Methodology

13. Power Sales Strategies 13.a.) Alternative sales

14. Additional Value Added Benefits 14.a.) Taxation

15. Electricity Generation License

16. Environmental aspects

17. Gas Consumption for Power Generation: Base Case

. 17.1. Basic project schedule

. 17.2. Gas Turbine Principle of Operation

. 17.3. Gases passing through an actual gas turbine cycle undergo:

. 17.4. Classification of Gas turbines

. 17.5. Types of Gas Turbines

. 17.6. Chosen Gas Turbine

18. Turbine Control

19. Balance of Plant Equipment

. Recommendations And Conclusion

20. Turbo Generator technical characteristic

21. Technical Recommendations

22. Environmental Recommendations

23. Economical Recommendations

24. Policy Recommendations

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1.The C&RD Initiative: An Overview A SPGP is powered by gas turbine generator installed on an industrial site for the dual purpose of power generation and electricity reliability. A SPGP is most effective at producing electricity when industries in Port harcourt (PH) industrial hub need it most – for steady, continual productivity, 24hours-366 days. A SPGP can be installed quickly (6 - 8 months construction time), can generate immediate power that will not fluctuate in price, and can provide relief to the energy system during peak demand periods, such as those being experienced in Port harcourt(PH). A SPGP will provide Port harcourt(PH) industries with the opportunity to generate environmentally benign electricity and maintain local control over energy revenues (instead of exporting these funds to non-resident energy providers). C&RD has an opportunity to transform these innovative, environmentally benign, and economically viable power generating assets for the energy-stressed industries in Port harcourt(PH) industrial hub. 1.1. A small power generation plant Opportunities for Port harcourt. A SPGP electricity can be sold for a price of approximately 10 kobo per kilowatt-hour (kWh), when including all potential economic incentives and buy-downs. This price will achieve payback periods ranging from ten to twenty years, depending upon which small power generation option is selected. Current retail prices of electricity supplied to the Port harcourt region are between 60 and 80 kobo per kWh. The power exchange rate (wholesale cost of power) average from January to july 2015 was 14 kobo per kWh; this average rate was nine kobo per kWh for the full year of 2015. C&RD has taken the initiative to undertaken a detailed technology and economic feasibility study to determine the viability of developing up to a six megawatt (6MW) SPGPs at different ports within the City. In addition, with expected continued shortfalls in electricity generation supplies likely, a SPGP could be a cost-effective means of enhancing electricity reliability and reducing electricity price volatility while meeting Clean Air requirements. This study has determined that a A SPGP can be an economically viable option for power production. 2. Energy Situation Energy prices hit new all time highs in January of 2014. As a result, retail energy prices are still well over 60% higher than the same period the previous year. In addition to rising energy costs, the scarcity of energy supplies throughout the state have resulted in an unprecedented number of power black out. High Alerts are implemented when electricity supplies are less than 25% above the expected demand on the system; this 25% margin is far below the industry standard of 75% reserve margins. There are a number of reasons that electricity consumers in PH may continue to experience black out and high energy prices, including: • Electricity demand is forecasted to continue to increase over the next five years in the Rivers

state; • New power plants planned for construction are not expected to keep up with the rising demand for electricity in the PH marketplace;

• The time lag for developing conventional power plants in PH is currently about 2-3 years;

• Nationwide, commodity prices for natural gas continue to increase as demand outstrips supply;

• There are only two transmission lines that connect PH to regional and Nationwide transmission

lines, thus increasing the likelihood of a "bottleneck" in the transmission system which can constrain the

amount of energy imported into the region; and

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• There are few available generation sites located near national grid transmission lines

within the state; The use of distributed energy resources, such as SPGP, can provide a long term solution to these concerns. Technical Analysis The following sections detail the technical components of the proposed SPGP at PH and include the system siting requirements, system optimization characteristics, and preliminary design considerations. 3. Installation Site The PH site is an ideal location for SPGP, as the site has an existing gas pipeline utility that we save the cost of contructing a new pipeline or transportation of gas. Repowering often involves the introduction of a gas turbine generator while using existing infrastructure such as steam turbine, generators and grid connection. Initial efforts under the system siting analysis focused on the development of a 10 MW SPGP. While this site is desirable due to its location adjacent to the cogeneration plant and grid tie-in point; the is an existing 3 MW SPGP installation within the facility that will account for 23% of annual output of a 9 MW, this will cover the industrial on-site energy need within the facility), and the tie-in voltage to the distribution system at this site is believed to be 480 VAC, follow-up analyses indicated that this site is commercially viable is it is situated in center of industrial hub. This is due to the fact that the utility tie-in voltage is 4160 Volts AC (VAC), while the SPGP system's optimal tie in voltage is 480 VAC. While the power from the SPGP could be "stepped up" to meet these high voltage requirements, it would add considerably to the capital cost of the project. In addition, contractual arrangements to integrate with the cogeneration plant operations may be:

1) complex due to the existing contractual arrangements the site Complex has with a third party re-seller of power from the cogeneration plant,

2) time consuming. Furthermore, the C&RD would not receive any cost saving benefits from the SPGP at this site. This is due to the fact that the C&RD currently receives free energy for some of the site operations and pays a low price for energy for the plant operations; this energy is provided by the on-site cogeneration plant as part of the C&RD's contractual arrangement with a third party re-seller. However, this site remains an option if the potential contractual hurdles and high voltage issues can be overcome.

TECHNICAL DATA REQUIREMENTS FOR A NEW POWER STATION 1. Site Information of Power Station location map to scale showing roads, transmission line and transmission stations, if any. 2. Fuel supply arrangement (contractual, gas and oil pipelines-where available) 3. On the site map show area required for the following: • Fuel delivery point, • fuel storage space, • liquid waste disposal area,

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4.1.Utility Grid Connection Proximity and Requirements The site is in close proximity (2000 feet or less) to potential utility tie-in points. An engineering feasibility study will be required by Transmission Company of Nigeria (TCN) & Nigerian Electricity Regulatory Commission (NERC) to determine interconnection requirements and line load capacity. Any power generation facility constructed in Nigeria will be required to meet NERC standard interconnection requirements (i.e., IEEE, UL, anti- islanding, and over/under frequency and voltage specifications) to tie-in to its transmission and distribution system. In addition, NERC will need to conduct analyses of each of the potential tie-in points to determine if the transmission or distribution line can accommodate the addition of up to 6 MW of capacity on these lines from the SPGP. At the completion of its study, NERC will provide the C&RD with tie-in and hook-up requirements and fees, detailed interconnection requirements, and the hourly availability and cost of reserving capacity on the line. NERC charges a nominal fee of approximately NGN 1.300 000.00 for each study. It is recommended that the C&RD immediately proceed with the NERC studies for each of the proposed site options as soon as the system design parameters are finalized. A copy of the interconnection application form and interconnection requirements is available from NERC. It should also be noted that the system designs developed for this feasibility study utilized listed components accepted by the Nigeria Electricity Regulatory Commission (NERC). 5. Land Requirements for 6 MW Small Power Generating Plant As part of the site assessment for a 6 MW SPGP at the industrial complex. C&RD calculated the land requirements for the SPGP system under consideration. Based on the system designs developed for this potential project, a 6 MW SPGP would require approximately 60 meter width) by 100 meters (length) of available land. 6. Preliminary System Design As one of the first steps in conducting the feasibility study for the SPGP at the PH, C&RD developed preliminary system designs for the system. SPGP type and size was designed to optimize performance for annual energy output and to maximize reliability. Gas Market Identification.

7.1. Macro Economic Scenario.

A reference Macro-economic scenario has been defined : • Growth Rate: 2010 - 2015 2.5 % per year (real terms)

2016 - 2035 6.0 % per year (real terms)

• Yearly Inflation Rate to be used in the economic evaluations :

2010 = 2,1% ; 2011 = 2,0% ; 2016-2035 = 1,9%

• NGN/US$ Exchange Rate:

2015 2016 2017 2018 2019 2020-2035 220,99 210,05 200,53 180,00 180,01 150,00

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7.2. Power Demand: Base Case. On the basis of the "maturity" of Nigerian power market and of the above economic scenario, the "base case" power demand forecast has been prepared.

Yearly growth rate (Electricity demand - final uses)

2014 2. 5 % 2015 2.2% 2016 2. 0 % 2017 1. 7 % 2016 - 2035 1. 5% 2016 - 2035 0 % (no growth)

Electricity demand (final uses - starting level 2014) = 1510 GWh Demand at PH (final uses - from 2015 to 2029) = 1904 GWh Starting from the demand forecast values, gross generation (including generation & distribution losses, own uses and no-revenue sales) was computed year by year, under assumptions based on historical data. 7.3.Power Demand : High and Low Cases. Two alternative cases ("High Demand" and "Low Demand" respectively) have been prepared as a first attempt to provide a range of possible results for discussion. The macro-economic scenario, however, has not been changed (same GDP growth throughout the forecast period); the different results derive from changes in the coefficients that link the power demand growth to the economic growth. Power Production and related Gas Consumption in the alternative cases .

Demand at plateau (2015) : Corresponding Gross Production : Corresponding gas consumption (In PH- from year 2015) :

High Dem.

1960 GWh/y

2488 GWh/y 540 Mscm/y

Low Dem.

1861 GWh/y

2363 GWh/y 509 Mscm/y

Fuel supply contract terms are relatively uniform across the sector, C&RD will procure its gas supply pursuant to a long-term gas supply agreement with the Gas Aggregation Company of Nigeria Limited (GACN).Gas transportation services will be provided by the state-owned Nigerian Gas Company Limited.

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7.4.Total Gas Demand. summarises the total gas demand at PH (2015). Power generation confirms to be "the customer" of natural gas in Nigeria, accounting for over 25% of the total consumption. Given the maturity of the River state power market, the two sensitivity cases (High and Low) analysed don't affect significantly the quantities of gas to be supplied. Total Gas Demand in 2015 - High, Base and Low Cases .

Power Gener. Other Uses TOTAL

High Dem. 540 28. 0 568 Mscm/y Base Case 521 18. 5 539. 5 " Low Dem. 509 0 509 "

Project Economic feasibility assessment The assessment was done in a systematic way. This included defining or evaluating the financial requirements of the project or capital investment required, which will be classified into different categories, namely Engineering, Procurement and Construction costs (EPC). Furthermore, the operations and maintenance cost of the SPGP were also taken into consideration. As a measure of its viability several factors were evaluated, namely; the project internal rate of return (IRR), payback period and the overall project net present value (NPV) at the end of the expected Plant life. 8.1 Project Capital requirement In order to simply the analysis and as well as to use the standard economic evaluation that is normally done for any power plant, the overall plant capital requirement was determined using the plant capacity first. Hence, the capital requirement for a SPGP as defined in the review, ranges between NGN10/kW and typically is NGN15/kW from experience. Thus for a 6 MW plant the Capital requirement is: Thus the Project total capital requirement is: 80 Million NGN . The Capital Requirement will be spread over six construction months, assuming equal investment in both years.

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9. Plant Operations and Maintenance Cost The O&M cost were spilt into two main categories, which are annual Variable and Fixed O&M

expenses. The Variable expenses include; repair and replacement cost, water, chemicals &

lubricants. The fixed costs include management expenses, training expenses and salaries. The

table below will list the annual variable and fixed expenses and the respective cost.

9.a. Diagram of Turbine generator T-6-2U3 air-cooled for coupling to a steam turbine

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10. Economic Analysis 10.1.a.Actual Project cost Amount (NGN)/ Million

1. Complete delivering set of Turbine generator T-6-2U3 air-cooled for

coupling to a steam turbine consisting of Turbo generator with air

cooler, support plate or foundation pins; Mounting accessories and

special tools; Installation materials to the generator; Hardware thermal 79,050,000.00

control; Cover sound proof; The pumps supplying water to the cooling

. coil; Excitation system

2. Logistic, Engineering and installation (ELSIB Russia experts on site) 3,889,600.00

3. Installation facility reconstruction 5,400.000.00

4. Labour, transportation, miscelaneous, etc) 2,160.000.00 (The total number of employees in SPGP is 8. After the completion of the

new plant, it will keep the same organization. It consists of 2 engineers .

, and 2 operators and 1 maintenance workers/transporter.)

5. O&M cost- water, chemicals, lubricants & training expenses 10,000,000.00

6. Estate value, Insurance & Licencing 10,000,000.00

Total cost 101,499,600.00

This cost evaluation is approximated to six months of Engineering, Procurement and Construction operational period and six months of active

service. The SPGP starts generating revenue for operational purpose after this period, revenue & pay backs and debit servicing will resume with 10

years to 20 years till 40 years service line of SPGP.

10.1.b.Annaul cost of runing installation Amount (NGN)/Million

1. Labour, transportation, miscelaneous, etc) 2,160.000.00

2. O&M cost- water, chemicals, lubricants & training expenses 10,000,00.00

Total cost 12,160,000.00

This evaluationcan be vary base actual energy out and operation capacity of SPGP, not more than 0.005 kw value.

10.1.c.Financial Source Amount (NGN)/ Million

1. Equity 12,712,600.00.

, 2. Capital investment 5,287,000.00

. 3. Loan 83,500,000.00

Total cost 88,787,000.00

Trem of payment: Documentary letter of credit / Equity evaluation and Capital investment on agreement

with bank

A further economic evaluation will be undertaken by C&RD to elavuate lontg term economic proxies

before the implementation of the project;

1. Short term cash flow projection 2. Medium term cash flow projection 3. Funding arrangements 4. Asset base 5. Risk Management Strategy 6. Management experience and depth

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10.2."Base Case" Economic Analysis In evaluating the economics of the SPGP system options for the PH, a net present value analysis was conducted for the "base case" scenario for each SPGP system type and size. The "base case" scenario was defined by the project costs detailed in section 10.1., and the project benefits accruing from the sales of plant energy or displacement of utility energy purchases. The "base case" scenario does not include the benefits of any economic incentives. Available economic incentives are evaluated under the "best case" scenario detailed. 10.3."Base Case" Economic Analysis Methodology In conducting these "base case" analyses, the net present value of the project benefits was derived through the summation of the projected annual revenues from energy generated by the plant over its expected forty year life. These revenues were calculated based upon an assumption that the value of the energy generated in the base year of operations was equal to 10 kobo/kWh (i.e., the commodity price of energy sold from the plant, or the cost of utility provided energy displaced from the on-site SPGP, is equal to 10 kobo per kWh). This value was calculated based on prevailing market conditions in the PH region from January through December 2014. The NERC General Service "A" rate tariff was used as a proxy for this assessment. This assumption for the value of power generated is a conservative estimate based on a mix of high and low monthly average energy prices during this period ranging from a low of under 10 kobo/kWh to a high of over 15 kobo/kWh. It should be noted that as recently as January of 2015, average monthly retail energy prices have reached nearly 80 kobo/kWh. After the base year, a 3% per year energy price escalator was included in the analysis to account for future energy price increases and inflation. These annual revenues were then discounted by the appropriate discount rate tied to the financing option, and then summed over the thirty-year period. Similarly, the net present value of the project costs was derived through the summation of the SPGP's fixed and annual costs over the fourty years period. These costs include the down payment, annual financing payments, and annual O&M expenditures (NGN0.005/kWh/year). It should be noted that the O&M expenditures have been calculated based on the O&M requirements for the SPGP system components only. Actual O&M costs may be higher due to the additional engineering costs associated with maintaining a SPGP system. The first step in calculating these costs was to determine the annual financing payment. This was accomplished by matching the projected annual revenues to an annual payment such that the annual finance payment and O&M expenditures do not exceed the annual revenues, thereby maintaining positive or neutral cash flow for the project over the finance period. After this iterative process resulted in the annual payment, the principle amount of the loan was determined based on the interest rate of the finance option. The principle loan amount was then subtracted from the system capital cost to determine the down payment of the system. Finally, the down payment, and the annual project costs were discounted by the appropriate discount rate, again tied to the financing option, and summed over the fourty year period. The net present value methodology detailed above was replicated for each system option with one exception. Since SPGP have an expected life of fourty years, the SPGP system options were evaluated over the fourty-year period.

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10.4.Results of "Base Case" Economic Analyses Based on the methodology review, economic analyses were conducted for the SPGP system, using options considered by this study. In addition, all of these of these options were analyzed based on the two financing options currently available to the C&RD. The results of these calculations are presented the economic results of these same systems under the 20-year financing mechanism.

10.5 Base Case Economic Analysis Results - 10 Year Financing Option

Down Payment Net Present Value Generation Cost Benefit/Cost Ratio Payback Period

SPGP System Option Requirement(NGN/million) (NGN /kWh) (6MW output) (years interest) SPGP NGN 84.00 (NGN 10K) NGN 0.186 0.72 10+

6 Mega watts NGN 12.00 (NGN 15K) NGN 0.128 0.98 10+ NGN 12.00 (2016-2045) (NGN 40K) NGN 0.194 0.69 20+ A number of observations can be made with respect to the above results. First, there is a significant difference in project economics between the 10-year financing options. In addition, the zero value used for the discount rate also improves the economics. A few additional observations can be made regarding the net present value and benefit-to-cost ratios of the SPGP. This means that while the loan may be paid off in year 10 or 13 years, depending on the finance option, project revenues will continue to be required to pay down the initial down payment. Once the specified payback year has been reached, then the system will be fully paid for, and positive cash flow will result for the remaining life of the system. Based on the above economic results, SPGP system result in positive economic valuations. It is apparent from these "base case" economic valuation results that the most favorable system type is the Gas turbine generating system, with fixed mount system. The SPGP systems which pass the initial economic screening criteria under this base case, in descending order of economic value are:

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Economic Incentives The following sections detail the economic incentives available to increase the economic potential of the proposed SPGP system options. It should be noted that the availability and applicability of these incentives varies, and therefore a range of financial impacts is presented. 11.Alternative Finance and Funding Scenarios In addition to the 10 year financing options, C&RD also conducted an analysis of two alternative scenarios to demonstrate the economic impacts of financing over a 10-year period with C&RD Collateral trust fund and a direct purchase of the system with no financing. Due to the fact that the use of Collateral trust fund will require 10 year financing starting in 2015, a best case scenario was developed for the SPGP system option financed with C&RD Collateral trust fund over a 10-year period. In addition, another best case scenario was developed for the same SPGP system option with no financing, that is, a direct purchase of the system. The results of these analyses are presented in the table below. Best Case Economic Analysis Results 10 Year Financing and No Financing Options Down Payment Net Present Value Generation Cost Benefit/Cost Ratio Payback Period System Option Requirement (NGN /kWh) (years) 6 Mega watts SPGP NGN84. 00 NGN 685 000 NGN 0.103 2.60 10 year financing option SPGP NGN 84.00 NGN 685 000 NGN 0.085 1.57 16 * - direct purchase (purchase price)

The one requirement that stands out with respect to obtaining these funds is that the system's energy production may not exceed 25% of the site's current electricity needs. For example, should the SPGP be sited near the Fee Station, this account would utilize only about 25% of the annual energy output of The are two main observations that can be made on these analyses. First, while the ten-year option provides on of the best economic valuations of all options studied, this is due to the fact that over half the system cost is paid for in the down payment. This combination of high down payment and short finance period provides highly favorable economic valuations for net present value and benefit to cost ratio. However, it is also important to note that payback period is longer than finance period.

The second observation that can be made is related to the direct purchase option. While the economic valuations provided by these options are not as favorable as some of the other financing options, this is due to the fact that the capital costs are paid up-front prior to development. Due to this fact, the entire capital cost of the system is fully valued in year one, and is not discounted in the cash flow analysis over the 30-year period. Again, this is a function of the discount rate factor which takes in to account that money is worth more in the present than in the future. However, the generation cost resulting from the direct purchase of the plant is lowest of all options evaluated. This is a result of the fact that this option is the lowest total cost option, since there is no finance interest charged.

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11.1. Economic Value And Value-Added Benefits

A number of options were evaluated under this study to estimate the economic benefits of the proposed project, as well as to specify value-added benefits provided by the plant. These benefits are described in the following sections. 12.On-Site Energy Consumption/Sales In order to quantify the benefits of on-site usage of SPGP at the site complex, an analysis was conducted to determine the "break-even" cost of SPGP produced energy when used to displace utility provided energy. In calculating the commodity price of utility provided power, a billing analysis for the site facility account was conducted for the period from January through December 2014. Based on this analysis, it was determined that the average annual price of utility energy during this period was 65 kobo/kWh. This commodity price was then designated as the "break-even" cost. That is, when the commodity price of energy generated by the SPGP is valued at 10 cents/kWh, and

displaces utility provided energy priced at 65 kobo per kWh, the result is a "break-even" transaction.

Should the utility price of energy increase above the 50 kobo/kWh level, then net savings are

provided to the Fee Station. It should be noted that the Fee Station's annual energy consumption is

equivalent to only 25% of the annual output of a 3 MW plant. Since the Fee Station is on the TCN

General Service "A" rate schedule. Therefore, if other accounts of the same tariff can be identified

and accessed, similar reductions in energy bills during these high cost months could be experienced.

12.a. NERC Generation Tariff Methodology

NERC has determined that the price of electricity to be paid to generators will be at the level required by an efficient new entrant to cover its life cycle costs (including its short run fuel and operating costs and its long run return on capital invested). The Long Run Marginal Cost (LRMC) Method is in use here. LRMC involves calculating the full life cycle cost of the lowest‐efficient-cost new entrant generator, taking into account current costs of plant and equipment, return on capital, operation and maintenance, fuel costs, etc. LRMC is applied in Individual long run marginal cost for each generator: This sets prices for each generator according to its plant and site specific costs. However, individual (site‐specific) LRMC model requires each new entrant IPP that requires a tariff beyond the MYTO benchmark to apply to the NERC for approval. The IPP will open its procurement process, accounts and financial model to scrutiny by the NERC, which will then apply prudence and relevance tests to determine whether such plant and site‐specific costs should be allowed in the tariff. 13.Power Sales Strategies Other options for utilization of the output of the plant include direct sales to customers in the PH industrial region. Currently, industrial rates in PH are "capped" at 65 kobo per kWh. However, this "cap" on industrial rates is seen by many as artificial since the rates are capped for three years at the 65 kobo/kWh level, but at the end of the three year period industrial customers will be charged the difference between the capped rate and actual cost of power consumed -- plus an interest rate for the balance carried over the three year period. Assuming that the capped rate and the actual cost of energy consumed are equal over the three year period (which most industry analysts do not anticipate), a typical industrial customer that purchases the output of the proposed plant at 35 kobo/kWh (estimated based on 15 kobo/kWh commodity price, 10/kobo per kWh CEC rebate, and 10 kobo/kWh to account for distribution, administrative, and transaction costs) would experience an annual increase in their utility bills of NGN70,000. Since this is obviously not an economical transaction for the consumer, this scenario is highly unlikely. Conversely, if the actual future cost of power in the region mirrors the current rates in the region (10-15 kobo per kWh), industrial consumers could purchase the power for a break-even transaction, or even at net savings on their utility bills.

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The direct sales strategy discussed above assumes an "all or nothing" purchase by the consumer. However, if the power were sold in 10000 kWh per month blocks (just under 15% of average industrial usage), the incremental cost on the consumers utility bill would be ~NGN20 000.00 per month. If this option is considered, the C&RD should investigate the legality of such a scenario as current restructuring laws prohibit customers from having more than one energy service provider per account. However, this law may not apply to the C&RD if it becomes a municipal utility. Another alternative considered under the sales options was direct sales to industrial power marketers. While this scenario may warrant further evaluation, Millennium contacted several green power marketers operating in Nigeria to determine their interest in purchasing electricity power resources from the Nigeria. While all were interested in purchasing electricity power (since few industrial power marketers have any SPGP in their resource portfolios), none were willing to pay more than 10 cents/kWh. This option is not economically viable for the C&RD based on the economics of the proposed SPGP at PH. Finally, the C&RD may also want to consider the option of selling the output of the SPGP directly into the Power Exchange. While current market conditions indicate that selling the power directly into the Power Exchange may result in immediate profits and positive cash flow, the future of the PH electricity market is highly uncertain and extreme volatility in energy prices may continue to exist. Therefore, selling directly into the exchange would be a high risk option, especially if future energy prices were to drop below the 15 kobo/kWh level; prices below this level would result in negative cash flow for the plant and would not accrue sufficient revenues to meet the finance payment requirement. In addition, selling into the market reduces one of the major benefits provided by electricity power - price stability. Since SPGP have no fuel or other variable costs, the energy from a SPGP can be sold at fixed prices under long-term contracts. Fixed price long-term contracts are the lowest risk option since they guarantee a positive revenue stream from energy sales. This strategy also provides advantages to the customer by providing a long-term hedge against future price volatility - a value-added benefit in addition to any energy price savings resulting from the long- term fixed price contract. Under any of the direct sales strategies that require transmitting power through the grid, additional costs will be incurred for these sales including, but not limited to, power scheduling and transmission wheeling charges, administrative costs, and transaction costs. Discussions should be initiated with NERC to determine the amount of these additional costs if direct sales strategies are pursued. Remarks: Further studies will be undertaken to evaluate procurement and installation of commercially sound metering, billing and collections by the utility (including the ability to disconnect customers who default on payments). 13.a. Alternative sales On the role of the Nigerian Bulk Electricity Trading Plc (NBET) established protocol in developing a model Power Purchase Agreement (PPA) for the IPP such that it is able to shore up credit enhancements provided through the Federal Ministry of Finance will ease investors’ consideration of the “project finance” option in investing in the sector. C&RD may pursuant to a 20-year power purchase agreement, sell the electric power generated at its power plant to NBET. NBET will make monthly capacity payments reflecting capital, equity return, and fixed operation and maintenance costs plus monthly energy payments reflecting a pass-through of fuel costs and variable operation and maintenance expenses in respect of energy delivered.

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14. Additional Value Added Benefits In addition to the value added benefits of a SPGP discussed throughout this report (i.e., hedging against future price volatility, peak power reduction, Brownfield redevelopment, economic development, and positive environmental impacts), there is one other value-added benefit that should be considered in evaluating the viability of SPGP options in the PH region. This additional value-added benefit is the voltage support distributed energy options such as SPGP provide to the local transmission and distribution grid. While this has no monetary value to the C&RD, NERC may accrue benefits on its stressed system through the additional localized voltage support provided by SPGP. While this additional voltage support is minimal from just one 6 MW SPGP, these benefits may become appreciable if additional distributed generation plants are brought on line in the future. While a 6 MW SPGP is unlikely to prevent a localized power black out, the proliferation of distributed energy options on the localized grid may have an impact in the future. As SPGP and other distributed energy options become valued on a more equal basis with conventional peaking power plants (such as natural gas combustion turbines) the value added benefits of SPGP are more likely to be transferred to tangible monetary benefits. The development of a SPGP at PH is an important first step in PH towards moving the market for SPGP technologies from small-scale electricity power applications to utility-scale power plant applications. 14.a. Taxation Company tax of 32% and annual depreciation rate of 33.3% as recommended by NERC 15. Electricity Generation License A generation license authorizes the licensee to construct, own, operate and maintain a generation station for purposes of generation and supply of electricity in accordance with the Electric Power Sector Reform Act, 2005. Subject to this Act, the holder of a generation license may sell power or ancillary services to any of the classes of persons specified in the license. -Distribution Licence • the connection of customers for the purpose of receiving a supply of electricity; • the installation, maintenance and reading of meters, billing and collection; and -Trading Licence A trading license authorizes the license to engage in the purchasing, selling, and trading of electricity. 16.Environmental aspects

The SPGP as a fuel will use natural gas that will cause energy saving by an energy efficient

generation plant. The greatest effect is the CO2 reduction, and also reduction of acid rain related

substances, SOx and NOx. The gas turbine shall be equipped with dry low NOx combustors in

small amounts.

The Gas Sales Agreement will be negotiated in case the Parties decide to proceed with the

project implementation. It is anyway envisaged that, in order to be consistent with the Project's

needs and make it economically feasible, it will have to be a "Long Term - Take or Pay" one .

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17. Gas Consumption for Power Generation: Base Case Gas consumption for power generation is a direct output of the Despatching Model. It is computed for each hour and for each unit according to the actual production of the single unit in that hour and to its heat rate at such a load. Gas consumption (total, per group and per site) is derived from these calculations in terms of total yearly volumes and hourly modulation curves. Shows the total yearly gas consumption from 2005 to 2015. Enclosure 2.1 reports all the details. Yearly Gas Consumption for power generation .

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Consumption 559 565 566 575 516 516 524 532 505 513 521 The volumetric gas consumption has been derived from the expected average chemical composition of the gas to be supplied to the plant, having the following energy content:

Net Calorific Value = 8.563 kcal/scm ; Gross Calorific Value = 9.470 kcal/scm .

17.1. Basic project schedule

According to the project schedule there is an intention to secure the supply of electric power and heat

by 2016. A gas turbine should start their operation for the first time during 2016, and a half year later the

remaining Gas turbine shall be put into operation will start.

17.2. Gas Turbine Principle of Operation

A gas turbine is a type of internal combustion engine that uses gas as the working fluid. It is essentially

comprised of an upstream rotating compressor coupled to a downstream turbine, and a combustion

chamber in-between.

17.3. Gases passing through an actual gas turbine cycle undergo:

i. Adiabatic process - compression.

ii. Isobaric process - heat addition. iii. Adiabatic process - expansion.

iv. Isobaric process - heat rejection to the atmosphere.

17.4. Classification of Gas turbines

Classification of Gas turbines can be done according to following criteria; path of working substance,

nature of cycle, process of heat absorption, mode of drive and function of rotational speed, pressure

drop in the gas turbine and physical location.

17.5.Types of Gas Turbines

There are two main types of Gas turbines; Aero-derivatives and Industrial Gas Turbines.

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17.6. Chosen Gas Turbine

The least rated power requirement for the gas turbine is: 6MW/6000kw

The limit is based on establishing a SPGP with a rated power output which is at least 8000Kva. This is

based upon theoretical knowledge that the steam section will generate about 20% of the rated

capacity of the Gas turbine.

After going through the several options the best option was a setup of ELSIB Т-6-2U3 TURBO

GENERATOR.

The choice had several key Technical and economic attributes which included;

• Short starting period (10-20 minutes).

• High Thermal efficiency (42%) and low heat rates (low fuel consumption).

• Low emissions.

• Readily available on the market and available spare parts.

18. Turbine Control

In order to ensure high efficiency, high plant availability performance and high safety standards; the

steam turbine Must be equipped with a control system. ELSIB makes this a simple task by packing

the turbine control system with the actual steam turbine.

19. Balance of Plant Equipment

For the Plant to function efficiently it requires other equipment or auxiliaries in addition to the gas

turbine. These include; the turbine inlet cooling system, the condenser, the boiler feed pump, the

water treatment plant, the cooling tower, and the exhaust gas stack. Therefore this section analyses

those other useful components of the SPGP.

Condenser - The steam from the steam turbine exhausts into the condenser which is a pressure of

10kpa. Boiler feed pump - The boiler feed pump must be able to raise the water to a pressure of

30Bars from 10kpa. Water treatment plant - The raw water from river needs to be treated, so as to

avoid tube scaling and damage to Turbine blades and pump impellers.Thus the plant will have a

Demineralization plant to remove the minerals which can corrode plant components. In addition the

plant will have water treatment ponds to allow for sedimentation to take place. Exhaust Gas Stack -

Exhaust stack design is important in reducing emissions. The stack should have the ability to cope up

with the exhaust gas temperatures of 194.9 and ensure that they are exhausted into the atmosphere

at a safe and lower temperature.

Complete delivering Package of Turbo generator delivery

- Turbo generator with air cooler, support plate or foundation pins

- Mounting accessories and special tools

- Installation materials to the generator

- Hardware thermal control

- Cover sound proof

- The pumps supplying water to the cooling coil

- Excitation system

- Spare parts to the extent agreed with the customer

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20. Turbo Generator Technical characterics

Characteristics Duty Long-permissible modes Full Active Power Kva 6000 Active Power, Kva 7500 Power Factor 0.8 Voltage Stator 10500 Current A 412 Rotational Speed, Vol / Min 3000 Frequency, Hz 50 Efficiency,% 97.7 Connection Phases Of The Stator Winding "Star" The Ratio of Short-Circuit 0.47 Transient Inductive Reactance 0.17 Rated Temperature of Cooling Water Inlet Air Cooler, ° C 32 The Minimum Temperature of The Cooling Water Inlet Air Cooler, ° C 15 Cooling water flow through coolers, m / h 42 In-let air temperature of 40 ° C in the generator, kW 6600 Temperature of the air entering the generator 40° C kW 7200 Operating Temperature, Co Stator Winding 125 Winding Rotor 130 Stator Iron 120 Weight, Kg General 18000 Stator 8800 Rotor 5300 Characteristics values regulatory documents Average square value of vibration speed bearings Turbo generator Not more than 4.5 mm / s. Complete the assigned service life 40 years; The number of launches per year with a set load Not more than 330; The number of disconnections from the network and switching (synchronization) for the entire lifetime, Not less than 10,000. A resource between overhauls 8 years The average sound level at 1m distance from the outer contour (with soundproof) 80 DBA Turbogenerator provides stable operation: - at a frequency of 46.0 Hz - for at least 1 s; - at a frequency of 47.0 Hz - for at least 40 seconds. The Turbogenerator is manufactured for operation at an altitude upto 1000 m above the sea level in the non-explosive environment at a temperature not lower than +5 C. The turbo generator has a closed design. Cooling turbo generator performed air in a closed circuit under the effect of the two axial fans mounted on the rotor shaft. The air is cooled by water in the air cooler that is integrated into the housing located above the stator of the turbo generator.

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The stator core is assembled from isolated segments of electrical steel. For cooling the windings and stator core in the core provided with radial ventilation channels that share the core along its length into individual packages. Outside diameter core made ducts for supplying air to the radial channels. The stator winding is a two-layer reel. The stator winding insulation thermosetting "Monolith" heat resistance class "F". Permissible temperature measured by the thermal resistance meter, laid in grooves 125C (heat resistance class "B"). The winding has six pins: 3 - linear, 3 zero. O are located at the bottom of the generator stator. The rotor is made from solid stainless steel forging, which provides mechanical strength of the rotor at all operating modes of the Turbo generator. The rotor winding is made of cold-continuous copper conductors and fit into grooves milled in the barrel rotor. Rotor winding insulation heat resistance class "F". Allowable temperature of the rotor winding, measured by resistance - 130 ° C (for temperature class "B"). On the console of the rotor shaft is set anchor brushless exciter with diode rectifiers. The voltage rectified current displayed on the slip rings are designed to control the rotor winding insulation. Stator end winding closed box-shaped shield. The panels are fixed bearings. On the side of the pathogen bearings and labyrinth seals are isolated from the "land". To monitor the thermal state of the Turbo generator is equipped with thermal resistance meters. Control devices can be connected to the PCS station.

Turbine Generator Excitation System Brushless excitation system powered by a rotating anchor of the auxiliary AC generator through the rectifiers. The anchor of the auxiliary generator and the rectifiers are placed on the shaft of the Turbo generator. System power is provided from the exciter transformer connects to the turbine generator.

Quality and Warranty Production and testing of turbine generators NPO "ELSIB" JSC carried out in accordance with the requirements of ISO-9001-2008. The Turbo generator meets the standards of RF and IEC recommendations. The company ensures compliance with the requirements of the Turbo generator standards, subject to improper use, transport and storage, set specifications. Warranty period of operation of the Turbo generator at least three years from the date of commissioning in the domestic supply or 1 year from the date of commissioning, and no more than three years since testing the Turbo generator across the state border of the Russian Federation in the supply of turbine generators for export.

Recommendations And Conclusion

In order for the full potential of the project to be realized a few but important factors have to be

noted in its implementation, and plant design and operation.

21.Technical Recommendations

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A clear result that was obtained from the technical analysis is that the plant will have to operate in

a SPGP mode. This will result in high thermal efficiency and electrical power output. Furthermore,

another important design feature of the plant is the use of a ELSIB type heat recovery steam

generator in the steam section so as to reduce plant start-up time; this design is also much

cheaper as compared to the conventional steam drum type.

Furthermore, it is also recommended that the plant will have a turbine inlet cooling system (TIC)

which can use water as the coolant, as this will ensure uncompromised plant electrical output

during warm periods. It also recommended for the plant to use the latest ELSIB control system for

the gas turbine so as to ensure high plant thermal efficiency, low emissions, and overall securing

high plant availability performance. It is also recommended that the ELSIB T6-2 Gas turbine be the

gas turbine technology of choice due to its high thermal efficiency and low emission rates and from

the technical analysis it had the best specifications.

22. Environmental Recommendations

Although the above recommended technical factors ensure protection for the environment, it is

also recommended that

several management technics must be adopted in the plant operation. These include

implementation of a Cleaner Production (CP) strategy at the plant and using established

international standards and overall using an Environmental Management System (EMS) so as to

ensure that the environmental goals are achieved.

23. Economical Recommendations

A lot of factors are putting into consideration in evaluating this assessment, general investment

opportunities and effective functioning of SPGP in Nigeria as a case study and Africa as a whole.

First, a favourable investment climate is characterized largely by the following: good repayment

record and investment grade rating; less (costly) risk mitigation techniques to be employed which

translates into lower cost of capital and hence lower project costs and more competitive prices;

potentially more than one investment opportunity.

The most critical areas in coherent power sector is planning linked to procurement and

contracting. Planning has built-in contingencies to avoid emergency power plants or blackouts;

responsibility for procurement is clearly allocated, plans are linked to procurement; technical and

environmental due-diligence on the proposed site is also essential, and the procurement process

is transparent and competition ultimately drives down prices. Finally, capacity is built to contract

and evaluate effectively.

A final area which may make or break the long-term sustainability of this projects is: abundant, low

cost fuel and secure contracts. We have chosen a fuel option that is cost-competitive with other

fuels and anticipate to secure contracts of fuel supply for the duration of the project.

There are other factors that will directly effect the project or may help to facilitate a more

balanced outcomes, namely:

1) favourable equity partners;

2) favourable debt arrangements;

3) a secure and adequate revenue stream;

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4) credit enhancements and security arrangements;

5) positive technical performance and finally,

6) strategic management and relationship building.

Favourable equity partners is defined as follows: where possible, the involvement of local partners

and equity as well as firms with development origins; appetite for the actual project risk and a

return on equity that is generally perceived by parties as a reasonable and fair.

Favourable debt arrangements are paramount for the long-term sustainability of projects and may

be characterized as follows: competitively priced financing, local capital markets; some flexibility in

terms and conditions (including possible refinancing). Of utmost importance is a secure and

adequate revenue stream, which is generally made possible via the following conditions:

commercially sound metering, billing and collections by the utility (including the ability to

disconnect customers who default on payments, be they Government ministries/departments or

parastatals); it should be noted that investors/financiers prefer markets where the off-taker is not a

vertically integrated utility with own generation stations; the revenue stream should be

safeguarded in a robust PPA, which stipulates capacity and energy charges as well as dispatch,

fuel metering, interconnection, insurance, force majeure, transfer, termination, change of law

provisions, refinancing arrangements, dispute resolution, etc

Taking various forms, credit enhancements and security arrangements are part of the muscle that

attracts and sustains IPPs, specifically: partial risk guarantees; political risk insurance and cash,

namely escrow accounts, letters of credit and liquidity facilities--all of which should be made clear

at the time of implementation.

Positive technical performance is an area where most IPPs have a clear advantage, however, it

should not be taken for granted; this encompasses high technical performance, including

availability, and also that sponsors anticipate potential conflicts (especially related to O&M, and

budgeting) and mitigate them.

Strategic management and relationship building is grease for the wheels and an integral part of

the balancing of development and investment outcomes. Sponsors should work to create a

positive image through political relationships, development funds, and effective communications.

Ongoing, strategic management of their contracts, especially in the face of exogenous stresses, is

critical.

24. Policy Recommendations

The plant will use fuel from Nigeria; therefore it is recommended that the government sticks to its

energy policy measures especially its commitment in ensuring a solid bilateral business

relationship with Nigeria. This is also pointed out in the energy policy where it's stated that the

country is committed to regional power system integration through supporting initiatives on system

integration, joint cross-border generation projects.