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Kosova Lignite PowerInvestors ConferenceJanuary 2010

PricewaterhouseCoopers LLPJanuary 2010

Slide 2Kosovo Lignite Power

Transaction structureComponents

A. Construction of a new electric power generation plant, ‘Kosova e Re Power Plant’ (“KRPP”)- Estimated installed initial capacity of 500 MW- Possibility of expanding up to 1000 MW- Limited associated interconnection facilities

B. Immediate development of the Sibovc Lignite Field to supply existing plant and KRPP

C. Private sector participation in Kosova B




Sibovc

Kosova A

Kosova B

KRPP 1

DiSCo Domestic Market

Regional MarketKRPP2 Option

Key: Transaction components




Sibovc

Kosova A

Kosova B

KRPP 1

DiSCo Domestic Market

Regional MarketKRPP2 Option

Key: Transaction components

LSA

LSA

LSA

PPA

PPA

LSA



GenCoGenCo

MineCo & GenCo

MineCo

Sibovc

Kosova B

KR

PP 1

KR

PP

2 Option

• 2 companies but one consortium bid• No pre-determined corporate structure, but must work to ensure

efficient project delivery and operation

GoK

GoK



Main transaction agreements

MineCo GenCoKosovo B1

Kosovo B2

KRPP

DiSCo

Kosovo ALSA

LSA

LSA

PPA1

PPA2

Power

PPA3



Transaction structureMineCo: Sibovc lignite field

• Asset / staff / truck & shovel contract transfer• Transfer of existing Sibovc SW mining licence• Exclusive rights to mining development of Sibovc lignite field• GoK contribution: e.g. Bucket Wheel Excavators, Sibovc SW overburden

removal spend• MineCo will not assume pre-existing environmental / social liabilities• Access to Bardh mine for overburden disposal (MineCo responsible for

safe operation of spoil heaps and contribution to rehabilitation)• Duration of concession (40 years from KRPP COD)



Transaction structureMineCo: Contractual & pricing arrangements

• LSAs – non-discriminatory pricing across generation customers, supply to Kosovo A, B, KRPP 1 and other potential generators serving the domestic market

• Mining tonnage concession a function of licensed generation• 5, 10 or 15 year levellized price per tonne; regulated/indexed price

afterwards (for remaining 25-35 years)• Will schedule meetings with interested parties to receive indicative market

feedback prior to Draft RfP



Transaction structureKosova e Re Power Plant (KRPP)

• Commitment to construct new plant with estimated installed capacity of 500MW for domestic consumption (KRPP 1)

• Long-term PPA with Distribution & Supply company (DiSCo)

• On site of Kosovo B power plant

• To fulfill all EU-mandated environmental requirements and to achieve efficiencies in excess of 38%

• Proposed option to extend by further 500MW (KRPP 2)



KRPP contractual framework

Licences

O&M Agreement

Water Supply Agreement

Ash Disposal Agreement

Lignite Supply

Agreement

Power purchase

agreement

Connection Agreement

Financing

KRPP



Transaction structureKRPP – unit size

• Trade-off between supercritical favourable efficiency / emissions and commercial / technical viability in context of domestic and regional market

• Willing to listen to indicative market feedback prior to Draft RfP• Draft RfP will include specific required contracted operating and technical

characteristics- Rated capacity (MW)- Minimum heat rate, thermal efficiency in excess of 38%- CO2 and other emissions performance (EU Standards)- CCS ready



Transaction structureKRPP – offtake arrangements

• Long term PPA with Licensed Distribution and Supply business- Capacity up to 500MW- Duration – 20 years (circa)

• Kosovo Government support agreement with World Bank PRG / MIGA support- Support framework to extend beyond DiSCo privatisation



Transaction structureKRPP – site for construction

• Existing water supply from Iber-Lepenc canal

• Existing transmission connections, require expansion

• Site-sharing synergies with Kosovo B

• Existing ash-disposal pipeline connection to Mirash mine

Kosovo B 1 & 2

KRPPAsh Pile

New CoalYard

To mine



Transaction structureKRPP – Typical IPP PPA structure

KRPPCapital

repayment & return

Tax

Fuel

0

10

20

30

40

50

60

70

Ave

rage

pow

er p

rice

of P

PA (€

/MW

h 20

09 p

rices

)

Capital repayment & return Operations & Maintenance costTax Fuel

Variable Operations & Maintenance

cost

“Availability charge” €/MW

“Energy charge” €/MWh

Fixed Operations & Maintenance

cost



Transaction structureKosova B

• Long-term PPA with DiSCo with pre-determined Availability payments and competitively bid energy price (inclusive of LSA price)

• Long-term LSA with MineCo

• Immediate revenue source to GenCo

• Contribution of B assets by GoK in return for equity interest in GenCo

• Rehabilitation of plant to extend life to ensure EU-compliance and to provide domestic security of supply

• Offtake arrangements through PPA with provision for rehabilitation expenditure; step-up in Availability payments for expenditure approved by ERO

• Clearly identified assets, including facilities, PPA and generation licence

• Existing skilled workforce



What does a bid look like: preliminary views

• Bid price for KRPP Availability and Energy (including bid price LSA)• Bid price for Kosovo B1 and B2 Energy (pre-rehabilitation, including bid

price LSA)- pre-determined Availability payment and minimum Energy conversion

efficiency• Bid price LSA for Kosovo A• Pre-determined government stake



Bid evaluation criteria

For a given project volume / structure, bidders will be evaluated on:

• Lowest total cost of power supplied from KRPP

• Lowest cost of energy supplied from Kosovo B, pre-rehabilitation

• Lowest cost of lignite supplied to Kosovo A

NPV of 20 years’ capacity charge + energy charge * demand

NPV of [20] years’ energy charge * demand

NPV of Lignite price * Kosovo A demand until decommissioning



How to win this transaction

• Pre-qualify!• Engineer a successful bid

- Efficient Lignite mining plan and efficient operation- Efficient and effective KRPP construction plan for early and compliant

commercial operation- Realisation of operational synergies with B1 & B2- Efficient and effective B1 & B2 operation- Optimum cost of capital- Integrating value synergies from trading with regional markets through

successful development of KRPP 2 option

slide set 7 pwc mark hughes

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