Project: Support for Power Plant Construction
The project considers a proposal to QENL from HBK Department of Projects to construct a power plant of 3-4 MW in Maiduguri using Electromagnetic Energy Flux Reactor technology which uses ambient energy as a no-cost fuel source; Maiduguri, which is in the YEDC franchise zone, is currently without power as a result of insurgency.
The proposal would see QENL leasing the plant for either 25 or 15 years (the term sheet references both) with a tariff of US$0.08/kWh, payable in US$. The proposal is based on plant availability of 96.2% and a load factor of 100%. It presents 2 particular challenges. Most generation plants run at load factors of around 50% reflecting the variability of customer demand (generally between daytime peaks and nighttime lows). If the plant were to run at 50% load then the effective tariff would become US$0.16/kWh. Then,
in YEDC there are very significant problems with losses, current ATC&C losses are around 74%. If the plant ran at 50% load factor and suffered ATC&C losses of 74% then the generation cost would effectively become US$0.615/kWh.
To this figure needs to be added the cost of using the distribution network and a margin for QENL. QENL are seeking a margin of US$0.02/kWh, and using MYTO data the distribution cost would be 13.3 N/kWh.
We have used data supplied by HBK-DOP in their presentations to Aida Global to estimate the cost of capital implicit in their proposal. We are told that the plant CAPEX is US$1.2m/MW and we have allowed O&M costs of 10% of revenue. We calculated the proposed tariff of US$0.08/kWh and gave the project developers a before-tax return of 50%, which is very excessive for the proposed risk allocation. Using figures more typical for a generation project we believe a generation tariff of $0.06/kWh or even $0.04/kWh might be negotiable.