Download: Accelerating Traditional Power Generation Projects

Project Finance in Accelerating Traditional Power Generation Projects

A traditional power generation plant is a tolling plant, where fuel (Gas, or Others) is converted into electricity by various configurations of boilers and engines.

The capital cost of a power plant is high, around US$3 million per MW installed for Gas based Power plants in Africa. Accordingly, power plants require long, flat repayment profiles of the order of 12 to 18 years. The market risk is mitigated through a Power Purchase Agreement and Completion risk is strongly mitigated in the power sector. The tariff (may be susceptible to political risk) will be structured to have a capacity charge to cover capital, debt, return on equity and an energy charge to pass through these operating cost risk components.

Key Considerations/Enablers (1)  The acceleration of traditional power generation projects has been known to Bankers for so many years, and the risks involved are well understood by Lenders (2)  Its attractiveness is mainly driven by the Long-Term Power Purchase Agreements with creditworthy counterparties.

Balancing economic development with environmental sustainability remains a key challenge. It is imperative for the sector to leverage adapting to change, adopting innovative approaches and fostering sustainability for resilient growth in the industry.

In addition to the above, this White Paper prepared by the Brickstone Africa Team, in much more detail explains on the Key issues for consideration by developers in Accelerating Traditional Power Generation Projects.

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