SMN Power & Affiliates

Transcription

1 SMN Power & Affiliates Is there a market for PV in the GCC (e.g. Oman)? Bangkok, 3 September 2015

2 CONTEXT

3 Middle-East region The PV «eldorado»? TARGETS Context Source: World map of global horizontal irradiation. SolarGIS 2015 GeoModel Solar. PROJECTED INCREASED IN DEMAND TO : 740 MW in bid stage 720 MW in preparation Source: Mesia MENA Solar Outlook 2015 Source: EIA 2010 Source: The opportunity for the Gulf s financial services sector by the University of Cambridge and PwC March

4 Lack of government support & price competitiveness remain the main barriers Context Although Prices have fallen dramatically in the past few years: solar PV falling by 80% in the past 6 years, the perceptions of renewables in the energy mix have not caught up with reality yet. Although Dubai set a new global benchmark for utility scale in December 2014, it does not bridge the gap with fossil fuel in the region yet. Indeed, at 5.84 US cents per kw hour, the bid would be cheaper than oil at US$10/barrel and gas at US$5/MMBtu. Source: The 2014 MENA Cleantech Survey Report 4

5 Markets in the MENA region do not have the same attractiveness Context Source: Middle East and North Africa (MENA) Solar Market Outlook,

6 OMAN POWER MARKET

7 Single fuel PPA driven market with an average growth of 9% p.a. Future Power Generation Capacity Requirements Main Interconnection System Oman Electricity Market First country in the GCC to have fully privatized its electricity sector attracting Foreign Investments through competitive tenders awarding a 15 years PPA to the winning bidder. Any new power project has to be included in the OPWP (National single buyer) 7 year statement. Source: OPWP 7 Years Statement Single fuel market using domestic gas in OCGT or CCGT power plants with diesel as a back-up fuel. Electricity demand expected to increase by 2 to 15% per annum in the coming 7 years. Hybrid merchant market expected to be implemented in 2020 while facing over capacity. 7

8 Highly subsidized market is a strong barrier to PV but for how long? Oman Electricity Market Electricity prices by sector in the GCC and the US in 2011 Financial Subsidies for Electricity Source: Hertog 2013 Total economic subsidy to gas-generated electricity, MIS and Salalah 2012 Source: AER 2012 With the projected continued growth in electricity demand and production in Oman subsidies will continue to increase. Hence, unless policies are adjusted the total economic subsidies would exceed the value of the Omani gas exports by Source: AER 2012 Since January 2015, MOG has taken the decision to fix the gas price at 3 USD / mmbtu. 8

9 Economy driven by the Oil & Gas industry with mitigated impact on PV - Revenue Generator per Sector Crude Oil Price to Balance Budget Oman Market Source: KPMG Analysis of Oman s Budget 2015 Source: KPMG Analysis of Oman s budget Gas Use per Sector Oman Natural Gas Supply and Demand Source: EIA 2013 Source: IRENA Oman Renewable Readiness Assessment Source: OPWP 7 Year Statement

10 SMN POWER HOLDING

11 Cater to 1/4 of main power grid demand and 1/5 of main water network needs SMN Power Holding & Associates Holding company of two power companies, SMN Barka and Al Rusail, SMN Power Holding represented in 2014, with 1,343 MW of power and 120,000 m3/day potable water capacity 19% of the power capacity of MIS and 21% of the water capacity of the MSZ. With both a 15 years PPA and 15 years PWPA for Rusail and Barka respectively, SMN Holding will remain under longterm agreements until The share price demonstrated that the market continue to value the business model of the company despite the implementation of a merchant market. 11

12 PV OPPORTUNITIES SMN POWER

13 The tender route is not formalized yet PV opportunity for SMN The AER has confirmed a shortlist of six renewable energy pilot projects of which four are solar projects as follows: 100 kw PV solar project in Hiji; 292 kw solar project in Al Mazyonah; kw project at location to be confirmed; 28 kw solar project in Al Mathfa incorporating battery storage capability; 500 kw wind project in Masirah Island; and kw wind project in Saih Al Khairat, Wilyiat of Thumrait. OPWP plans to tender a 200MW CSP in 2016 but the process has not been confirmed yet and somehow already delayed. The small scale projects are trials / pilotes that do not present an interest for SMN s shareholder and business model. A tender is more attractive but requires skills and workforce that SMN does not have in-house for the moment but could be provided by its shareholders. 200 MW CSP is not too big and with a decent D / E ratio remains in line with the company cashflows. 13

14 Solar to water route has more barriers than upsides PV opportunity for SMN OPWP is unbundling water production from electricity generation. SMN Barka produce water through Reverse Osmosis : 120,000m³/d If we consider a consumption of 4kW/m³ during winter and about 6kW/m³ during summer; The area requirement for a production of 20,000m³/d (1/6 of the total capacity) would be approximately 25,000 m² considering 8 hours sunshine. If we need round o clock electricity for RO, we would need 3 times the area i.e 75,000m² and batteries or thermal storage for the electricity. Since our plot area is approximately 90,000m², over 80% of the area will have to be covered by panels. We could consider using solar panel to generate electricity for potential RO expansion. Main barriers are: Investment and electricity cost vs. current electricity price; Storage capacity; and Surface within the fence. 14

15 Diversification to industrial PV or residential PV could be an option Solar PV growth expectations PV opportunity for SMN Although it remains within the same sector, diversifying our activities to industrial PV or residential PV requires a significative change in the organization. Moreover, as the company is «project financed» from its inception, any change with a significative impact on its cashflows would need prior lenders approval. 15

16 PV OPPORTUNITIES IN OMAN

17 Oman could lead the way to a new energy mix and business model Economics Regulation Future for PV Cost-reflective pricing and more dynamic tariff systems. Bringing in the private sector for financial capital & project risk. Find the niches e.g. rural areas, rooftop, oil & gas. Setting up strong renewable targets. Strong climate change policies. Planning, planning, planning. Fiscal incentives: Feed In Tariff, etc. Innovation Driving financial innovation to finance renewables. Be a pioneer in the use of PV e.g. CSP for Thermal Enhanced Oil Recovery (Miraah: 1GW 600 MUSD // GlassPoint & PDO). Driving the storage innovation effort. Championing the world From the black gold to the shiny gold: a double blessing. Institution building: the new Sun diplomacy. Research building: R&D. 17