AFRICA ENERGY FORUM. Barcelona, 19 June com energia construimos futuro ELECTRICIDADE DE MOÇAMBIQUE, E.P.

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1 AFRICA ENERGY FORUM Barcelona, 19 June

2 Energy Outlook for Mozambique Content 1. General information on the ESI in Mozambique 2. Domestic and regional power demand 3. Mozambique power Generation Option 4. Transmission backbone (STE Project) 5. Conclusion 2

3 The new paradigmas... to stakeholders...changes... Before Now/future Government and Regulator Donnors and Financiers Extend the access to electricity to the population Promote cheap energy for economic development Institutional development and regulation of the electricty sector Finance de development of the electricity system in the Country Funding predominant under Concessional Scheme Regulated tariff system Ensure medium and long term energy needs and access to natural resources Competitiveness of the energy sector in the Country Promote private initiative Operational management efficiency Economic and Financial viability on the investment (PPP) Cost reflective Tariff and or Cost recovery mechanism Governance, transparency, Clients / market Access to basic energy services and low tariffs Surplus capacity of infrastructure in transmission Excess of energia Availability / Service / Quality of Supply / Industrialization Transmission Capacity on the Limit / constrains Déficit of power and new generation plants #

4 EDM STRATEGIC VISION A EDM major challenges involves four major vetors to reinforce its business, enable financial sustainability. It shall make a substantial step forward in regard to Customer Service, Quality and Reliabiity of Supply as well as modernized the operational management to continue Growth Vision Vision Rural Electrification Business growth and profitability Excellency on Customer Service, Quality and Reliability of Supply Institutional Modernization and Management 4

5 Matrix of Strategic Vectors and Objectives Strategic Vectors Strategic Objectives Pursue the efforts of rural electrification, considering the dynamics of growth Ensure an adequate planning, study and contracts for efficient financing solutions for the rural electrification projects Ensure the adequate implementation of rutal eletrification projects and dynamize/encourage the efforts leading to the economic promotion of the electrifyed areas. Achieve an adequate level of Operational Rentability and promote Financial Restructuring Maximize the busisness by potentiating the customers database and tariff balance, always with the social mission of the company in the horizon Potentiate the generation of additional revenue through the exploration of new businesses Promoting the optimization of running costs resulting from the acquisition and use of own resources and external goods and services. Optimise the structure of capital and financial costs of the company Lead the company towards Excellence and ensure an adequate development of the Electric Power System Resolve/Unblock contentious issues in the response capacity to power supply demand Ensure that EDM gets solutions for electric power access as well as the infrastructures of the electric power system Achieve high quality standards in power supply Achieve high quality standards in providing services Capacitate and modernize the Organisation and the Management Pattern Promoting adjustments in the company business functions and Units (mission, attributions, behaviour patterns,...) Improve management and governance capacities aimed at decision making versatility, organisational efficiency and efficacy Ensure that EDM is able to manage with property its human resources. Ensure that EDM manages with property its financial resources, assets and property goods #

6 Regulatory Framework Project needs to meet Mozambique Legal and Regulatory requirements, International standards and financiers requirements: EDM created in 1977 with monopoly for GX, TX & DX (except for HCB) Law for Public Enterprise approved in 1991 (Lei Nº. 17/91) EDM transformed into a Public Enterprise in 1995 Electricity Act approved in 1997 (Lei Nº. 21/97) Electricity Regulation Decree approved in 2000 (Decreto nº 08/2000) Tariff System (Decree nº29/2003) EDM designated Manager of the National Transmission Grid and System Operator in (Decree nº 43/2005) Private Partnership Law for Infrastructure (Decree nº 15/2011) 6

7 Electrification

8 Transmission Network 8

9 Number of customers and new connection 1,200,000 1,140,835 1,000,000 1,010, ,000 N. Ligações Clientes 736, , , , , , , , , , , , , ,719 85,155 95, , , ,938 20,679 26,121 37,335 53, Moçambique is after South Africa the highest new connection rate per Year in SADC with an average of new connection in the last 3 years 9

10 Energy Outlook for Mozambique Content 1. General information on the ESI in Mozambique 2. Domestic and regional power demand 3. Mozambique power Generation Option 4. Transmission backbone (STE Project) 5. Conclusion 10

11 EDM Total Demand Country demand is around MW, including MOZAL 11

12 MW EDM Regional (Local) Demand 180 MD - ATCN 25% % 22% % MD-ATCN Evol. 24% 22% 19% 25% 30% 25% 20% 15% 10% 5% 0% MD-ATCE % 25% % 7% 20% 15% 10% 20 1% 5% MD-ATCE Evol. 14% 1% 7% 21% 0% 12

13 MW FORECAST DEMAND GROWTH REGIONAL SADC Planned Capacity vs Forecast, MW All SAPP Members Forecast Capacity Planned SOURCE: SAPP 13

14 Energy Outlook for Mozambique Content 1. General information on the ESI in Mozambique 2. Domestic and regional power demand 3. Mozambique power Generation Option 4. Transmission backbone (STE Project) 5. Conclusion 14

15 The Mozambique natural resources and the least cost options Mozambique Natural Resources: Hydro 15

16 The Mozambique natural resources and the least cost options Mozambique Natural Resources: Hydro Mozambique is the second country in Southern Africa with the biggest hydro potential The potential in Zambezi river is around MW and only 2075 MW is in operation at Cahora Bassa South Bank The total unexplored hydro potential in Mozambique is close to MW out of which in Tete province 16

17 The Mozambique natural resources and the least cost options Mozambique Natural Resources: Mineral Coal Mozambique Coal reserves are believed to be amongst the world s largest, and a strong investment currently being made in the sector, particular in the Tete Province Moatize Coal basin poised to become the World s newest major export coal basin 2 large scale projects already in mining activity (20 to 50 Mtpa) Additional large scale coal projects in exploration (Ncondezi, Jindal, Rio Tinto, Zambeze, Revuboe, etc..) Potential + 50 Mtpa of export coal by 2025 The coal proven reserves can produce more than MW, base load power for 30 years 17

18 The Mozambique natural resources and the least cost options Mozambique Natural Resources: Natural Gas The only gas fields currently in production in the country are located in Temane, in Inhambane province The gas is exported and transported by pipeline to South Africa by SASOL, a South Africa Company 27 MGJ are allocated for power generation > 100 MGjJ is for export to South Africa Currently, EDM, SASOL, Investec, Aggreko, Gigawatt and MGC are developing generation power projects Around 350 MW will be Installed until 2014 in Ressano Garcia (Border with South Africa) 18

19 The Mozambique natural resources and the least cost options Mozambique Natural Resources: Natural Gas 2011 and the first months of 2012 saw the announcement of successive large finds of natural gas in Mozambique offshore. Such potential of natural gas identified is corresponding to 60 to 75 trillion cubit feet. The size of the natural gas finds in the Rovuma basin could turn Mozambique into Africa s second large exporter of natural gas in 2018 Medium and large scale power generation plant could be installed in the north of Mozambique (200 MW to 1000 MW) Possibility of large scale development of a liquefied natural gas (LNG) project 19

20 The Mozambique natural resources and the least cost options Generation Projects: Geographic location Benga (2000 MW) Lúrio (180 MW) Cahora Bassa North (1245MW) Alto-Malema (60 MW) Mphanda Nkuwa (1500 MW) Moatize (2400 MW) Mavuzi 2 & 3 (60 MW) Boroma (200 MW) Lupata (600 MW) Kuvaninga (40 MW) EDM / SASOL (175 MW) Massingir (25 MW) Temane (50 MW) Gigawatt (100 MW) Aggreko (100 MW) 20

21 Options of supply (Short and Medium Term) Aggreko 107 MW 115 MW Kuvaninga Sasol/EDM 40 MW 175 MW Gigawatt CTM Moatize Benga 100 MW 80 MW 300 MW 300 MW Massingir 28 MW 21

22 Options of supply (Medium and Long Term) CTRG 22

23 Options of supply (Road Map and Tracking) 23

24 Energy Outlook for Mozambique Content 1. General information on the ESI in Mozambique 2. Domestic and regional power demand 3. Mozambique power Generation Option 4. Transmission backbone (STE Project) 5. Conclusion 24

25 The Mozambique natural resources and the least cost options Mozambique Transmission Backbone To evacuate the power to be generated in the Central Region a Transmission Backbone is required Design a transmission system strong enough to evacuate the around 9200 MW to be generated in the Zambezi Valley The proposed an AC transmission system to ensure future grid expansion as per the requirement from the Mozambican Government The Backbone shall be implemented in synchronized way with the generation projects 25

26 The Mozambique natural resources and the least cost options Mozambique Transmission Backbone Phase 1 includes combined HVAC & HVDC solution HVAC solution with a 1,340 km 400 kv AC line for up to 900 MW continuous transfer and 50% series compensation of AC line HVDC solution (Phase 1) includes a 1,275 km ±500 kv DC bipolar transmission line and converter stations with 2,650 MW capacity Implementation of HVDC solution is proposed staged: Stage 1: ±500 kv DC line with 1,325 MW converter capacity (sufficient for realisation of Mphanda Nkuwa) Stage 2: Additional 1,325 MW converter capacity 26

27 The Mozambique natural resources and the least cost options Mozambique Transmission Backbone HVAC operated at 400 kv (equipment designed for 550 kv) 900 MW transfer capacity HVDC operated at ±500 kv 2,650 MW transfer capacity, implemented in two stages, each with 1,325 MW converter capacity 27

28 The Mozambique natural resources and the least cost options Mozambique Transmission Backbone: Cost Estimate Summary STE Phase 1: 400 kv 900 MW HVAC Transmission and ± 500 kv 2,650 MW HVDC Transmission USD ( 000) Total HVAC Phase Total HVDC Stage 1 of Phase Total HVAC + HVDC Stage 1 of Phase Total HVDC Stage 2 of Phase Total STE Phase 1 (incl. Owner s Costs & Physical Contingencies, but excl. Price Contingencies)

29 Energy Outlook for Mozambique Content 1. General information on the ESI in Mozambique 2. Domestic and regional power demand 3. Mozambique power Generation Option 4. Transmission backbone (STE Project) 5. Conclusion 29

30 Key Conclusion Mozambique, through EDM, is in a unique position in terms of the potential to develop a diverse portfolio of medium and large scale power assets These could be among the cheapest and cleanest providers of electricity to the region EDM has an exceptional opportunity to participate in these projects as developer, shareholder and offtaker These developments cannot be sustained on the current balance sheet and a new approach will be required Tariff Increase will be required for EDM ability to raise additional cash from its existing assets Credit Enhancement of National Power Utilities is required to sustain Investments and play a determinant off taker Role 30

31 Mozambican Gas Engine Power Plant June 2013

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41 Thank You! 41