Mozambique Regional Transmission Backbone Project ("CESUL") : Technical & Economic Feasibility Study

Mozambique Regional Transmission
Backbone Project (“CESUL”):

Technical & Economic Feasibility Study
Presentation of Feasibility Study Report
CESUL Launch Workshop

Centro de Conferências Joaquim Chissano
Maputo, 24 November 2011
Technical & Economic Feasibility Study for

Mozambique Regional Transmission Backbone Project (“CESUL”)
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Presentation outline
 Feasibility study objective & goals
 Feasibility study highlights
 Power market assessment
 Mozambique generation options considered
 CESUL technical feasibility
 Economic & financial feasibility
 CESUL project timelines
 Institutional and operational arrangements
 Conclusions & Recommendations
2

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Feasibility Study objective & goals
Objective:
• Provide technical and economic determination of least
cost option for transfer of 3,100 MW north-south in
Klicka här för att ändra format på underrubrik i bakgrunden
Mozambique
CESUL Project Goals:

• Contribute to Mozambique’s economic and social
development through facilitating improved access to
electricity by:
– Interconnecting the Mozambique power systems north-south,
i.e. creating a Backbone Transmission System
– Supply electricity at affordable prices to load centres and
consumers along the transmission system corridor
• Facilitate realisation of Mozambique’s large power
development potential, with particular focus on
hydropower, for domestic and industrial use and bulk
export of cost-competitive renewable energy to South
3
Africa and Southern Africa
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Feasibility Study scope of work
Review and update all information in previous studies and undertake:
• Load forecasts (Mozambique / Southern Africa region)
• Regional generation
Klicka här förexpansion scenarios
att ändra format (for Mozambique
på underrubrik i bakgrunden candidate projects)
• Power system studies
– Minimum one (1) AC link north-south as a premise for acceptability of any alternative
• Determination of substation locations
• Line routes – HVAC and HVDC (incl. electrode locations)
• Preliminary engineering designs (lines & substations) and costing
• Project packaging and implementation programme
• Operational and control centre requirements, including organisation & training
• Economic and financial feasibility analysis
• Liaise with CESUL ESIA/RPF Consultant (separately appointed)
The CESUL Feasibility Study builds on previous pre-feasibility study (2008) by Vattenfall
Power Consultants and subsequent technical Optimisation Study (2009) 4

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Feasibility Study deliverables
The Technical and Economic Feasibility Study report consists of the
following documents:
• VolumeKlicka
I-A: härMain
för attReport
ändra format på underrubrik i bakgrunden
• Volume I-B: Appendices to Main Report

• Volume II: Economic Impact Study (still being completed)
• Volume III-A: Preliminary Design Report – HVAC and HVDC
Transmission Lines
• Volume III-B: Preliminary Design Report – HVAC and HVDC
Substations
• Volume IV: Line Route Report – HVDC Line
• Volume V: Line Route Report – HVAC Line

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Key challenges encountered
• Challenges to successful realisation of CESUL and the associated large
(hydropower) generation developments include:
– Project size and remoteness / distances involved
– Technical requirements (to ensure high availability & reliability)
– Cost competitiveness compared to alternative regional options
– Amount of financing and commercial frameworks required
– Integrated nature of generation and transmission developments, requiring
alignment of stakeholder interests and high degree of coordination
• Other key considerations include:
– Devising transmission solutions in support of initial generation developments
while facilitating long-term expansion to tap Mozambique’s energy potential
– Ensuring sustainability and tangible benefits to local (Mozambican) economy
from recommended technical and economic solutions
– Minimising environmental & social impacts through line route selection
– Dynamic and iterative nature of planning, analysis, structuring and financing
6

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Findings and Conclusions
• Feasibility Study confirms technical viability of combined HVAC and HVDC
transmission backbone solution for 3,100 MW (and more) power transfer capability
• CESUL Phase 1 investment costs (excl. financing costs and IDC) are estimated at
US$ 2,119Klicka
million
här(of
förwhich US$
att ändra 1,800
format på million for Stage
underrubrik 1)
i bakgrunden
– Phase 1 financing requirement of ~US$2,780 million incl. IDC & price contingency
• Economic viability of combined hydropower and transmission backbone is robust
• Financial viability and competitiveness of delivering electricity at Mozambique / South
Africa border in southern Mozambique appears promising
– Timely realisation of Mphanda Nkuwa project is key to commence CESUL development
– Realising Cahora Bassa North Bank will allow complete CESUL Phase 1 development
– Cost of debt financing to be tested with market participants
• HVAC solution will ensure interconnection of Mozambique’s national transmission
grid, with increased access to electricity along line route
• HVDC portion of transmission backbone is scalable – for initial CESUL Phase 1
solution and beyond
• Due to magnitude of project costs, a staged Phase 1 realisation should be considered
• CESUL development needs to continue without delay from early 2012 to align with
planned timeframe for commissioning of hydropower project(s) 7

•
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Recommended CESUL Phase 1 solution
• CESUL Phase 1 includes combined HVAC & HVDC solution
• HVAC solution includes:
• 1,340 km 400 kV AC line for 900 MW continuous power
transferKlicka
at 400här
kV,för
butattwith 550format
ändra kV design of equipment
på underrubrik i bakgrunden
• 50% series compensation of AC line
• HVDC solution (Phase 1) includes:
• 1,275 km ±500 kV DC bipolar transmission line and converter
stations with 2,650 MW capacity
• 90 km transmission lines to Cataxa and Maputo electrodes
• Implementation of HVDC solution is proposed staged:
• Stage 1: ±500 kV DC line with 1,325 MW converter capacity
• Stage 2: Additional 1,325 MW converter capacity
• Project is proposed packaged and tendered as a limited
number of contracts (indicatively 7)
• Timeframe to implement Phase 1 / Stage 1 is 59 months:
• Design, tendering and contracting period: 17 months
• Construction period: 42 months 8

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CESUL Feasibility Study –
Power Market Assessment

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Mozambique demand forecast - recent electricity
demand growth trajectory (excluding Mozal)
10

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Mozambique demand forecast (cont. I)
• Forecast period is 2010 – 2030:
– Energy supplied (before losses) (in GWh) and Peak demand (MW)
– Natural growth + Large consumer demand
– Medium forecast
Klicka här =
förbase case (+
att ändra high på
format and low forecast)
underrubrik i bakgrunden
• General electricity demand drivers:
– Annual GDP growth:
• 2010 - 2015: 6.5% - 7.9% (IMF estimates)
• 2016 - 2030: initially 7.0%, tapering off to 4.0%
• GDP elasticity: 1.2, tapering off to 1.1 (except large loads)
– Electricity tariffs – current tariffs do not cover costs:
• 7% real increase assumed over next 5 years
• Assumptions applied will contribute to dampen future demand growth
• Large user loads:
– Defined as > 5 MW initial loads, identified based on information from EdM,
Ministry, developers and consultant estimates
– Cost-reflective tariffs assumed, with consequences for energy intensive projects
that rely on low tariffs (e.g. Mozal expansion)
– Uncertainty with respect to loads and timing dealt with by estimating probability
and applying loads to medium forecast, high forecast and low forecast respectively 11

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Mozambique demand forecast (cont. II) –
Base Case national demand forecast (GWh)
National Energy Demand (GWh): Medium Case Forecast
GWh
14000
12000
10000
8000
6000
4000 Northern
Central
2000
Southern
0
2009 2014 2019 2024 2029
12

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Mozambique demand forecast (cont. III)
Peak Demand – Base Case, High and Base Case forecast – natural growth and
Low forecasts (MW) large loads (MW)
13

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Southern African power demand
SAPP power demand and supply: Importance of South Africa’s IRP2010
• South Africa approved an IRP2010 in
April 2011, being a 20-year indicative
generation
Klicka här för att ändra format på underrubrik expansion plan
i bakgrunden
• Strong focus on clean, renewable energy
• Plan assumes 2,600 MW of hydropower
import, mainly from Mozambique, to
commence in 2022 (earlier if possible)
• Preference is for base load / mid-merit
energy (not peaking)
• IRP2010 includes long-term indicative
electricity price forecast
• Forecast average cost of new (base-load)
generation is >10.0 USc/kWh
• Southern Africa needs additional
• Represents benchmark for Mozambique
generation capacity – quickly! hydropower at South Africa border
• Current reserve margins are insufficient • Actual price will however be subject to
• South Africa is by far the dominant market commercial negotiations 14

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Mozambique Generation Options and
Regional Generation Expansion Scenarios
15

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Generation Option Assessment –
Mozambique candidate generation projects
• Potential generation projects were reviewed, focused
on hydropower, coal, gas-fired projects
• Gas-fired plant with a total capacity of up to 600 MW
are assumed built in Southern Mozambique, as well
as 100 MW of local generation injected into Tete part
of system
• Based on regional market assessment, hydropower
projects are considered priority:
• Mphanda Nkuwa (“MPNK”)
• 1,500 MW base-load / mid-merit plant
• 8,600 GWh of annual energy (850 MW firm power)
• Feasibility study complete / Concession Agreement exists
• Cahora Bassa North Bank (“CBNB”)
• 1,245 MW estimated mid-merit/peaking capacity
• 2,983 GWh of gross annual energy (but only 854 GWh
increase in overall Cahora Bassa annual energy)
• Studies ongoing / data & information to be firmed up 16

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Generation Scenarios and associated
Transmission Solutions
No. Scenario: CESUL capacity CESUL transmission alternative
Not applicable (new 400kV line Songo-Matambo-
0 Reference 0 MW
Inchope + reinforcement in south required)
Single circuit 400 kV line (4 x Tern) with 550 kV
1 CBNB 1,245 MW
equipment rating, 70% series compensation
Double circuit 400 kV line (4 x Tern) with 550 kV
2 MPNK 1,500 MW
equipment rating, 50% series compensation
Single circuit 400 kV line (4 x Tern) with 550 kV
3 MPNK + CBNB 2,745 MW equipment rating, 50% series compensation, plus
Bi-pole DC line (4 x Martin), 2,650 MW capacity
Same as Scenario 3 (2nd bi-pole may be required
4 Add. Hydro Energy 3,536 MW
if all generation projects implemented early)
5 Extended Hydro 4,486 MW Scenario 3 plus 2nd bi-pole (5,300 MW capacity)
Scenario 3 plus 2nd bi-pole to Maputo and 3rd bi-
6 Large Hydro & Coal 7,545 MW
pole terminated in South Africa
Candidate generation projects and associated transmission alternatives were studied
through scenarios, with grid injection of 600 MW gas-fired generation in south and 100 MW
generation in Tete common to all scenarios 17

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Regional generation expansion modelling
• Southern Africa needs ~1,500 MW of additional (base-load) capacity per annum
• Future generation and transmission developments in Mozambique will depend on
competitiveness of Mozambique projects compared to alternative regional projects
• Cost characteristics
Klicka här förfor
att Mozambique and
ändra format på regionali generation
underrubrik bakgrunden projects were
developed and analysed
– January 2011 used as reference year for prices and cost estimates
– Investment, (fixed and variable) O&M costs, and fuel costs considered
– Analysis covered thermal (coal and gas-fired) and renewable generation projects
(including hydropower, wind and solar)
– Cost data were sourced from EPRI, Nexant and Consultant’s own data bases
– Particular focus on generation expansion as envisaged by South Africa’s IRP2010
• Generation expansion simulations were undertaken to demonstrate economic
viability of large-scale power export from Mozambique
– Total generation costs, including energy not served (“ENS”) and spinning reserve
costs, as well as generation related transmission costs (including losses) considered
– Mozambique options substituted for ‘generic’ options in IRP2010
– Overall NVP of total generation costs in regional generation simulations was
calculated, using feasibility study Generation Scenarios 1 to 6 as previously presented 18

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Generation expansion scenario results
Sc. 3 Sc. 4 Sc. 5 Sc. 6
Generation Expansion Sc. 0
Sc. 1 Sc. 2 MPNK 3,500 4,600 Large
Simulations 2011 - 2030 Refe-
CBNB MPNK & MW MW Hydro
(NPV in US$ billion) rence
CBNB Hydro Hydro & Coal
Total Generation System Costs
132.481 131.357 130.635 129.903 129.616 129.751 129.252
(capital, O&M, fuel, ENS)
Generation System Savings
- 1.124 1.846 2.579 2.866 2.731 3.230
(relative to Reference Scenario)
Transmission System Costs
0.233 0.685 0.983 1.384 1.422 1.748 2.368
(related to generation options)
Total Costs 132.714 132.042 131.618 131.287 131.038 131.499 131.620
Total Savings (relative to
- 0.672 1.096 1.427 1.676 1.215 1.094
Reference Scenario)
Tentative value of reduced CO2
- 0.255 0.752 0.884 1.104 1.198 0.937
emissions (using US$20 per ton)
Savings incl. emission reduction
- 0.927 1.848 2.311 2.780 2.413 2.031
(relative to Reference Scenario)
Some observations:
• All generation scenarios with inclusion of Mozambique hydropower projects appear merited
• Despite significant transmission costs, both MPNK and CBNB are economically viable projects
• While Scenario 4 shows the highest potential saving, this scenario may trigger additional investments
in transmission infrastructure at an early stage
• On balance, therefore, Scenario 3 (MPNK and CBNB) appears to be most robust, with scope for
future expansion by additional hydropower resource developments 19

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Technical Feasibility Assessment
20

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Planning methodology & criteria
• Transmission
– Planning assumptions document prepared and discussed with Eskom (ref.
“Memorandum of Transmission Planning Assumptions”)
• Complies
Klicka härinför
general withformat
att ändra Southpå
Africa’s Grid Code
underrubrik i bakgrunden
– Deterministic N-1 planning criteria, but with agreement that up to 2,000 MW of
generation can be tripped in Tete area for an outage of a line on CESUL
transmission backbone (effectively a “N-½ criteria”)
• Will normally not affect customers in South Africa due to size of South Africa system
– Series compensation facilities and Static VAr Compensators (SVC) along AC
backbone planned with redundancy
– All transmission alternatives considered include at least one 400 kV AC line from
Tete area to Maputo, to provide supply to areas in between
– Recognised that wheeling capacity through Zimbabwe may be limited
• Generation characteristics recognised
– Production profiles
– Forced and Scheduled outages
– Minimum 15% reserve requirement for South Africa, with maximum 19% import
share (of peak load) 21

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Transmission system studies undertaken
• Load flow, voltage stability and losses
• Simulation of normal ‘steady state’ operation
• Contingency analyses
• Transient and dynamic stability

• Fault levels
• Sub-synchronous resonance studies
• Switching studies
• Optimisation of conductor configuration
• Optimisation of reactive power compensation facilities:
– Line and bus shunt reactors
– AC line series compensation
– Static VAr Compensation (SVC)
22

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Transmission system studies (cont.)
• Key assumptions:
– Generation at Benga and Moatize developed basically to
cover own demand, with 100 MW surplus generation sold
to EdMKlicka här för att ändra format på underrubrik i bakgrunden
– HVDC Songo - Apollo transfer capacity of 1,920 MW
– SAPP grid support during contingencies
– Wheeling via Zimbabwe attempted kept at low level as full
capacity of interconnection Songo - Bindura may not be
available in future
• Under normal operations, wheeling may possibly be avoided
once CESUL HVDC line is in service
– Comparison of alternatives based on unit cost estimates
• Detailed cost estimates based on supplier quotations
developed for recommended CESUL scheme
– CESUL O&M costs estimated at 2.0% p.a.
– Marginal cost of losses priced at 6.0 USc/kWh (for
equivalent capacity and energy cost) 23

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Transmission solutions considered
• HVDC
• 500 kV and 600 kV bi-pole schemes - bi-pole
lines
• 800 kV mono-pole Phase
Klicka här 1 ändra format på underrubrik i bakgrunden
för att
• 2nd 800 kV mono-pole in Phase 2, forming bi-pole
with DC in Phase 1
• HVAC
• 400 kV operation (but heavier equipment design)
• Quadruple line configuration to limit reactance
• Compact line / expanded bundle design
considered for high transfer levels
• Series compensation up to 70% to achieve
Both HVAC and HVDC technology
transient stability
solutions were examined in the
• Line and bus shunts to handle energization / load
Feasibility Study, under a number of
rejection
design considerations
• SVCs for voltage & stability control measures
• Intermediate substations required for voltage
control combined with supply to local area 24

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Transmission studies – considerations
• Characteristics of existing transmission
system
• Defining a base case (without CESUL
backbone)
• Specific technical challenges (line lengths,
fault levels, compensation, energization)
• Substation locations (AC + DC)
• Interaction with HVDC system Songo – Apollo
(RSA)
• Integration with neighbouring SAPP countries
and wheeling over SAPP networks
• System expansion in Southern Mozambique
• Interfacing with Motraco system
• New Master Power Controller (MPC) 25

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Line routings (HVDC and HVAC)
Key considerations:
General
• Utilize existing and planned "energy" corridors
(transmission lines,
Klicka härroads,
för attrailways)
ändra format på underrubrik i bakgrunden
• Minimise social and environmental impact
• Access and maintenance conditions
• Utilise reliable low cost design
• Least cost
HVAC Line Routing
• Support for development of Mozambique
• Interconnection of EDM grid
• Selection of substations considering reactive
compensation requirements
HVDC Line Routing
• Bulk power transfer (aligned to generation scenarios)
• Minimise social and environmental impact
• Utilise reliable low cost design
26

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Conclusions from transmission studies
For AC line(s), the following is noted:
• Distance from Tete to Maputo (~1,340 km along chosen route) presents
technical challenges:
– Voltage control (for energisation and normal and contingency operation)
– Transient and dynamic stability
– (Note: 53 km of 400 kV line Songo – Cataxa will be required, not currently
defined as part of CESUL Phase 1)
• Low reactance is required, implying:
– Four bundle conductor configuration
– Compact line design with expanded bundle would be required for high
transfers (>1,400 MW)
• Low reactance leads to high capacitance, causing:
– Higher switching surges
– Increased insulation level
– Higher investment costs 27

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Conclusions from transmission studies (cont. I)
• AC line requires extensive reactive power control
for energisation and voltage regulation during
normal and contingency operation:
– LongKlicka
line - här
mustför be
att ändra
split informat på underrubrik i bakgrunden
sections
– Intermediate substations at Inchope,
Vilanculos and Chibuto are required and will
feed into local grids
– Line shunt reactors required at either end of
each line section in combination with switched
bus shunt reactors
– Large SVCs required at intermediate
substations, with two units at each of Inchope
and Vilanculos to maintain operability during
outages of SVCs
• New substation proposed at Moamba to act as
feeding point for Maputo area (and suitable
connection point for gas-fired plant and potential
future 3rd 400 kV line to South Africa) 28

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Conclusions from transmission studies (cont. II)
For DC line(s) the following is noted:
• 500 kV HVDC bi-pole solution with bi-
pole DC line estimated to present
least-costKlicka här för
solution foratt ändra format
CESUL på underrubrik i bakgrunden
DC link
– 600 kV HVDC bi-pole and 800 kV mono-
pole also evaluated, but considered to
imply slightly higher overall costs
• Bi-pole solution will provide higher
overall availability (than mono-pole),
although loss of 500 kV bi-pole will
require tripping of generation as for a
800 kV mono-pole solution
• 500 kV bi-pole solution will also limit
environmental impacts through
reduced width of right-of-way, lower
line towers (about 3.5 m lower) and
less time of operation with electrodes
29

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CESUL Phase 1 – combined HVAC / HVDC solution
• 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 30

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Staged implementation of HVDC for CESUL Phase 1
Stage 1: 1,325 MW Stage 2: 1,325 MW

31

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CESUL connections to Mozambique power system
Connection to ‘regional’ power systems

Connection to load centres and
Klicka
consumers här för
along att ändra
CESUL format på underrubrik i bakgrunden
HVAC
transmission line route Transmission Transformer
Voltage levels
lines capacity
Matambo 400/220 kV - 2 x 250 MVA
Inchope 400/220 kV 220 kV in-out 1 x 400 MVA

External project
Vilanculos 400/110 kV 1 x 125 MVA
(not CESUL)
400/110 kV External project 1 x 125 MVA
Chibuto
110/33 kV (not CESUL) 1 x 40 MVA
400/275 kV 1 x 500 MVA

External project
Moamba 275/110 kV 1 x 125 MVA
(not CESUL)
110/33 kV 1 x 63 MVA
32

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CESUL Project cost estimates
• General approach
– Unit costs used for comparison, drawn from Consultant’s databases and
external cost statistics (e.g. CIGRE)
– Supplier quotations
Klicka här used
för att ändra for actual
format Project icosting
på underrubrik and economic/financial
bakgrunden
analysis, based on EPC delivery, "CIF to port“
• Project costing includes Engineering & Owner’s Costs and Contingencies
(added to suppliers’ EPC cost quotations):
– Engineering & Owners Cost: 10% of EPC quotations
• Considered conservative
– Physical Contingencies: 10% of EPC quotations
– Price Contingencies: not included in Project cost estimates
• 10% price contingency on EPC quotations recommended included when
finalising Project financing requirements
• Relocation / compensation payments:
– Included in Project costs with value equal to 2% of estimated transmission
line cost (HVAC and HVDC)
– CESUL RPF Report recommendations will be used in Final Report, with
latest indication is 3% of transmission line costs 33

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Phase 1 HVAC costing
HVAC - Cost Components Foreign Local Total

USD
400 kV Klicka här för att ändra format på (‘000) i bakgrunden
underrubrik USD (‘000) USD (‘000)
HVAC Transmission Line 339 641 81% 79 672 19% 419 313
HVAC Substations 336 736 92% 29 281 8% 366 017
Compensation (2% of line) 0 0% 8 386 100% 8 386
Engineering & Owner's Cost (10%) 47 120 60% 31 413 40% 78 533
Physical Contingencies (10%) 62 826 80% 15 707 20% 78 533
Total HVAC Phase 1 786 323 83% 164 459 17% 950 782
34

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Phase 1 HVDC costing
HVDC - Cost Components Foreign Local Total
Stage 1, ± 500 kV 1325 MW USD (‘000) USD(‘000) USD (‘000)
HVDC Transmission Line 308 258 81% 72 308 19% 380 566
HVDC Stations 294 685 92% 25 625 8% 320 310
Compensation (2% of line) 0 0% 7 611 100% 7 611
Total HVDC: Stage 1 of Phase 1 701 066 83% 147 597 17% 848 663
HVDC - Cost Components Foreign Local Total

Stage 2, Additional 1325 MW USD (‘000) USD (‘000) USD (‘000)
HVDC Stations 244 720 92% 21 280 8% 266 000
Total HVDC: Stage 2 of Phase 1 284 620 89% 34 580 11% 319 200 35

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CESUL Phase 1 – total investment costs
Summary CESUL Phase 1:
400 kV 900 MW HVAC Transmission and
± 500 kV 2,650 MW HVDC Transmission USD (’000)
Total HVAC Phase 1 950 782
Total HVDC Stage 1 of Phase 1 848 663
Total HVAC + HVDC Stage 1 of Phase 1 1 799 445
Total HVDC Stage 2 of Phase 1 319 200
Total CESUL Phase 1 2 118 645

(excl. IDC, Financing costs/fees and Price Contingencies)
Interest During Construction (IDC) & Financing Costs / Fees (est.) 450 000
Price Contingency (10% of Project Costs excl. IDC & fees) 211 865
Total Phase 1 Funding Requirement 2 780 510
36

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Economic & Financial Feasibility
37

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Economic feasibility – objective & approach
• Objective of economic analysis:
– Establish least-cost Project option (for each generation scenario)
– Ensure that benefits of least-cost Project option exceeds Project costs
Klicka här
– Demonstrate för Project
that att ändrarepresents
format på underrubrik i bakgrunden
efficient use of scarce economic resources
• Approach:
– Project benefits and costs are compared to a situation without the Project
– Analysis is based on discounted cash flow (“DCF”) modelling
– Required Internal Rate of Return (“IRR”) of 10% in real terms (equal to assumed
economic opportunity cost of capital)
– Calculation of Economic IRR (“EIRR”), Net Present Value (“NPV)” and Economic
Unit Energy Cost (“EUEC”) of electricity generated and transported
– Analysis focused primarily on assessment of Generation Scenarios 1, 2 and 3:
• Scenario 1: CBNB only (1,245 MW)
• Scenario 2: MPNK only (1,500 MW)
• Scenario 3: MPNK + CBNB (1,500 MW + 1,245 MW), with CBNB implemented 2 years
after MPNK
• Scenario 3: MPNK only + Stage 1 of CESUL Phase 1 only 38

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Economic feasibility – assumptions
• Main assumptions:
– 45 years Project life
– All power from MPNK and CBNB assumed contractually transmitted over
CESULKlicka här för att ändra format på underrubrik i bakgrunden
infrastructure
– Transmission losses assumed as 4.5% in recommended alternative
– Electricity valued at 10.5 USc/kWh at SA border
• Equal to estimated alternative cost of base-load supply (assuming
Combined Cycle Gas-Fired plant using imported LNG)
– Operating costs of CESUL infrastructure: 2.0% p.a. of investment
– Energy transmitted from:
• MPNK: 8,548 GWh/year
• CBNB: 2,983 GWh/year
– Total net increase of production at Cahora Bassa complex is 854 GWh/year,
including a decrease at CBSB of 2,129 GWh/year
– Loss of generation at CBSB takes place at night, and such lost generation is
priced at 2.6 USc/kWh (assumed as variable cost of coal-fired plant)
39

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Economic feasibility - results
Total Economic Value Scenario 3

Scenario 3
(Generation + CESUL) - Scenario 1 Scenario 2 Phase 1
Phase 1
in USD million Stage 1 only
Total Economic NPV 132 1 565 1 962 1 416
(at 10% economic discount rate)
Scenario 3
CESUL Project Scenario 3
Scenario 1 Scenario 2 Phase 1
Economic Feasibility Results Phase 1
Stage 1 only
Project IRR 12.5 % 12.5 % 12.7 % 12.6 %
NPV (USD mill) @ 10% 184 268 402 332
Break even tariff

4.60 2.35 2.56 2.89
(USc/kWh)
Note: IRR and NPV calculations are based on financial transmission tariff
40

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Economic feasibility – results (cont.)
Sensitivities –
Scenario 3
Scenario 3 • MPNK + CESUL are economic
Economic Unit costs Scenario 2 Phase 1 viable and robust solution
Phase 1
(USc/kWh) – MPNK Stage 1 only
Construction cost + 20% 7.30 7.41 7.73
• With MPNK only, cost ‘penalty’
of developing CESUL with
Construction cost + 10% 6.94 7.06 7.38
combined HVAC and HVDC
Base case has marginal impact only
6.58 6.71 7.03
(unit cost at SA border)
Construction cost - 10% 6.22 6.35 6.68 • Staged CESUL Phase 1
development is viable solution
Construction cost - 20% 5.86 6.00 6.33
• CBNB + CESUL represent an Sensitivities –

Scenario 3
economic viable solution based on Economic Unit costs Scenario 1
Phase 1
HVAC transmission solution (USc/kWh) – CBNB
Construction cost + 40% 10.37 8.01
• CBNB economics improve
substantially when developed with
MPNK and ‘complete’ CESUL
solution (HVAC + HVDC)
Base case
• CBNB economics appear robust in (unit cost at SA border)
9.41 7.07
combination with MPNK, based on Construction cost - 10% 9.17 6.84
recommended CESUL Phase 1 Construction cost - 20% 8.93 6.60 41

© Vattenfall AB
Financial viability – objective & approach
• Objective of financial analysis:
– Takes the view of prospective investors in CESUL
– Establishes whether
Klicka här för att ändrainvestors can be expected
format på underrubrik to achieve a
i bakgrunden
satisfactory equity return
• Approach:
– Project financial income and costs are compared to situation without
the Project
– Analysis is based on discounted cash flow (“DCF”) modelling
– Required USD based equity IRR of 16% after tax in nominal terms for
CESUL, 17% for generation investments
– Calculation of Project and Equity IRR, NPV and Financial Unit Energy
Cost (“FUEC”) of electricity generated and transported
– Same Generation scenarios as in Economic Analysis, i.e. Scenarios 1
to 3, including alternative with Scenario 3 Stage 1 only 42

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Financial viability – assumptions
• Main assumptions:
– 30 years concession period
– Electricity selling
Klicka här för attprice
ändraset at 10.5
format USc/kWh
på underrubrik at SA border
i bakgrunden
• Based on estimated alternative cost of base-load supply (assuming
Combined Cycle Gas-Fired plant using imported LNG)
• 10% of MPNK (and CBNB) energy sold with 40% discount to EdM (as per
term of Concession for MPNK)
– 70/30% debt/equity ratio assumed
– 8.0% - 8.5% interest rate on USD loans (including margin)
• Debt financing assumptions to be tested and confirmed by CESUL Financial
Adviser
– VAT and excise duty exemptions assumed for Generation and CESUL
– No income tax incentives assumed for CESUL
– Tax regime for Generation projects assumed as per MPNK Concession
43

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Financial viability - results
Scenario 3
Scenario 3
MUSD NPV Scenario 1 Scenario 2 Phase 1
Phase 1
Stage 1 only
Total Financial NPV -39 293 389 200
Total Government take 216 793 897 826
Scenario 3
CESUL Project Scenario 3
Scenario 1 Scenario 2 Phase 1
Financial Results Phase 1
Stage 1 only
Project IRR 13.0% 13.0% 13.1% 13.0%

Equity IRR 16.0% 16.0% 16.0% 16.0%
Break-even transmission tariff

5.78 2.95 3.26 3.64
(USc/kWh)
44

© Vattenfall AB
Financial viability – results (cont.)
Sensitivities Scenario 3 • MPNK + CESUL is a
Scenario 3
Financial Unit costs Scenario 2
Phase 1 Phase 1 financially viable and robust
(USc/kWh) – MPNK Stage 1 only solution
Construction cost + 20%
Klicka här för att
9.74
ändra format
9.94
på
10.31
underrubrik • Cost ‘penalty’ of CESUL
i bakgrunden
Construction cost + 10% 9.25 9.45 9.82 with combined HVAC and
Base case
(Unit cost at SA border)
8.75 8.96 9.33 HVDC solution has
Construction cost - 10% 8.25 8.47 8.85 marginal impact only
Construction cost - 20% 7.75 7.98 8.36 • Staged CESUL Phase 1
development is viable
• CBNB financial viability uncertain Sensitivities
based on CESUL HVAC solution Financial Unit costs Scenario 1 Scenario 3
(USc/kWh) – CBNB
• CBNB viability improves when
developed with MPNK and Construction cost + 40% 12.34 9.46
‘complete’ CESUL solution with Construction cost + 30% 12.05 9.17
HVAC + HVDC Construction cost + 20% 11.76 8.89
• CBNB financial viability appears
Base case
robust in combination with (Unit cost at SA border)
11.18 8.32
MPNK, based on recommended Construction cost - 10% 10.89 8.03
CESUL Phase 1 solution Construction cost - 20% 10.60 7.75 45

© Vattenfall AB
Project Timelines
46

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Implementing CESUL – key steps
• Key Project development activities
– Appoint Consultant for Design, Specifications & Tender documents - Feb 2012
– Commencement of Procurement process - Mar 2012
– Approved tender evaluation - Mid Apr 2013
– Approved contracts - Jun 2013
– Financial Close of Project – Jul 2013
• Construction of Project Facilities
– Commencement of OHTL Construction Contracts – Mid Jul 2013
– Commencement of Converter Stations Construction Contract – Mid Jul 2013
– Commencement of Substation Construction Contracts – Nov 2013
– Taking-Over of Project Facilities – Jan 2017
• Assumed timeline for associated IPP projects
– Financial close MPNK – Mid-2013
– Commissioning of MPNK – 2nd half of 2017
– Commissioning CBNB ~ earliest mid-2017 (but could be later) 47

© Vattenfall AB
CESUL Phase 1 – Indicative Project Programme
48

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Institutional & Operational Aspects
49

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Envisaged organisation of CESUL
• CESUL Project size, technical nature and complexity, as well as the very
large financing requirements, are all factors indicating that CESUL should
be established as a Special Purpose Vehicle (“SPV”)
– SPVKlicka
modelhärand
för att ändra format på
recommended underrubrik
structure will i be
bakgrunden
developed by CESUL Financial
& Legal Advisors
– EDM is expected to be lead Sponsor
– Additional equity participation may be sought from credible international
investors with relevant skills, experience and financial strength
• Organisation structure, staffing and training programme for CESUL SPV
should be clarified early to mitigate against operational risks
• CESUL SPV will be granted long-term Concession under Mozambique law
– Terms and conditions of the Concession need to be confirmed, including a
Transmission / Wheeling charge methodology supportive of limited recourse
project financing structures (part of mandate of Financial & Legal Adviser)
– Relationships to EDM (as National Power Transmission Grid Manager), HCB,
Motraco and other stakeholders must be clarified and formalised to ensure
timely implementation of CESUL 50

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Skills and training requirements
Management of CESUL Transmission Company
• Maintenance Management System Training
Staff of new Dispatch Centres
• Operator training
• Maintenance engineers and technicians: hardware, software and communication
equipment training
HVDC and SVC Staff
• Project engineers, operation managers, control and protection specialists
• Engineers responsible for HVDC and SVC control and protection
• Technicians maintaining HVDC and SVC equipment
• Operators for HVDC link, remote and local control
Maintenance staff of CESUL Transmission Company
• Maintenance engineers and technicians: fault tracing and preventive maintenance
of HVAC substations, as well as live-line maintenance
Key staff should be in place and be trained during Project construction phase
Complementary external maintenance support by suppliers is recommended 51

© Vattenfall AB
Control centre requirements
New Control Centres
• Generation and load growth in North/Central area
• System expansion, load growth and interface with
SAPP in South area
• Hence, two (2) new National Control Centres are
proposed
Location
• New NCC in (or near) Maputo SS
• New SNCC in (or near) Matambo SS
• Each CC equally equipped to be able to act as full
back-up for the other
• Existing Maputo RCC gradually transformed to
Distribution CC for Maputo area
Manning
• Operation, each centre continuously manned with:
− One chief operator and two assistant operators
• Maintenance, each centre manned with:
− One chief and two assistant SCADA maintenance
engineers (in SNCC two assistant only) plus two
telecom technicians 52

© Vattenfall AB
Conclusions & Recommendations
53

© Vattenfall AB
CESUL Feasibility Study – Conclusions
1. CESUL is found to be technically and economically viable
2. Recommended Phase 1 design is a combined HVAC (400 kV) and HVDC (500 kV
bi-pole) solution with high reliability, at a total cost of US$2,119m (funding
requirement of ~US$2,780m), providing a transmission capacity >3,000 MW
3. HVAC solution will ensure interconnection of central and southern parts of national
grid, allowing for economic & social development along line route
4. Phase 1 solution is considered economically and financially robust, based on large-
scale export of hydropower to South Africa, with significant revenue to GoM
5. Phase 1 facilitates implementation of MPNK and CBNB, with both projects found to
be economically and financially viable in combination with CESUL solution
6. HVDC portion of CESUL Phase 1 can be implemented in two stages, allowing for
staggered realisation of MPNK and CBNB if required (with MPNK assumed to be
the first major hydropower development)
7. Phase 1 implementation is expected to take 59 months (of which 42 months
construction time)
8. Financing requirements for CESUL Phase 1 are significant, with need for close
coordination of generation and transmission developments to manage commercial
and timing risks
9. CESUL can be expanded by adding 2nd bi-pole with capacity of 2,650 MW 54

© Vattenfall AB
CESUL – Recommendations and Next Steps
i. Based on a targeted commercial operations date for MPNK by 2017,
CESUL project preparation work has to commence early 2012 by
progressing design, procurement and contracting arrangements
ii. In parallel, recommended legal, financial and commercial structures
and arrangements need to be finalised
iii. Financial close of CESUL should be targeted for mid-2013 (to align
with generation project timeframes)
iv. Early confirmation of CESUL equity sponsors (in addition to EDM) will
be key to successful development
v. Timely and coordinated engagement with South Africa (Government
and Eskom) will also be essential
vi. Consideration may be given to creation of a Mozambique Joint
Coordination Committee for CESUL and associated hydropower
projects 55

© Vattenfall AB
Obrigado / Thank you for your attention!
com energia construimos futuro………
56

© Vattenfall AB

Mozambique Regional Transmission Backbone Project ("CESUL") : Technical & Economic Feasibility Study

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Mozambique Regional Transmission

Backbone Project (“CESUL”):

Presentation of Feasibility Study Report

CESUL Launch Workshop

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

CESUL Project Goals:

Technical & Economic Feasibility Study for

• Volume I-B: Appendices to Main Report

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Klicka här för att ändra format på underrubrik i bakgrunden

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Klicka här för att ändra format på underrubrik i bakgrunden

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

• Transient and dynamic stability

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Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Klicka här för att ändra format på underrubrik i bakgrunden

Technical & Economic Feasibility Study for

Klicka här för att ändra format på underrubrik i bakgrunden

Stage 1: 1,325 MW Stage 2: 1,325 MW

Technical & Economic Feasibility Study for

Connection to ‘regional’ power systems

Matambo 400/220 kV - 2 x 250 MVA

Inchope 400/220 kV 220 kV in-out 1 x 400 MVA

400/275 kV 1 x 500 MVA

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

HVAC - Cost Components Foreign Local Total

HVAC Substations 336 736 92% 29 281 8% 366 017

Compensation (2% of line) 0 0% 8 386 100% 8 386

Physical Contingencies (10%) 62 826 80% 15 707 20% 78 533

Technical & Economic Feasibility Study for

HVDC - Cost Components Foreign Local Total

Technical & Economic Feasibility Study for

Total HVDC Stage 1 of Phase 1 848 663

Total HVAC + HVDC Stage 1 of Phase 1 1 799 445

Total HVDC Stage 2 of Phase 1 319 200

Total CESUL Phase 1 2 118 645

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for

Technical & Economic Feasibility Study for