BOT Desalination Projects and their Financing in a Nutshell

IDE. Your Water Partners

udiRani Meerovitch
Director, Special Projects IDE Technologies Ltd – Israel

 

 

 

Technology

  • Barry Pomerantz of MHD Technology asks If financing is from the Public or private sectors?

All depends on the project structure , the off-taker and the market place. Financing can come from the private sector (Commercial Banks) or from the Public Sector (Development Banks, ECA's etc.)

  • Is it possible to get the presentation slides ? Thx

The presentation will be available on IDE's web-site

  • What is the approximate electricity cost per year to run the facility?

Electricity cost to run the plant depends on the electricity cost at the location of the plant. Rough figuresfor elec consumption will be 3.5-3.8 kWh/m3

  • What is the smallest size of WPA that you believe has been done?

WPA agreements can be signed for small quantities of water but the financing will probably NOT be on Project Financing Basis so the risk allocation can deviate

  • Hi, is there any hand book or reference can be helfull?

I am not familiar with one, though if you have a solid opportunity we can try to assist

  • Compared to BOT projects, is there a difference in water tariff for BOO projects?

If the BOT is under a long term concession (20-25years) you will not see a difference in the water price. The discount factor will basically reduce to close to zero the future value of the years beyond 20-25

  • Are there examples of simple WPA's available online?

We are not familiar with such, specially not for medium to large size projects where conditions can differ from one project to another and where lenders focus on risk allocation that will be tailor made to the project characteristics

  • Keneco Kenya - What does it take for IDE to set up a local entity in order to do this

When we are awarded a project we set a local company for that. We also try to hire as many locals as possible and, while running the O&M, to transfer knowledge and technology to our local counterparts and employees

  • How bottleneck if any for execution of the project is taken care of

Sorry, no magic answer. We always run into bottle necks and if you are professional and experienced you know how to resolve these

  • Can the cost be controlled if EPC contractor and OM contractor are one and same ?

Yes it can. Their price should be negotiated and agreed prior to bid submission/financial close, and the agreements with them should be strong, comprehensive and binding (turn key lump sum basis)

  • is there any recommended well experienced freelance expertise can help us in this regards??

Yes, there always are. You can contact me directly to further discuss this.

  • How depreciation of equipments and loan interests issue are managed

Interest rate should rather be hedged or fixed. Depreciation/ replacement/ renewal of equipment should be taken into account in the pricing of the O&M. This should be an O&M risk

  • How much does water cost in projects stated in the presentation

Sorry, our agreement with the off-taker forbids us to reveal this information. I can only say it was a very competitive price.

  • where could we get a copy of a typical WPA template? what are the main sections that form a WPA?

We are not familiar with templates, particularly for medium to large size projects were conditions can differ from one project to another, and where lenders focus on risk allocation that will be tailor made to the project characteristics. You can consul twith a reputable law firm that has international experience with such contracts

  • In the BOT scheme who will define the approved vendor list for the scope of supply? Is the EPC?

This can be combined but it cannot be the only source as it doesn't produce electricity on a 24/7 basis

  • Can IPP wind and solar be combined for the power source supply for the plant

This can be combined but it cannot be the only source as it doesn't produce electricity on a 24/7 basis

  • What were the lessons learnt? Did you have similar experience for all the three projects mentioned in your presentation?

The main lesson is be creative, be professional, try to understand the main concerns of the lenders, and try to answer these

  • How much will be fixed cost and variable cost for producing the water

The variable price is very dependant on the electricity price. The Fixed price is very dependant on the financing costs, the gearing and the tenor of the loan. We should evaluate on a case by case basis

  • Which party typically takes the risk for the distribution or conveyance pipeline?

Usually it would be the Off- Taker's risk. It involves issues of rights of way, regulation etc. The SPC might have problems addressing this

  • what happens if plant does not produce what is quoted

This should be defined in the WPA. There will be LDs that the Off-Taker will impose on the SPC and it can be reason for termination due to the default of the SPC (the project company)

  • What typically happens when there is a Force Majeure and the insurance does not cover all expenses? Is there a compensation for missed revenue (for example sharing 50-50)?

The risk allocation in FM events is an important point which is negotiated on a case by case basis. The there are several answers to this You can communicate with me directly for further ideas on this point

  • do you come do presentation with potential clients

I should better understand what project we are talking about. You can contact me directly

  • Does the sponsor typically passes through the RO plant performance risk to the EPC contractor or supplier?

Yes they do. I would say that this is mandatory when Project Financing is required

  • Need to know, do you come and do personal presentation for potential projects and what timeframe is required .

It depends on the circumstances. You should contact me directly and explain more (ranime@ide-tech.com)

  • is there any recommended well experienced freelance expertise can help us in this regards??

Yes, there always are. You can contact me directly to further discuss this.

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