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TONGA Independent Power Producers (IPP) & Power Purchase Agreement (PPA)

- Tonga is working to increase renewable energy production to meet its 50% target by 2020. It has issued a tender for an independent power producer to build a 6 MW solar farm, the largest in Tonga. Singyes was selected to construct the first 2 MW under a power purchase agreement. - The objectives are to reduce diesel use, lower costs, and meet renewable energy goals in a financially sustainable way for the local power company. Independent power producers invest capital while the power company purchases the electricity. - Careful coordination is needed between the power company, regulator, and independent producer regarding construction, operations, and pricing to ensure a smooth transition and reliable supply that benefits all parties and customers. Approvals and

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55 views

TONGA Independent Power Producers (IPP) & Power Purchase Agreement (PPA)

- Tonga is working to increase renewable energy production to meet its 50% target by 2020. It has issued a tender for an independent power producer to build a 6 MW solar farm, the largest in Tonga. Singyes was selected to construct the first 2 MW under a power purchase agreement. - The objectives are to reduce diesel use, lower costs, and meet renewable energy goals in a financially sustainable way for the local power company. Independent power producers invest capital while the power company purchases the electricity. - Careful coordination is needed between the power company, regulator, and independent producer regarding construction, operations, and pricing to ensure a smooth transition and reliable supply that benefits all parties and customers. Approvals and

Uploaded by

soumya19800000000
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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TONGA Independent Power

Producers (IPP) & Power


Purchase Agreement (PPA)

6 June 2017
Mrs Sosefina S Maileseni
Summary
• Overview
• Primary Objectives
• Typical IPP Structure
• Offtaker and IPP Relationship
• Construction
• Operation
• Finance
• PPA Provisions
• Pre and Post PPA Approvals
• Other RE projects to reach 50% RE
OVERVIEW
• Tonga currently has two main solar facilities of 1.0 MW and 1.3 MW which are
both operated and maintained by TPL. Other minor plants (Vv 420kw, Hp 550
kw, 200kw).
• TERM 50% RE target - the Introduction of IPP/PPA will assist to expedite
moving Tonga towards achieving this target.
• Biggest Solar farm in Tonga.
• TPL conducted a Request for Price (RFP) for interested IPP participants for
installation of up to 6 MW of additional solar PV under a Power Purchase
Agreement in February 2016. Singyes was selected after an exhaustive and
detailed selection process. (First 2MW only).
• An MOU was executed with Singyes on 1 April 2016.
• AECOM have completed a detailed Engineering report on the installation and
interconnection of 6 MW including battery storage.
• Negotiations with Singyes on the PPA and the technical and engineering
aspects of their proposal has been conducted in detail since 1 April 2016.
• The PPA document is now well advanced, executed last year and construction
has commenced.
PRIMARY OBJECTIVES
• To assist in complying with the TERM target of 50% renewables by 2020.
• To utilize 3rd party private sector finance for renewable electricity generation.
• Reduce the reliance on imported diesel fuel for power generation.
• Achieve sustainable, affordable and reliable electricity for the nation.
• Maintain TPL financial viability.
• Support the strategic direction of lowering electricity tariffs for the nation.
TYPICAL IPP STRUCTURE
Offtaker & IPP relationship
• the IPP to accept the full financial risk on capex and performance and production the
plant. Despite this The local power company and the regulator will adjust the design and
operation of the network to accommodate the planned energy production and despatch to the grid.
Hence if the planned production is interrupted even briefly, let alone for long periods, it will cause
significant disruptions to the balance and performance of the network resulting brownouts or
outages and perhaps ultimately customer tariff increases if alternative production needs to be
implemented. Consequently the Offtaker and the regulator have a common vested interest in
ensuring the construction, operation and performance of the IPPs power plant meets planned
performance criteria.
•

• the commercial and operational aspirations of the Offtaker and the legal and operational and
enforcement requirements of the Regulator overlap to a large degree.
•

• hence It is essential for the Regulator and the Offtaker of the energy produced eg the local power
company such as TPL to work collaboratively to maximise the desired financial outcome for the
host country.
•

• similarly the regulator and the host local power company to work together to ensure network
benefits are maximised.
CONSTRUCTION
• tier one equipment.
• - ensure the capabilities and track of the IPP are researched and proven.
- work is performed by Licenced and regulated contractors.
- lease of land is for a period exceeding the term of the ppa.
• technical and engineering design is performed by tier 1 consultants and approved
by the host power company and regulator to ensure it complies with all local
standards and will be integrated seamlessly into into the local network.
• transformers and interconnection design to comply with all regulatory standards
and local requirements.
• completion date is coordinated with the local power company and planned and
managed to meet local requirements.
• interconnection to the grid is either conducted by the local power company or is
closely managed by the local power company.
• construction progress is kept to schedule so grid instability does not occur if
interconnection is late or early.
OPERATION
• planned output is strictly adhered to.

• outages and fluctuations are avoided.

• Maintenance schedules are complied with.

• O&M costs are met prior to repatriation of any dividends to IPP.


FINANCE
• required equity from the IPP is proven.

• ensure the level of debt is kept within reasonable commercial limits if not
prevented altogether.

• availability to drawdown equity and debt is assured.

• Local power company or reg has ability to step-in and ensure all ppa requirements
are adhered to.
PPA PROVISIONS
- The ppa is an extremely complicated document and requires experienced advisors
and consultants.

- Local power company and/ or regulator retains the ultimate sanction to step in and
takeover the power plant in the event of persistent or serious breaches.

-All approvals from local authorities are in place prior to commencement of


construction.

- Commissioning is performed by reputable external consultants and ultimately


approved by the local power company.
PRE AND POST PPA APPROVALS
The following matters were required prior to execution of the PPA
• GoT agreement
• TPL Board Approval
• Singyes Board Approval
• Agreement by the Electricity Regulator
• Sign off from chapman Tripp (TPL Lawyers)
• Satisfactory Due diligence on Singyes
• Proof of funds from Singyes.

The following matters are to be addressed on finalising PPA (Conditions Precedent)


• Approval of engineering, Design and Construction drawings
• Approval of all technical equipment (panels and inverters etc)
• Completion of all environmental permits and approvals.
• Singyes request and GoT determination for Taxation relief
• Land rental agreement
• Approval of construction contract and other matters

•
Other Projects to reach 50% RE
MALO ‘AUPITO

QUESTIONS ??

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