1© 2014. all rights reserved. do not reproduce or allow access to third parties without prior...

1© 2014. All rights reserved. Do not reproduce or allow access to third parties without prior authorization from the Ministry of Energy and Water - Republic of Angola.

João SaraivaPTSE Manager Coordinator

ELECTRIC SECTOR TRANSFORMATION PROGRAM (PTSE)

18th A.P.U.A. CongressLuanda – September 11th 2014


AO

1. Angola’s Power Sector

2. Electric Sector Transformation Program and Market Model

3. PTSE Phases and Progress

4. Future Perspectives

AGENDA


Angola’s Power Sector2025 GoalsThe Presidential Decree 256/11 established a set of objectives for the electricity sector, reinforcing the importance of electricity to the country.

Reduce tariff subsidization

Develop an optimal generation mix, making better use of Angola’s natural resources

Develop the capabilities of the local workforce

System Sustainability

Improve the efficiency of public companies

Implement a new market model that allows for cost reductions

Develop a new regulatory model encouraging efficiency

Industry Competitivene

ss

Increase the electricity rate from 30% to 60%

Quadruple generation capacity from current ~2.0 GW para ~9.5 GW in 2025

Extend more than 2.500 km of lines and substations in the transmission grid, and establish international interconnections

Rehabilitate distribution networks, adding more than 1.5 million consumers

Ensure and Increase

Electricity Supply

i


2002 2013 2017 20250.0

2.0

4.0

6.0

8.0

10.0

0.55 0.87

4.83

6.88

0.33

1.10

1.50

1.60

0.43

0.78

Other Renevables Combined Cycle

Conventonal Thermal Hydro

Angola’s Power SectorSector challenges and progressTo successfully achieve the proposed goals in the energy sector a large amount of investment is necessary in generation assets and grid infrastructure.

2003 2013 2017 20250

1,000

2,000

3,000

4,000

5,000

6,000

2,051

3,354

5,000

5,500

2002 2013 2017 20250.0

500,000.0

1,000,000.0

1,500,000.0

2,000,000.0

2,500,000.0

3,000,000.0

210,000.0

816,100.7

1,228,549.5

2,414,604.4

Installed capacity(GW)

2,0 GW

6,9 GW

Source: 2002 Data – Development of a Energy Strategy , IEA; 2013 Data – MINEA Expanded Council Board; Financial Reports ENE e EDEL; 2017 and 2025 estimated data - PSEA 2009

x4

Transmission grid(Kilometers)

# Consumers(Millions)

x1.5

x3

9,5 GW

0,88 GW


CABINDA

ZAIRE UIGE

L. NORTE

L. SUL

MOXICO

MALANJEK. NORTE

K. SUL

BENGO

LUANDA

HUAMBO

BENGUELA

K. KUBANGO

HUILA

CUNENE

NAMIBE

SE. Capanda elevadora

SE. Cambambe*

How to take advantage of Angolan natural resources

Grid connections until 2025

Angola’s Power SectorElectrification enhancers Angola is managing large, concurrent infrastructure developments, carefully planned to take advantage of Angola's national resources – natural gas, hydro, wind and solar.

Benefit from the hydro potential of Kwanza river – Laúca and Caculo-Cabaça

International interconnection with Namibia and Congo

NAMIBIA

CONGO

Rural electrification with distributed renewables sources

National integration of transmission systems

North System

Center System

South System

East System

Install combined cycle gas turbines, partnering with Sonangol/ Angola LNG

SIMPLIFICATION


AO





AGENDA


Electric Sector Transformation Program GoalsIn addition to infrastructure investments, MINEA considered necessary to establish a package of initiatives to allow a progressive restructuration and a orderly development of the Power Sector, by creating PTSE.

Other Initiatives (non exhaustive)

Restructure the current organizational model

Ensure economic and financial sustainability of the system

Promote the entry of private capital

Strengthen the regulator role in the new Market Model

Expand the distribution network – rural (Solar Village) and urban

Expand the pre-payment model

Establish public-private partnerships

Electric Sector Transformation Program (PTSE)


Electric Sector Transformation ProgramInstitutional reform of public companies The Electricity Sector Transformation Program (PTSE) seeks to improve efficiency by unbundling activities and a new market regulation that allows private participation.

Future status

Transmission National Company

Distribution National Company

Private Concessions

Generation National Company

Private Investors

Engineering Office (for strategic projects)

Restructuring of Public Companies

Distribution and Customer

Operations

Transmission

GenerationPrivate

Investors

Munici-palities

Value Chain Current status

Regulation

Engineering


Distribution National Company

Transmission National Company

Transmission

Generation National Company

Distribution Generation

PTSE Includes organizational and corporate restructuring, leading to the establishment of three new public companies, one per phase of electricity value chain.

Distribution

Generation

Engineering Office

(for strategic projects)

Generation

Distribution

Transmission

Electric Sector Transformation ProgramInstitutional reform of public companies


New Market ModelPrinciples and agentsThe design principles considered in the definition of the new model are listed below:

Market opening (ex.: generation and distribution) Promote the entry of private capital Greater transparency and competitiveness among

companies New tariff model to reduce system costs and subsidies

Expected Results

Design Principles

Strengthen the regulator role (IRSE) Competitive processes for both public and private generation Independent Transmission Operation, also acting as Single Buyer

for all electricity generated in Public Electric System (SEP) Long-term Power Purchase Agreements (PPA) “Merit order” for generation dispatch based on PPAs

Wholesale buyerSingle BuyerMarket Operator

Transmission

Wholesale seller

Distribution Public

Generation

Private Generation


New Market ModelMarket economic modelThe new sector configuration is supported by the new market model defined in Regulation, increasing the control of the economic flows and energy supply.

MO operates the Compensation Fund and pays Distributor

IRSE

PAYMENT FLOW – AGENT RETRIBUTION

Customers pay Distributor

Distributor pays Market Operator (MO)Market

Operator pays Generators

PPAsPrices

UniformPrices

RegulatedTariff

Generation and billing of energy

supplied to Single Buyer

Transmission and billing of energy

supplied to Distribution

Distribution and billing to AT, MT, BT

customers

ENERGY SUPPLY FLOW

Transmission(Single Buyer)

DistributionPublic and Private Generation

CustomersBT Pre-paymentBT Post-payment

ATMT


Tariff-

DISTRIBUTION TO

CUSTOMER Billing

Subsidy to customer

SECTOR COSTS

Regulated Price

Regulated* Tariffs

PPAs* Prices

New Market ModelTariff compositionTariffs are calculated by adding the real cost of the Agents. The Government is subsidizing the final tariff in order to not charge the customers with the high system costs.

Exploration Costs

Investment Retribution

GENERATIONTO

TRANSMISSION Billing

TRANSMISSION

Exploration Costs


TRANSMISSION TO

DISTRIBUTION Billing

DISTRIBUTION

Additive tariff

SIMPLIFIED

Exploration Costs


GENERATION

Segment specific costs

Energy cost of immediately preceding step of the value chain* PPA prices negotiated between Market Operator and each Generator, with IRSE supervision and Regulated Tariffs fixed by the Government, with IRSE supervision

Pays the generation total costs

Pays the transmission total costs

Pays the distribution total costs


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AGENDA


PTSE Phases and ProgressPTSE’s phased planPTSE is structured in three phases. At the moment is about to finish the second one, by the establishment of the new public companies for the power sector.

Confirmation of the expected market model Identification of open / pending issues Communication to companies senior management Release of restructuring and change

1. Diagnostic, Mobilization and Change

Management

CONCLUDED

Restructuring of IRSE, GAMEK and Public Companies Market model & regulation and IRSE training Capability development of the electric sector Implementation plan of operational improvements Program and change management

2. Electric Sector

Restructuring (Unbundling)

CONCLUDING

Detailed design of the new operating model Pilots in reference areas Effective implementation of operational improvements of the new

companies :

• Focus on the most critical areas

• Progressive rollout along geographies and isolated systems

3. Operational and Functional

Improvement of Public

Companies

2014-2016

i


PROVINCE OF LUANDA

Cazenga Thermal Power Plant

Viana Transmission Substation

Viana (EDEL) technical and commercial area

PROVINCE OF MALANJE

Capanda Hydric Power Plant

Transmission

Distribution

Generation

PROVINCE OF BENGUELA

Benguela Area

Lobito Area

Catumbela Area

Baía Farta Area

GENERATION

• Actions over maintenance and operations plans of critical assets to increase their availability

• Actions over supply chain to ensure the availability of the parts and to reduce storage costs

TRANSMISSION

• Permit to work coordination in the system operator (CONS) to increase the system availability

• Maintenance management to reduce unavailability times and increase assets productivity and lifetime

DISTRIBUTION

• Technical operational improvements

• The establishment of a Work Orders Programming Centre in order to reduce failures resolution time

• Commercial operational improvements

• On field identification of consumers and contract regularization to improve electricity readings and to increase income

• Optimization of commercial functions to reduce service times and improve customer service

• Definition of Pre-payment and Agent models

IRSE - REGULATION

• Statistical information systematization and tariff analysis

• Concession contracts development

Locations until August 1st 2014

NOTE: During 2014 is foreseen the launch of new pilots in other provinces.

PTSE Phases and ProgressPhase III executive summary – Operational Improvements


AO





AGENDA


Future PerspectivesLevers of efficiency Some levers are available to increase sector efficiency and to reduce costs:

1. Tariff Model• Increase tariffs

2. Commercial cycle improvement• Pre-payment• Meters in all consumer

points

3. Reduction of acceptable system costs• Implementation of more

demanding benchmarks

4. Reduction of system costs• Reduction of energy

losses transferable to the tariffs

5. Adjusts of tariff models • Balance between the

variable and fix terms• Price curves for qualified

clients

6. Change in the retributive model• Change for a retribution

model by incentives• Include incentives for the

losses reduction

To have all the supply points measured and tariffs more representative of the real

costsControlled costs and new retributive model defined. High control power from IRSE

12

3

4

56

7 8

Stabilization2014-2017

Transition to efficiency2018-2021

Partial liberalization2021-2025

7. Sector restructuration• Public-private partnerships• Concessions of

distributions areas to private companies

8. Reduction of system costs• Cheaper energetic mix• Coexistence of PPAs and

market pool

Review and adjustment of Electric System Regulations (IRSE)

Sustainable companies, service quality and efficiency

TO DISCUSS


Future PerspectivesSustainability In conclusion, PTSE is one of the building blocks to achieve maturity and sustainability in the Angolan Power Sector.

Adopt a better installed capacity mix focused on Angola’s natural resources

Choose thermal power plant technologies with reduced CO2 emissions

Develop pilot projects to expand renewable energies Promote electricity efficiency with mass installation of prepayment

meters

Economic Sustainability

Social Sustainability

Environmental Sustainability

Expand rural electrification, boosting growth and development in these regions

Ensure long-term sustainability and independence of local capabilities (human and technological)

Deliver results to society in the short term

Establish new electricity market conditions Reduce governmental tariff subsidization Develop regulation capabilities to promote efficiency Management professionalization

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=YDbrEgeMEgifoM&tbnid=hNRkH3U1FFWAqM:&ved=0CAUQjRw&url=http://www.techletter.com/Archive/ER%20articles/raisingprices.html&ei=CFfgUseFB8jT0QWmmIDwDg&bvm=bv.59568121,d.ZGU&psig=AFQjCNEJuvxcAvPJaM10kXz1kZwHEXAKTg&ust=1390518020489517


AO

Thank youJoão Saraiva

EMPRESA PÚBLICA DE PRODUÇÃO DE ELECTRICIDADE

REDE NACIONAL DE TRANSPORTE DE ELECTRICIDADE

EMPRESA NACIONAL DE DISTRIBUIÇÃO DE ELECTRICIDADE


National Policy and Strategy for Energy Security FrameworkNational Policy and Strategy for Energy Security define the main strategic guidelines for the sector, specially for Electricity, Oil and Natural Gas.

January 2009Establishment of the Interministerial Commission for Energy Security of Angola

Strategy and Energy Policy of Angola and Energy Security Plan of Angola

Institutional Model of the Energy Supply Industry and Oil Sector

November 2011Approved Presidential Decree n.º 256/11 - National Policy and Strategy for Energy Security

Organized in the following chapters:

Importance of transformation required in the Electric System

Strategic guidelines for electricity Subsector

Strategic guidelines oil and natural gas subsectors

Environmental sustainability

Institutional model recommended for energy system


National Policy and Strategy for Energy Security – Electricity SubsectorElectric Subsector goals are focused on increasing the electrification rate, by ensuring electricity supply to large part of the population

Strategic Guidelines for Electricity Subsector

Strongly increase the power generation pool and enhance the role of renewable energy

Connect North, South and East Systems

Expand electrification (urban and rural) covering from 50% to 60% of population in 2025:

Ensure the economic - financial sustainability (Tariffs cover 20% of the costs)

Rearrange the current organizational model, through the creation of public entities , for generation, transmission and distribution/commercialization

Strengthen the Regulator role – IRSE (Electricity Sector Regulatory Institute) and the AREA (Atomic Energy Regulatory Agency)

Promote the entry of private capital and construction and operation capabilities (know-how) and define engaging compensatory systems for private investors

Establish partnership between National Generation Company and Sonangol to provide the Centrals with Natural Gas.


Operational and Functional Improvement of Public Companies,

GAMEK and IRSE

Phase II Phase IIITransition

Prioritized improvements in

Distribution(quick – wins)

Diagnostic

2013

SJ J A O N DAJ F M M2012

2014

SJ J A O N DAJ F M M20152016

Electric Sector Restructuring (Unbundling)

Phase I

Current Capabilities Diagnostic

Public Companies Restructuring, IRSE e GAMEK

Market Model

Development of Power Sector Capabilities and IT roadmap

Change Management

Corporate Constitution, Feasibility study and Financial statement Support

Organization and Allocation Preparation

Company staffing and salaries equalization model

Market set-up Operation Market Simulation Tariffs study CAE1 and CAR2 determination

Actual IT System Adaptation and Start Up Operative procedures definition

Operative improvement in Technical and Commercial Areas, with short-term results in commercial cycle and customer service

Pre-payment and Agent Models Definition

Focus on maintenance planning of transmission and distribution key assets, to increase the availability

Improvements in Support Corporative areas

Progressive rollout along geographies and isolated systems

SAP implementation to support HR, finance, procurement and logistics.

Phase I and II Transition Quick-wins e Phase III (2014)

1) CAE – Contrato de Aquisição de Energia; 2) CAR – Contrato Comercial de Acesso às Redes

Companies startup follow-up and transition

Electric Sector Transformation Program Planning by phases

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