Funding Caspian Energy Infrastructure

A Caspian Energy Grid

Chris Cook

Ashgabat December 2014

Reliable & Stable Transmission – Problem

'Caspian Energy Grid' = Caspian region energy transportation/ generation & transmission infrastructure

Existing legacy infrastructure fragmented, fragile & grossly inefficient (<20% output efficiency)

Huge carbon fuel waste between producer & consumer

Competition between Caspian regional producers for sales of energy-as-a-commodity

Market volatility & ongoing bank capital shortage means conventional funding almost impossible

Reliable & Stable Transmission – Solution

Least Carbon Fuel Cost Principle - minimise carbon fuel system input for given electricity, heat or power output

$ 100s billion investment in

- efficiency upgrade of legacy gas transportation & heat/power generation

- existing legacy power grid

- next generation gas to power & efficient grid transmission eg HVDC

Question - how can Caspian Energy Grid upgrade/ development be funded?

Funding the Grid

Prepay Energy Credit

- energy consumers or investors pay forward at a discount

- pre-dates modern debt/equity finance capital

- re-emerging in use eg $85bn prepay transaction by Sinopec with Rosneft

Energy Loans

- investors lend $, € or other agreed currency

- Energy Loan denominated in energy eg MWhrs or MMbtu

- Project repays loan by purchasing energy credits at the energy market price in $, € or agreed currency

Funding the Grid

Value Proposition

- consumers buy in advance cheaper & lock in price

- producers obtain interest free credit & lock in price

- investors obtain energy return & sell to consumers

Requirements

- physical energy market & pricing benchmark

- accounting system

- framework of trust - “Clearing Union”

Caspian Energy Grid Market Platform

Caspian Energy Grid(Custodian)

Caspian Energy Grid(Custodian)

Investors

Caspian EnergyGrid Users

Service Providers

%Prepay

Use Fee

Energy-as-a-Service – Value Propositions

Producers/Generators & Consumers - share cost of Caspian Energy Grid through agreed use payment

Service Providers - receive agreed entitlement as %age of use fees - balance of use fees available to investors

Investors - buy energy prepay credits at a discount

Consumers – pay for energy delivered using conventional payment or energy prepay credits

Proof of Concept – KAT Core

KAT = Kazakhstan, Azerbaijan, Turkmenistan

Turkmenistan littoral Gas to Power generation hub

- state of the art Combined Cycle Gas Turbines (CCGT)

- c 60% efficiency

High Voltage Direct Current (HVDC) subsea triangle

- Turkmenistan – Kazakhstan (eg Atirau)

- Turkmenistan – Azerbaijan (eg Baku)

- Azerbaijan - Kazakhstan

Marchwood (UK) – 58% efficient CCGT

BritNed and NorNed HVDC Connections

BritNed 260km - 600MW NorNed 580km - 600MW

Caspian Energy Grid – KAT Core

Turkmen Gas/ Power Hub

Caspian Energy Grid - Outcomes

Turkmenistan exports power to Caspian littoral statesEnergy savings fund development of Caspian Energy GridTurkmenistan conserves gas which is then available for

generation or exportAzerbaijan & Kazakhstan reduce local carbon fuel requirement

and release fuels for exportCaspian energy market & pricing benchmarkMinimise funding costs: energy loans bear no compound interestIncreased resilience - Grid also capable of carrying regional

renewable energy power & load balancing

Proposal & Next Steps

Wimpole Consortium – led by major global energy engineer/ manufacturer

Two proposed proofs of concept- KAT Core proposal- re-powering of existing legacy gas transmission infrastructure