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22nd November 2007
Rurelec plc (AIM:RUR) announces today that its Bolivian subsidiary, Empresa Guaracachi SA ('Guaracachi') has finalised its 96 MW combined cycle gas turbine ('CCGT') expansion project in Santa Cruz de la Sierra.
Guaracachi's CCGT project is the largest single power unit ever to be constructed in Bolivia. At 96 MW of electric output, it will represent more than 10 per cent. of the country's peak demand when completed in early 2009 and it will help alleviate power shortages which have been forecast during the next eighteen months.
Guaracachi has signed contracts to acquire a steam turbine from Steag of Germany which is now being reconditioned by Sulzer Hickham before delivery to Bolivia. At the same time the Board of Guaracachi has approved the selection of IST of Canada as preferred supplier for two heat recovery steam generators ('HRSGs') which comprise the heart of the conversion project. Contract signature is expected by the end of November.
Under the combined cycle conversion, the waste heat from two existing General Electric 6FA gas turbines will be channelled through two new HRSGs to be constructed on site, instead of being vented directly into the atmosphere. This capture of heat from the existing power plant allows electricity to be produced from the same natural gas as is currently used simply to fire the open cycle gas turbines themselves, since the waste heat is converted to steam which in turn powers a steam turbine synchronised to the two original gas turbines.
Compared with the current production in open cycle Guaracachi will generate approximately 40 per cent. more electricity in combined cycle without any increase in gas usage. This significant reduction in gas consumption in turn reduces the new CCGT unit's emissions of CO2 for every hour of electricity generated. For this reason, the project qualifies for certified emissions reductions certificates, also known as 'carbon credits', under the Kyoto Protocol of the United Nations Framework Agreement on Climate Change.
Financing Initiatives
At the same time as finalising the mechanics of the project, Guaracachi has launched a series of important financing initiatives.
Today, Guaracachi has received confirmation that its planned domestic bond placement programme of up to US$40 million has been authorised by the Superintendencia de Pensiones, Valores y Seguros, the Bolivian financial market regulator. The bonds, rated A+(Bol) by Fitch, will be placed with Bolivian financial institutions by Credibolsa, the brokerage arm of Banco de Credito de Peru. Placement of the first tranche of the bonds in an amount of US $20 million is expected to be completed shortly. This first placement, which has been authorised by the shareholders of the company, will have a maturity of 10 years with principal payments of 33.33% in year 8, 33.33% in year 9 and 33.33% in year 10. The annual fixed interest rate will be 8.55%, which will be paid semi-annually.
In parallel with the bond programme, Guaracachi has agreed outline terms with Corporacion Andina de Fomento ('CAF') for a project loan of US $20 million for the combined cycle conversion. This loan has received support from KfW, the German development bank, which is providing a subsidised tranche of lending in recognition of the importance of the CCGT project for the infrastructure expansion of Bolivia. This is the first CCGT plant in Bolivia and it represents a major development in the Bolivian interconnected system, introducing high efficiency, complex thermal power generation into the system. Signature of the proposed CAF and KfW loan is expected at a formal ceremony at the end of November.
Guaracachi is also working closely with Rurelec to create a carbon financing programme which will provide further project funding. This will utilise the future revenues from the forward sale of carbon credits which will be generated by the CCGT plant when it comes on line in the second quarter of 2009.
Peter Earl, Managing Director of Rurelec commented: 'Rurelec is continuing to make substantial progress in Bolivia, and the completion of the CCGT expansion is testament to this. The basic cost of the CCGT project is circa US$40 million, or US$416,000 per MW of incremental capacity. This is a capital cost considerably below industry standards and Rurelec is delighted at the co-operation this represents between English and Bolivian power engineering and finance teams. The final funding requirement will also include Bolivian VAT and import duties as well as interest during construction. Taken together, these items add a further US $10 million to the capital budget for the conversion and take the total funding requirement of the CCGT project to US $50 million.'
For further information please contact:
Peter Earl, CEO, Rurelec PLC 020 7793 5610
Paul Shackleton, Daniel Stewart 020 7776 6550
Simon Robinson, Park Green Communications 020 7851 7480