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Proposal of a 550MW electrical power Station

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This proposal was initiated after failure to establish of the "Mishor Rotem" shale oil power Station. Due to my proposed structure as a JV the US State Department had a keen interest to provide the appropriate guaranties and OPIC financing. More details upon request.

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Proposal of a 550MW electrical power Station

  1. 1. Fax Cover This message, intended solely for the person to whom it is addressed. If you receive this message in error, please forward it to the correct person, or mail it back to us. Thank you. Saturday, August 16, 1997 To Otniel Schneller, General Manager COMGRO, 3 Israel Beck, Tel Aviv, Israel Fax No. 972-3-561-7888 From Haim R. Branisteanu - 212/308-2477 Subject Electrical Power Plant J.V. with Jordan Pages 4, including this one CONFIDENTIAL Dear Otniel : Further to our telephone conversation and your fax message dated August 13, 1997 regarding this project, I am sending you this summary. The Jordanian formal response will be crucial in promoting this project. Only after receiving the appropriate indication, I will be able to interest an US based Utility or group of Utilities as an stabilizing joint venture partner. The involvement of a US based company in this project, will enable me to pursue the financing with the blessing of the US Government, and hopefully the appropriate loan guaranties, who are crucial. The joint venture partners in this electrical power project, which I estimate around $300 million are: 1. A Jordanian entity including the Jordanian Dead Sea Works 2. Dead Sea Works, Machteshim Chemical Works and other big Israeli electricity consumers in the area. 3. An US based Utility or group of Utilities and may be Amoco The equity participation may vary, as long as US entity will control at least 25% of the equity (preferred 33%). Location: The location will be on the border on the south side of the Dead Sea, in the vicinity of both Dead Sea Works (e.g. Jordan and Israel). The complex will consist of : 1. Gas Storage facilities, which may be above or underground 2. The power generating plant with the turbines and substations 3. Water cooling reservoir and may be a thermal energy Solar Pond from (Ormat) which will be powered by waste heat and the sun. This complex will be connected to an electrical distribution grid which will connect the output to the Israeli and Jordanian electrical grid. Internet - Scheller4.lwp
  2. 2. Consumer of electricity: High Possibility Low Possibility Dead Sea Works Israel (DSW) 150 MW 250 MW (DSW already has 100 MW) Jordanian Dead Sea Works 50 MW 100 MW Machteshim and others 50 MW 100 MW Jordan National Grid 50 MW 150 MW PA Authority via Jordan 100 MW IEC via DSW 50 MW 135 MW Total Power generated 350 MW to 853 MW Based on those assumptions it will be realistic to anticipate a 500 MW complex. DSW is already operating a 110 MW power plant on residual (heavy) oil which will be converted into a gas powered plant. Presently DSW is in need of additional 50 MW. The anticipated magnesium DSW/Volkswagen joint venture will need an additional 100 MW. The electrical needs of Jordan are estimates and may conflict with the present development of a 2x150 MW power plant in Aqkaba which will be powered with residual oil from Iraq. The project may supply an estimated 100 MW electricity to the P.A. in the Jericho/Hebron area via Jordan or in transit over IEC electrical grid to Gaza. The electricity will be in exchange of US/European aid, which will be paid directly to Jordan or the Jordanian partner in the joint venture. The supply to the IEC will be a substitute for the aborted oil shale plant in Rotem (as discussed). Based on my own assumptions of efficiency and cost, a gas pipeline from Egypt, from the Port Said area, will cost around $250 to $300. The economic justification for building such a gas pipeline will need that our project will generate around 400 MW of power (based on my assumptions). Why Natural Gas - better efficiency and lower capital investment = 30% cheaper electricity The latest achievements in the development of gas turbine parts enables gas turbines to work at higher temperatures (around 550 deg. C) and higher pressure ratio (30:1), which resulted in higher net energy conversion efficiency of 37% to 40% (for the gas turbine alone). The combined cycle concept which uses gas and steam turbines in the same system, increases the total system efficiency to around 54% to 60%. Some of the more popular manufacturer are: GE STAGtm 109H Combined Cycle System with efficiency of up to 60% Siemens GUDR 1.94, 2.94 Combined Cycle Power Plants with efficiency of 57% to 60% ABB GTX series Combined Cycle Power Plants with efficiency of 54% to 58% Westinghouse, GE-Alsthom and others (Japan) have similar performance. The unit cost (per MW) is around $600,000 to $700,000. Power generating turbines come in various power generating capacity (usually a power plant consist of 3 to 8 combined cycle units). A coal or oil powered plant (boiler and steam turbine) has a conversion factor of 38% to 45% depending on the type of boiler and steam turbine. Those efficiency rates varies if the steam turbine uses single stage or multiple stage (e.g. high pressure, intermediate and low pressure turbines). The unit cost (per MW) of a coal powered plant is around $1,200,000 to $1,400,000 and the unit cost (per MW) of an residual (heavy) oil powered plant is around $900,000. Ramko Rolland Associates Faxmessage Page - 2 Internet -
  3. 3. Financial Comparison of 3 types of Electric Power Station the calculations were made for 1 MWe output for one year for comparison and indication purposes only @ 5 cents/kWh. Operation and Maintenance are based on data received from the Gas Research Institute, an association of all major gas producers and customers in the US. Ramko Rolland Associates Page 3 Internet - Scheller4.lwp Yearly Hours87601000 cFeetMetric TonBarrel Oil Electricity/MWH$50.00$2.50$45.00$19.00 MM BTU/Mwh3.4161.02524.0005.800 Var. Exp. Oil$0.66$2.44$1.88$3.28 Var.Exp. Coal$2.5154%43%43% Var.Exp.gas$0.536,3267,9447,944 Interest7.50%$700,000$1,400,000$900,000 Years Amort.20100%$328,500100%$328,500100%$328,500 31%$101,36930%$97,86252%$170,978 8%$27,75016%$53,5209%$30,000 Power75%1%$3,4825%$16,4911%$4,336 Output16%$52,50032%$105,00021%$67,500 56%$185,10183%$272,87383%$272,814 44%$143,39917%$55,62717%$55,686 0$021%$68,66542%$137,32927%$88,283 39%$127,2347%$23,29811%$34,903 Input data Fuel Price BTU Content (MM) Cost per BTU (MM) Power Station Efficency Heat Rate MMBTU/MWH Est Investment per MW Revenue - Electricity Expenses Fuel Cost Fix Opr. & Maint. Var. Opr. & Maint. Interest Total Cashflow Loan Payment Indicative Free Cashflow Heavy Oil HO Rate Coal Coal Rate Nat. Gas Rate Misc. Item B5
  4. 4. Operating cost of those power plants varies substantially with their electrical output as the variable costs differ widely (difference of around $2 per MWH for gas to coal). On the other hand gas turbines efficiency falls substantially at power outputs below 70% (therefore the multi unit concept). There are also many other factors such as cost of land, fuel storage facilities, water, access roads, connection to the main electrical grid, substation, transfer cost and energy loss, etc. World pricing of energy are usually rated based on the net energy content of the fuel measured in BTU (1 kWh = 3416 BTU). Today energy prices are around:  Natural gas prices are around $2.2 to $2.5 per million BTU.  Coal prices are lower ($1.5 to $1.8). But - Coal must be pulverized, transported and it’s exhaust cleaned, which adds around $2.2 per MWH or $0.45 to $0.55 per million BTU.  Oil prices are higher ($2.6 to $3) transportation cost are around $ 0.1 to $0.25 per million BTU In my calculation I assumed that the cost of natural gas at the Dead Sea will be $2.5 slightly above the present $2.3 to $2.4 of the world market prices (such as the US or Western Europe). As residual oil must be transported by truck or rail (residual oil can not be pumped over pipelines), similar to coal, power plants in Jordan or Israel are most cost efficient on the sea shore or in the proximity of light crude refineries. A gas powered electrical power station does not have the fuel transport/logistical problems and can be easily located anywhere. The estimated cost of transport for natural gas over a pipeline is around 4 to 5 cents/100 km per million BTU. In summary an electrical power plant powered by gas is around 35% more fuel efficient and the variable costs are substantial lower. In addition, my estimation is that the use of waste energy from the power plant which will feed a Solar Pond with the Ormat concept will add around 10% of additional efficiency which can be used mostly for “Peak Hours” and power output transitions. General I am in agreement with your assessments as expressed in your fax that the Jordanians are the key factor for this project. But Jordan also has the most to gain and benefit from this project. Jordan will be unable to finance this type of project without the Israeli partners, as their credit rating will request substantially higher financing cost which will increase electricity cost. The US involvement will lower the borrowing cost by an estimated 20% or around $6 million a year on an 500 MW project. After receiving a positive written response from Jordan with regard of this project I will be able more adequately to ascertain the potential difficulties if any, in delivering natural gas from Egypt to the Dead Sea area. Egypt is in need of hard currency and the US may offer assistance. LNG exports are an expensive proposal for Egypt, and Turkey will be importing from the Caspian basin which has plentiful of reserves, which, by the way, may be also an interesting and feasible option for Israel. I hope that this summary will help you in presenting the project to the Jordanian authorities. Please call after receiving. Sincerely yours,C:WordprodrawsymHB.bmp Haim R. Branisteanu, Partner Ramko Rolland Associates Faxmessage Page - 4 Internet -