Eliminating end-user capital risks from BOOT Power Solutions

Altaaqa Global’s BOOT product, which is tailored to mining requirements, eliminates the need on the part of the client to make any capital investment, upfront or balloon payments. Costs are levelised over the contract period, with options to transition to a standard O&M contract at the end.

Sourcing reliable and cost-effective energy supply solutions for operations in far-far-flung areas that are located off-grid is becoming a burden for mining companies, considering that they also have to focus on their respective core businesses.  Among an increasing host of solutions that are available, the BOOT (Build-Own-Operate-Transfer) model is one of the most viable options for mining companies with operations in Africa to consider.

However, naturally, one of the biggest challenges that a management of a mining company would face is making an informed choice on the most suitable solution for their specific need. The availability of numerous providers, who appear to have similar offers, would also compound their situation.

Altaaqa Global Energy Services (Altaaqa Global), an international energy services business providing cost-effective multi-megawatt power solutions, is well-resourced to deliver appropriate BOOT model power solutions to mining companies with operations throughout Africa.  As a true energy services partner, the company prides in supporting clients throughout the life of their power projects – from designing the power plant; to providing flexible contractual arrangements; to mobilising, installing and operating the equipment.

“Often mine sites are far away from the grid, and this is where Altaaqa Global will prove to be a valuable power solutions partner. We offer a cost-effective, OPEX-driven, stable power supply to mines,” Nicolas Kuhn, Altaaqa Global’s Business Development Director for Sub-Saharan Africa describes the company’s unique client-centred solution and reference a project in which it has been deployed successfully.

A unique client-centred BOOT solution

What sets apart Altaaqa Global’s unique BOOT solution from the conventional BOOT offering from competitors is that it has been developed with accommodating realities which every contemporary mining business faces in mind.

Undoubtedly, one would appreciate the relevance of Altaaqa Global’s BOOT solution better by examining the inherent gap in the conventional BOOT model, mainly the discordance between the Power Purchase Agreement (PPA) and Life of Mine (LoM). 

The BOOT model has existed for many years in the IPP space, combined with a PPA. The most salient feature of the BOOT model is that at the end of the contract, the complete ownership of the power plant asset is transferred to the client. The solution is ideal for private and public off-takers whose core business is not in the field of planning and managing power plant projects.

Usually, this type of solution comes with a PPA attached, which entails the off-taker being signed up to a PPA and a tie-in for an extended amount of time. These Agreements can extend to around 20 to 25 years or more. While it may work for organisations in other industries, this model generically applied to the mining industry can potentially have challenges for a number of reasons.

From a life-of-mine (LoM) perspective, such long PPA periods can be difficult to sign up to for mining companies. Typically, mines are not always ready to sign up to a 20–25-year PPA as the LoM might be significantly shorter, and the competitiveness of the asset might diminish over time. Furthermore, the IPP and lenders are very wary of change of ownership control of the mine, and in this case the PPA might come attached with restrictions or obligatory notifications, which can potentially be challenging to work with. Financially, it is also worth noting that some mining companies would need to raise project finance. This could mean that there would be little support for debt repayment, and that the mine would have to exclusively depend on project revenues to pay the debt. This can raise questions: Is the off-taker creditworthy over 20 years? Does the off-taker have payment support or guarantees in place?

In the end, the alignment between mining companies and the IPP lies in the amount of risk both sides are ready to take on. The split of the risk is where the tariff will be based, which in turn will be used to fund the project under a PPA. For medium and shorter-term projects, the option until now has only been rental, which may leave customers open to significant financial and logistical risks.

This was the conundrum that mining companies have faced, which does not make conventional BOOT an attractive proposition.

Filling the gap

Hence, to adapt to industry needs and fill the gap, the Altaaqa Global BOOT offering is particularly customised for clients with medium and short-term, small to large power projects. Highlighting what particularly makes the solution exceptional in the context of the contemporary mining environment, Nicolas Kuhn explains: “Mining is a power-intensive industry, with ever changing requirements on the power infrastructure. Our BOOT product, as we tailor to mining requirements, eliminates the need on the part of the client to make any capital investment, upfront or balloon payments. Costs are levelised over the contract period, with options to transition to a standard O&M contract at the end. The ownership and risk is retained by us until the asset is finally transferred at no cost to the customer. In fact, this is an OPEX type of solution, which can be paid for by mining revenue, depending on the mining company’s model.”

By and large, from financial and technical standpoints, Altaaqa Global’s BOOT solutions nestles perfectly within this market gap.

Scrupulous steps in delivery

Altaaqa Global recognises that every client has different requirements which necessitate developing a unique solution. In view of this, Nicolas Kuhn says that scrupulous steps are taken to ensure that a suitable BOOT solution is delivered according to client’s exact expectations as far as possible. Actually, they underline getting involved with the client from the onset of the project as the company’s strength.  “We work as consulting partners to take clients through different solutions and technologies, bearing in mind their particular set of requirements. This could be carbon footprint reduction, a planned expansion which requires a modular set up with incremental power additions, or specific financial constraints. For example, a particular project in Central Asia has had Altaaqa Global delivering under similar kinds of customer requirements, building up to 400MW of installed power over few years.”

Another noteworthy aspect about the BOOT turnkey power solution is that Altaaqa Global supplies, installs and commissions a turnkey power plant. This involves taking responsibility for safe operation so that the plant is well managed and runs at maximum efficiency with as minimal downtime as possible. In-house engineers and on-site technicians will operate and service the plant throughout the contract.

Furthermore, Altaaqa Global builds-in redundancy into the plant enabling flexibility and safety in both unplanned events and planned maintenance. Spare parts supply is maintained via its global supply chain network. In order to ensure the plant is operated to maximum efficiency, the company always keeps critical and maintenance spare parts at hand.

Eager and ready

In a nutshell, the project management team urges mining companies in Africa to exercise prudence when choosing BOOT power solutions for their projects in off-grid, remote sites. They assure clients that with its adequate wherewithal Altaaqa Global is eager and ready to offer customised BOOT power solutions which eliminate their exposure to financial risk.

Altaaqa Global delivers for the client

Altaaqa Global’s client-centred BOOT solution has found favour with the global industrial sector. Recently, the company delivered a solution in Latin America. The client needed power for a processing plant urgently. Engaging Altaaqa Global was the only convenient option as managing a power plant was neither their core competency nor business model. Additionally, they did not want to put down the necessary unbudgeted CAPEX for a captive power plant and have to deal with the associated operational risks.

Altaaqa Global relieved the client of the liability of managing a power plant. “The BOOT model was the best fit for this customer, as it is a highly cost-efficient model with levelized costs over the project period, the risk is essentially transferred to Altaaqa Global, as owners and managers of the risk.”

Contact Nicolas Kuhn, nkuhn@altaaqaglobal.com

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