1. 1 The Future of SAPP, WAPP, CAPP, and EAPP – With Inga IEEE GM 2005 San Francisco June 15, 2005 PURDUE UNIVERSITY F. T. Sparrow Brian H. Bowen Zuwei Yu

2. 2 Establishment of Africa’s Power Pools

3. 3 Sub-Sahara Regional MW Totals

4. 4 Southern African Power Pool SAPP Major new lines for increased trading SAPP – well along in their Operation (1995)

5. 5 West African Power Pool WAPP Major new lines for increased trading WAPP – moving into Operational phase (2000)

6. 6 Central African Power Pool EAPP now in the process of identifying needed HV lines (2005) DRC-Inga with future exports to SAPP, WAPP, EAPP, Egypt

7. 7 East African Power Pool EAPP Just getting organized expecting a launch late 2005

8. 8 Proposed Future Africa Grid International transmission links within power pools International transmission links between pools During next 10 years development of lines CAPP to SAPP &WAPP CAPP to Egypt & EAPP CAPP becomes central link with vital role for Inga site

9. 9 North American Trading Between Interconnects System designed for reliability, not economy trades Result – very little load carrying capability between regions Pacific DC HV Inter-Tie 3,100MW, 800miles

10. 10 Total Gross Transactions Between 4 NERC Regions Trade represents 8.8% of total U.S. peak demand

11. 11 The Feasibility of Grand Inga The underlying question – is there enough demand in Africa to justify the enormous up-front dam construction cost? The average historic demand growth has averaged about 2% per year over the last ten years Is there enough suppressed demand to justify the much higher growth rates projected by member nations?

12. 12 Forecast Growth in Electricity Demand 1993-2002 Average Historical Growth for:- Egypt = 2.6% Nigeria = 2.4% S. Africa = 1.4% Forecasting 5% + What are low and high scenarios?

13. 13 Assumptions for Inga Feasibility Analysis All demand growth in likely export markets for Inga (SAPP, WAPP, EAPP, Egypt) will be met by Inga power, not local construction Growth rates in the range of 2% to 4% per year Electricity will be sold at 3.5 cents/kWh (otherwise markets will generate their own electricity) Inga construction and transmission line costs are $16 Billion The cost of capital is 10%

14. 14 Demand Values & Export Revenues 58,556MW + Egypt capacity 18,000MW = 76,556MW total Assume base year demand with 80% capacity factor = (76,556 x 0.8 x 8,760) MWh Year 1 revenues resulting from increase in demand growth of 2%, electricity price of $30/MWh = $(76,556 x 0.8 x 8,760 x 0.02 x 30.0) = $322M

15. 15 Inga – Question & Answer Q: When will the annual net revenues from export sales cover the annual capitalized cost of the Inga project? A1: Never if the growth rate is 2% A2: In 19 years if the growth rate is 4% Does this mean Inga should be abandoned? NO – Just broken down into smaller pieces

16. 16 Inga Annual Net Revenue Stream

17. 17 With economies of scale in construction and a given growth rate in demand, “the higher the cost of capital, then the smaller will become the optimal size of each installation” Alan Manne Stanford University Growth in Demand & Cost of Capital

18. 18 Low & High Demand Growth Rates Low Growth High Interest Rates High Growth Low Interest Rates Demand & Capacity Demand & Capacity Time