Appendix

A 

AfDB — African Development Bank

B

BOO — Build Own Operate

BOOT — Build Own Operate Transfer

BOT — Build Operate Transfer

C 

CAPEX — Capital Expenditure

COD — Commercial Operation Date

D 

DFI — Development Finance Institutions

E 

EPC — Engineering, Procurement and Construction

ECA — Export Credit Agencies

EIA — Environmental Impact Assessment

ESIA — Environmental and Social Impact Assessment

G

GSA — Government Service/Support Agreement

I

IFC — International Finance Corporation

IPP — Independent Power Producer

IRP — Integrated Resource Plan

IPT — Independent Power Transmission

K 

KPI — Key Performance Indicators

kWh – Kilowatt Hour

M 

MWh – Megawatt Hour

MDB — Multilateral Development Banks

MoF — Ministry of Finance

MTS — Main Transmission Substation

O 

OECD — Organisation for Economic Co-operation and Development

OEM — Original Equipment Manufacturer

O&M — Operating and Maintenance

OPEX — Operating Expense

P

PCOA – Put and Call Option Agreement

PCG — Partial Credit Guarantee

PRG — Partial Risk Guarantee

PPA — Power Purchase Agreement

PRI — Political Risk Insurance

PPF — Project Preparation Funds or Facilities

PPP — Public-Private Partnerships

R 

RAB — Regulated Asset Base

RfP — Request for Proposal

RfQ — Request for Qualification

ROR — Rate of Return

S 

SAPP — Southern African Power Pool

SADC — Southern African Development Community

SPV — Special Purpose Vehicle

SSA — Sub-Saharan Africa

T

TDP — Transmission Development Plan

TSA — Transmission Service Agreement

TSO — Transmission System Operator

Glossary

A 

Annual Revenue Requirement — the total revenue to be collected in a given year through the transmission of electricity over the transmission infrastructure, including associated technical losses, to compensate the transmission operating company for all expenditure incurred in the same year and provide the basis for sound economic operation of the infrastructure.

B

Balance Sheet Financing — the financing of a project which is provided in full by a sponsor.

Bankable — a project or contract is said to be “bankable” if it comprises a level of risk allocation which would be generally acceptable to lenders.

Baseload Power or Capacity — generating capacity within a national or regional grid network that the offtaker or grid operator intends to dispatch or utilise continuously.

C 

Concession — a right to develop, construct, operate and maintain an infrastructure project and to earn the revenues generated by the project.

Concession Agreement — an agreement that grants a concession over a transmission system or a part of a transmission system.

Concessionaire — the holder of a concession.

Corporate Finance — used to distinguish Project Finance (see below). Corporate finance implies that a borrower utilises its existing balance sheet strength and operational cash flows to borrow. Lenders assess the creditworthiness of the corporate entity itself. This includes an assessment of its current indebtedness, its capital structure and the business plan of the corporate entity.

Commercial Operation Date (COD) — a key milestone date defined in the agreement when the transmission infrastructure commences commercial operation after all testing and commissioning have been completed.

D 

Deemed Energy Payments — payments made concerning deemed generation.

Deemed Generation/Energy — the electricity that a power plant would have been able to generate, but for the occurrence of an event or circumstance for which the offtaker bears the risk.

Developer — see Sponsor.

Development Finance Institutions (DFI) — financial institutions with a mandate to finance projects that achieve development outcomes. Examples include the World Bank, AfDB, OPIC, FMO, DEG, CDC, DBSA and Proparco.

E 

Engineering, Procurement and Construction (EPC) contract — one or more contracts to be entered into between the EPC contractor and the project company for the purpose of setting out terms and conditions for the design, engineering, procurement of materials and equipment, the construction and commissioning of the power plant.

EPC + F — in addition to the Engineering, Procurement and Construction (EPC) definition, the EPC+F is a project financing mechanism in which the EPC contractor also arranges financing for the project, through tie-ups with financing institutions. It is useful when EPC contractors have better access to low-cost financing, including EXIM financing.

Environmental and Social Impact Assessment (ESIA) — a process of evaluating the environmental and social impacts of a proposed project, evaluating alternatives and designing appropriate mitigation, management and monitoring measures.

Equity — money invested by the sponsors in the project that is not borrowed by the project company. The term "equity" may sometimes be used to include shareholder subordinated debt (which is finance made available to the project company by the sponsors or shareholders of the project company, which is subordinated to debt made available by the lenders).

Export Credit Agencies (ECA) — public agencies and entities that provide government-backed loans, guarantees and insurance to corporations from their home country that seek to do business overseas in developing markets.

F 

Force Majeure Event — an event beyond the control of the affected party that prevents it from performing one or more of its obligations under the relevant contract. Events constituting force majeure are generally further classified into political force majeure events and non-political force majeure events, with different financial and contractual consequences to the contracting parties. Natural force majeure events fall within the latter category.

Financial Close — occurs when all conditions precedent in a signed loan agreement have been met or waivered, making the funds available for drawdown.

Finance documents — the agreements required to finance the relevant transmission infrastructure project under which the project company borrows (and then owes financial obligations to) a series of lending institutions — be they banks or development finance institutions or export credit agencies. The facility agreement is typically one of the main finance documents which is an agreement that sets out the terms and conditions on which the lenders make a loan available to the project company.

G 

Government Support Agreement — an agreement entered into by a host country and a project company established to undertake an infrastructure project or hold a concession to provide certain identified types of support to the project company in respect of the project or concession.

Government Concession and Support Agreement — an agreement between the host government and the project company, under which the host government agrees to certain undertakings concerning the project. This agreement typically goes beyond the customary provisions of an Implementation Agreement and may include an explicit guarantee of the performance obligations of a governmental entity, such as an offtaker or fuel supplier.

Grid — a system of high tension cables by which electrical power is distributed throughout a region.

H

Host Country — the country in which a project, concession, or part thereof is located.

I

Independent Power Producer (IPP) — a special purpose company established for the sole purpose of developing, financing, constructing, owning, operating and maintaining a power plant.

Institutional Lender — a regulated financial institution engaged in lending.

Integrated Resource Plan (IRP) — is an electricity infrastructure development plan based on least-cost electricity supply and demand balance, taking into account several considerations such as the security of supply, ability to reduce/shift the demand and the impact on the environment.

Interconnection — the linkage of transmission or distribution lines between the offtaker (utility) and the power plant, enabling evacuation of the energy generated.

Investor — see Sponsor.

Independent Power Transmission (IPT) — the construction and financing by a private sector investor of a single transmission line or a package of transmission lines and/or associated transmission infrastructure including substations. These are independently owned but typically connected with the wider electricity network.

J

Joint Venture (JV) — a joint venture is a commercial enterprise undertaken jointly by two or more parties that otherwise retain their distinct identities. These can be conducted either by way of incorporating a special purpose vehicle (called the JV company) or by way of contract alone (in which case it is called an “unincorporated” joint venture).

K 

Key Performance Indicators (KPIs) — set of performance indicators used to evaluate the performance of a project or system.

Kilowatt Hour (kWh) — a measurement of energy that is equal to 1,000 watts of electricity being generated or consumed continuously for one hour.

Kilovolt (kV) — a unit of potential equal to 1,000 volts.

L

Lenders — the providers of loan financing to the project company.

M 

Megawatt (MW) — a measurement of power meaning 1,000,000 watts.

Multilateral Development Banks (MDBs) — an institution, formed, owned and controlled by its member countries, that provides financing and advisory development services. Examples include the World Bank (IBRD and IDA), AfDB, and MIGA.

N

New York Convention — the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention) allows for the enforcement by a contracting state of arbitration awards issued by another contracting state, subject to limited defences.

Non-Recourse Financing — financing that will be repaid solely through the cash flow proceeds of a project, structured as a special-purpose vehicle. The obligations of the shareholders in the special-purpose vehicle are usually limited to their obligation to contribute capital and, in some cases, to provide other limited and well-defined support to the special-purpose vehicle.

O 

Offtaker — the party to a PPA whose obligation is to purchase the capacity made available and the electricity generated by the power plant, subject to the terms and conditions of the PPA. Also referred to as the Buyer.

Operating and Maintenance (O&M) Agreement — the agreement between the project company and a plant facilities operator under which the operator operates and maintains the power plant and associated facilities.

P

Partial Credit Guarantee (PCG) — a guarantee that covers interest and principal defaults, up to a pre-agreed amount — expressed either as a fixed sum or as a percentage of the credit balance. See Chapter 2 on Funding Options and Constraints.

Partial Risk Guarantee (PRG) — a guarantee specifically structured to address targeted risks and can be time-bound or event-bound. See Chapter 2 on Funding Options and Constraints.

Power Purchase Agreement (PPA) — a medium-to-long-term contract that governs the production, sale and purchase of electrical capacity and energy. Also referred to as an "offtake" agreement.

Political Risk Insurance (PRI) — offers coverage to mitigate and manage risks arising from the adverse action, or inactions, of governments that go against contractual obligations. PRI can be provided by both public and private insurers.

Privatisation — also called divestiture, in the context of this handbook, relates to where full ownership of the transmission infrastructure is transferred to a private-sector party. Privatisation may occur on a single transmission corridor, by region or even in respect of the entire transmission system operation in a country.

Project Company — a special purpose company established to undertake an infrastructure project. Also referred to as a Special Purpose Vehicle (SPV),  a corporate entity established specifically to pursue a specific project and is prohibited from undertaking any activity beyond the project in question. For this handbook, the term Project Company is used.

Project Documents — key project and finance documents that would typically be required in transmission projects.

Project Finance — see Non-Recourse Financing.

Project Preparation Funds or Facilities (PPF) — donors/funds designed to provide funding for the project preparation of transmission lines. Some have specific objectives such as the introduction of the PPP model or to help promote regional integration while others aim at encouraging projects that help meet climate change targets.

Public-Private Partnerships (PPP) — arrangements between the public and private sectors whereby a service or piece of infrastructure that is ordinarily provided by the public sector is provided by the private sector, with clear agreement on the allocation of associated risks and responsibilities.

R 

Regulated or Regulatory Asset Base — this is a system of long-term tariff design aimed primarily at encouraging investment in the expansion and modernisation of infrastructure. It looks at the overall value of regulated assets (e.g. a national transmission grid) and uses that to create a methodology for paying a private operator to run the relevant assets.

Regulation by Contract — regulation by contract is a form of governing private contracts with utilities that uses no separate regulatory agency, where the public sector owner of the asset monitors the performance of the (private) operator and sets the relevant tariff and revenue arrangements. A contract typically defines the relationship between the asset owner and the service provider.

Regulator — the authority that is responsible for ensuring efficiency, transparency, and fairness in the management of the electricity sector. An independent regulator is generally established by the legal framework that governs the electricity sector as a legal entity that is separate from the government and is governed by a board of commissioners with fixed terms who can only be removed for cause, as defined in the legislation that established the regulator. Regulators issue, modify, and enforce licenses (including transmission licenses) and establish and implement price controls for network businesses and, in some cases, generation businesses.

Request for Proposal (RfP) — a solicited invitation from the procuring entity to potential bidders to submit a proposal to develop a power project.

Request for Qualification (RfQ) — a solicited invitation from the procuring entity to invite potential bidders to provide qualification credentials for the development of a power plant.

Reverse Auction — a process where there is a single buyer and many suppliers. The buyer indicates its requirements, and suppliers progressively bid downwards. The lowest bidder wins the right to supply. This is opposite to a regular auction that involves a single seller and many buyers.

S 

Sponsor — a commercial entity active in developing and investing in power projects. Typically, it is a shareholder of the project company. Also known as the investor or developer.

T

TransCo — a state-owned utility that owns a transmission network.

Transmission Development Plan (TDP) — a consultative process to identify viable, economical, and environmentally feasible projects. The process evaluates and compares options and alternatives based not only on technical efficiency and cost, but also on their environmental, social, regulatory, and political impacts.

Transmission Service Agreement (TSA) — an agreement concluded between the relevant IPT and the grid operator that entitles the IPT, as a network user, to use the grid and transmission systems of the relevant country.

Transmission System Operator (TSO) — entity entrusted with transporting energy on a national or regional level, either directly or through instructions issued to others who operate as agents of the TSO.

W

Wayleaves — rights-of-way granted by a landowner, generally in exchange for payment and typically for purposes such as the erection of transmission lines, telecommunications infrastructure or for the laying of pipelines.