1 Innovation Energie Développement Innovative Financial scheme for sustainable development of RE in Rural Area in Indonesia, Philippines & Vietnam (IFRERA)

1Innovation Energie Développement

Innovative Financial scheme for sustainable development of RE

in Rural Area in Indonesia, Philippines & Vietnam (IFRERA)

Dr. Tuan NGUYEN, IEDDissemination and Training workshop, Hanoi

December 19-20, 2005

Supported by the European Commission through the EC – ASEAN Energy Facility

Overview


Project objectives

Develop small-scale hydropower based rural electrification in area not yet covered by the main grid systems

Develop a “ready to implement” package and ESCO implementation modality for investors in RE projects– Based on actual site feasibility studies– Identified and mobilised project partners– Ensure local level integration: can take different forms– PPA and contractual elements – understanding of

regulatory frameworks– Financial package

Capacity building: Policy and decision makers, financial community, beneficiary communities


Project facts data

Financing : – 50% from EC through EAEF– 50% from partners (in kind contribution…)

Start : July 2004 End : April 2006 Partners :

– Innovation Energie Development (IED, France) – Leader

– ETC foundations (Netherlands)– Agency for Environment & Energy Management

(ADEME, France)– Institute of Energy (IE, Vietnam)– MBA (Philippines)


Stakeholders and impact on beneficiaries

Stakeholders and beneficiaries : – Local developers : Fully implementation packages of

SHP for business development– Local authorities and communities : Beneficial

consequences on those who do not have access to electricity

– National utilities and authorities : New scheme of economic and financial analysis; Regulatory framework review and analysis

Outputs : – FS documents– Tender documents (technical, financial, contractual

and BIM)– Reports, Workshop proceeding and newsletters,

Participation in regional meetings within the framework of existing groups – HAPUA, NRSE SSN, AEBF/SOME


Project’s activities

Tec. FS Studies / reviews (as applicable) Economic Analysis / review Analysis of the Regulatory, Legal and Fiscal

Framework Financial Analysis Local level integration Preparation of full implementation package Dissemination, management and reporting


Project’s Scope

Indonesia : The institutional and contractual frameworks were negotiated locally. Promising sites have been identified and screened in Sulawesi. The need and interested of the local authorities is established; a national developer was identified; financial and contractual schemes are to be developed

The Philippines: A full batch of sites has been identified and developed at the pre F/S stage and 1 sites to technical and economic F/S. The issue now is of mobilising interested national developers / investors and integrating in the framework under development. EIA & SIA is underway

Vietnam: A number of sites have been pre-identified. Looking at the approaches under development in Indonesia and the Philippines, the technical FS of one site proposed by IoE was validated and a contractual framework proposed More information will be presented in following presentations.


Project status – Indonesia (1)



In the Sulawesi province of Indonesia, the three identified sites have the following characteristics : Mikuasi 1838 kW. Ratelimbong 1365 kW Sambilambo 3149 kW Their respective estimated annual productions amount to 12.5 GWh, 8 GWh and 23 GWh ; Investment package : <10 MUS$



In Indonesia, the implementation package is adapted to the situation where the PLN is the main authority

It’s daughter company IP is the identified developer, willing to invest 30% equity.

A financial analysis was conducted based on the criteria, assumptions and method wished by IP.

The objective of this study : to identify the PPA tariff price that enables IP’s profitability target (IRR = WACC + 5%).



The most sensitive variables are investment costs and hydrology. Recommendations : Invest 100% in US$, PPA in US$ (if possible).

Base case scenario

Worst case scenario

Pessimistic scenario

Reference scenario

Hydrology 100% 80% 80% 80%Inflation in IDR 8% 10% 10% 10%

Investment cost overrun 0%10% Civil

Works5% E-M

10% Civil Works

5% E-M

10% Civil Works5% E-M

Investment Currency 52% USD 100% Rp 52% USD 100% USDDemand growth 10.9% 5% 5% 5%Grant financing 0% 0% 0% 0%Carbon revenues ($/tCO2) $0,00 $0,00 $0,00 $0,00PPA Tariff USD /MWh 53,37 53,37 53,37 53,37PPA Tariff Rp /kWh 507 507 507 507WACC 8,87% 11,20% 8,95% 6,43%WACCtarget 11,66% 14,60% 11,77% 8,60%IRR 11,65% 6,48% 9,17% 11,16%PPA tarif for risk mitigation USD/MWh 81,58 62,21 45,68PPA tarif for risk mitigation Rp/kWh 775 591 434

Res

ults

Ass

umpt

ions


Project status – the Philippines (1)



The Catanduanes Power system is isolated from the main grid. The distribution is in the hands of FICELCO (32,724 customers).

The Lower Dugui site is located in the mountainous area spreading on the north of Virac

Pinst = 3.1 MW & 11.4 GWh Investment : 393 millions

pesos (7.1 million US$) Criteria for investment (Power

One Corporation POC – private investor) : Overall discounted cost < Bunker C diesel reference cost.



The Lower Dugui MHPP price is very sensitive to the discount rate that POC will choose, the cost of access to capital that POC faces.

With access to a cost of capital of 7%, Lower Dugui is already competitive with the March 2005 oil price of 13 Peso/L

Overall Discounted kWh Cost (Peso/kWh)

2,97

3,44

4,17

1,50

2,00

2,50

3,00

3,50

4,00

4,50

5,00

5,50

Lower Dugui size 3.1 MW

Disount rate 5%

Disount rate 7%

Disount rate 10%

Bunker oil price 16.5 Peso/L , 4.45 Peso/kWh

Bunker oil price 13 Peso/L , 3.50 Peso/kWh


Project status – Vietnam

Krong Pa 2 SHP in Dak Rong commune, KBang district, Gia Lai province

Supply electricity to the national network and local villages

Installed P = 5.8 MW; 24.48 GWh/y

More information will be presented in details in following presentations :

– IoE/ Krong Pa 2 developer on development of Krong Pa 2

– ETC on EIA and SIA– IED on Economic and

financial analysis


SWOT Conclusions High energy resources potential still largely under exploited

Competitive sites for MHPP can still be found Investment costs are significantly lower than in developed countries. Reduces dependence on fossil fuels and reduces environmental costs.

Need for local and national government support Need for local partners involvement, for accurate data collection. Need for private funding.

Regulatory frameworks are being adapted to foster investments in RE resources.

Demand growth is sustained. The demand growth is very fast. This triggers quick returns on

investment.

Collaboration with government bodies at both the local and national levels.

The exchange rate risks have to be mitigated. The importance of demand growth in the investment profitability

requires to secure a good demand forecast. Accurate investment costs are very hard to forecast. Good local

knowledge is essential to mitigate this.

Strengths

Weaknesse

s

Opportunitie

s

Threats


Thank you

Documents

1 Innovation Energie Développement Innovative Financial scheme for sustainable development of RE in Rural Area in Indonesia, Philippines & Vietnam (IFRERA)