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

1Innovation Energie Développement - IED

Innovative Financial scheme for sustainable development of RE in

Rural Area in Indonesia, Philippines & Vietnam (IFRERA)

Final Workshop

Jakarta, March 2006

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

Overview


Project data sheet

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 foundation (Netherlands) : local integration– Institute of Energy (IE, Vietnam)– MBA (Philippines) – also following Indonesia– Agency for Environment & Energy Management

(ADEME, France) – electrical and economic analysis


Project objectives

Develop small-scale hydropower based rural electrification in areas not yet serviced

Develop a “ready to implement” package– 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 scope

Covers 3 countries: Indonesia , the Philippines, Vietnam

First phase: May to Dec 05: identification of sites and of

project developers; signing MOU

Second phase: Jan to June 05: Feasibility Study review

Third phase: July to Sept: Comments

Fourth phase: Oct 05 to April 06: implementation issues:

partnerships, financing, EIA, SIA, Regulatory issues, PPA


Project status – Indonesia (1)



In the Sulawesi province of Indonesia, the three identified sites :

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$



Development of a cluster of 3 sites– 600 kW to 1,7 MW, ROR– Substitute intermittent diesel supply, 12 MW and 8

MW peak– require a network and electrical study– Regulatory framework in the making: decentralisation,

no incentives

Developer: Indonesia Power, PLN group– MOU signed– Ready to mobilize equity, has an existing loan

arrangement



Project viability– Competitive against cost of diesel power at commercial

financing conditions - 8 years max (450 to 700 Rp /kWh)– PLN ready to discuss PPA– EIA, SIA, local support are positive for obtaining needed

authorisations– Impact of carbon revenues on IRR

Current status – Withdrawal of IP due to insufficient project size – Apparent private development of Tamboli 15 MW for captive

use– Rural services' issue remains unresolved, unless taking up

by an ADB loan, or PT Bukakak is confirmed


Project status – the Philippines (1)



The Catanduanes Power system is isolated from the main grid; fuel based

Distribution by FICELCO (36 000 customers in 2005, peak load is 6,6 MW).

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

Cap = 3.1 MW & 11.4 GWh Investment : ~6,5 m$ Criteria for investment :

– IRR

– Comparison to diesel alternative



Development of a MHPP on a mainly diesel based island grid– 3,1 MW, ROR– Substitute mainly diesel supply: – Clear but complex regulatory framework: authorisations,

permits, ERC

Developer: FICELCO and POWER ONE CORPORATION– MOU signed– Joint venture between the distributer and holder of the PSA

(Power Supply Agreement)– Ready to mobilize equity, in a special generation company:

issue of shareholders– Local banks have special windows for lending



Project viability– Project economic IRR meets threshold for FICELCO and DBP

(13%) at price lower than current cost of generation– Competitive against cost of bunker C power [7,5 c/ kWh at

20 peso / l] at POC's financing conditions – EIA, SIA, local support are positive for obtaining needed

authorisations: logging is an important issue– Impact of carbon revenues on IRR

Current status – Finalisation of EIA and SIA– April: investment decision and ownership of generation

company– Financial mobilization and launching of EPC contracting


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


Project status – Vietnam

Development of a MHPP in a remote location connected to the grid – 5,8 MW, ROR– Feeding in the grid which requires support and supplying to local villagers– Regulatory framework in the making but large production oriented

Developer: local construction company– MOU signed– Various options being considered for investment and financing

Project viability– Project indicators meet government requirements (> 14% EIRR)– Impact of carbon revenues on IRR + 1,5 to 3% on EIRR

Current status – Gia Lam Joint Stock Company estabilishing the generation company– Financial mobilisation and launching of EPC tender.


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 local partners involvement, data collection,private funding. Small project sizes, high transaction costs Still modest appetite from the financial community

Regulatory frameworks are being adapted to foster RE investments Demand growth is sustained. Rising fuel prices Rising environmental concerns

Insufficient incentives at regulatory level 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

- IFRERA – Innovative Financial Scheme for Sustainable Development of Renewable Energy

in Rural Areas in Indonesia, Philippines and Vietnam

Supported by the ACE through the

EC – ASEAN Energy Facility

Documents

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