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Sustainable Energy and Practice - Financing Issues. Present ed by. Mr. Anat Prapasawad Executive Officer Business Development Department TMB Bank Public Company Limited. Topics. Opportunities Overview of the barriers and/or risks affecting investment in RE projects - PowerPoint PPT Presentation
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1
Mr. Anat Prapasawad
Executive Officer
Business Development Department
TMB Bank Public Company Limited
Sustainable Energy and Practice-
Financing Issues
Presented by
2
Opportunities
Overview of the barriers and/or risks affecting investment in RE projects
Risk / Return analysis to asses each major risk and the means to mitigate its potential impact on the project
Financial risk management instruments currently supporting RE projects and those that could be developed to reduce uncertainty as barriers
Innovative financial services
TopicsTopics
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Opportunities Opportunities Technologies DistributionTechnologies Distribution
Renewable• Biofuel
(biodiesel ethanol)
• PV• Biomass gen,
Co-gen• Waste to energy• Wind Turbine• Hydro• Geothermal• Etc.
Energy Efficiency
• Controling
• Replacing
• Modifying
Fuel Switching
Conventional fuel
Biofuel/NG
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TE = Traditional Energy
NRE = New & Renewable
Energy
2011
NRE0.5%
TE16.5%
CommercialEnergy83.0. %
200252,939 KTOE
81,753 KTOE
TE11%
NRE8%
CommercialEnergy81%
TARGET
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Thailand Thailand TTargets in 2011argets in 2011
RE Power1,060 KTOE (2,400 MW*)
Liquid Biofuel1,570 KTOE
Heat3,910 KTOE
6,540 KTOE8%
of final energy use in 2011 (81,753 KTOE)
* Existing 560 MW
Industry Agriculture Transport Agriculture
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RE Power ProductionRE Power Production
Solar 200 MWWind 100 MWMSW 100 MW
Biomass 740 MWSmall Hydro 350 MWSolar Home System 50 MWSPP 300 MW
1840 MW*(+560 MW)
* Existing SPP 560 MW
RPS 5% Obligation for newfossil power plant
Incentives• Guaranteed buy back• Soft loan• Tax incentive
MSW=Municipal Solid Waste
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Thailand Target of REThailand Target of RE
2003 2012 5% 8%
Electricity 2,400 MW (1,060 KTOE)
Heat 4,000 KTOE ; Industry + Agri.
Biofuel 1,570 KTOE ; Transport + Agri.
Measures: 1. RPS 5% (Renewable Portfolio Standard)2. Incentives3. R&D
970Ethanol
600Biodiesel
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Barriers risks?Barriers risks?
“Financial risk management is a key element of any commercial investment in conventional energy …, yet little attention has been
paid to its use in the development of renewable energy technologies, particularly in developing countries, … if used
transfer certain types of risks away from investors and lender.”
Monique BarbutDirector
Division of Technology, Industry and EconomicsUNEP
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“The financial incentive package for each country is carefully crafted to suit its economic, legal, and fiscal system. The types of
incentives used include concessional import duties, excise tax benefits, corporate and income tax benefits (including tax
exemptions, holidays, credits, and deduction as well as depreciation), subsidies against investment cost, low interest
loans, and premium power purchase prices.”
World Bank Discussion Paper No. 391
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Type of FinanceType of Finance
Funding of major capital
Cashflow of the project as sources of fund for repayment
Asset of the project as collateral
Risk management through transference (allocate to parties best able and willing to accept)
Project Finance (PF)Project Finance (PF)
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Corporate Finance Comparison Corporate Finance Comparison with Project Financewith Project Finance
< Corporate Finance>
Financiers
Company
Project Assets
< Project Finance>
Sponsor Companies Financiers
GovernmentContractorsSuppliersCustomersManagersInsurers
Limited resourse
Contractual Assignment
Project Entity
Project Assets
FinanceR
isk transfe
rence
to co
ntra
ct
ConsultantsESCO
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Major Risk & ManagementMajor Risk & Management
Major risk categories
(throughout project cycle)
Control of risks
(identifying, analyzing, allocating)
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Project Feasibility AnalysisProject Feasibility Analysis
Financial aspect
Marketing aspect
Technical aspect
Management aspect
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Major Risk CategoriesMajor Risk Categories(throughout project cycle)(throughout project cycle)
Project Identification
Project Development
Project Appraisal
Project Implementation
Project Operation
Project Cycle
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Typical BarriersTypical Barriers
High transactionRelatively small sizeLow marginal returnPerceived weak credit worthiness of companiesResource availability and supply riskCountry risk (political & economy instability)Lack of legal and Institutional Frameworks to support RE projectsAnalytical barriers (quality&availability information)Cognitive barriers
Other priority investmentUnfamiliarity with technologiesCollateral problemLack of expertise in companyFI lack of knowledgeBenefit sharingCultural
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Risk Management InstrumentsRisk Management Instruments
Contracts (gov., suppliers, consultant, ESCO)Insurance / ReinsuranceCredit enhancement products (Guarantee)Alternative risk transfer instruments (various type of asset backed securities)Private sector risk managementRisk poolingSecuritization structureBundling small projects (reduce transaction cost)Carbon Finance Guarantee
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How to build portfolio? : Lesson LearnedHow to build portfolio? : Lesson LearnedBarriersBarriers
1. 1 Access ability to financial resources1.2 Low priority projects 2. Technical Barriers2.1 Unfamiliarity with technologies2.2 Lack of capacity to develop projects2.3 Bad experience with consultants/suppliers 3. Management Barriers3.1 Lack of time3.2 No policy to invest
1. Financial Barriers
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Lesson LearnedLesson LearnedRemoval of BarriersRemoval of Barriers
1. 1 Access ability to financial resources PFI
1.2 Low priority projects PFI
Technical Barriers
2.1 Unfamiliarity with technologies ESCO
2.2 Lack of capacity to develop projects ESCO
2.3 Bad experience with consultants/suppliers FI
Management Barriers
3.1 Lack of time PFI
3.2 No policy to invest PFI
Financial Barriers
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Project Cycle
How to develop projects (FI views)How to develop projects (FI views)
PI : Project Identification (financial & technical screening)
PD : Project Development (feasibility & engineering design)
PA : Project Approval (FI + Shareholders)
PR : Procurement
OM : Operation + Maintenance (Repayment)
PG : Performance Guarantee
PDD : Project Due Diligence
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Case Study Ethanol ProjectCase Study Ethanol Project: Demand: Demand
• Government policy : deplete all of UPG 95* consumption with gasohol (comprising a mixture of gasoline and ethanol) by yr.2007
UPG 95: Unlead Petroleum Gasoline with 95% octane
184,915
798,693
1,985,780
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
litres/day
2005 2007 2009
Yr
Thailand 's projection of ethanol demand
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Ethanol ProjectEthanol Project: Supply: Supply
• Total licensee 24 plants, registered capacity 4.985 Million litres/day
• Yr.2006 : operate only 3 plants with total production capacity 0.285 Million litres/day
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Ethanol ProjectEthanol Project: Case Study: Case Study
• Plant capacity : 200,000 litres/day• Raw material : tapioca• Investment cost : 35 M. US$
• Land and land improvement 3.25 M. US$
• Building 0.75 M. US$
• Machinery 24.13 M. US$
• Pre-operation 1.63 M. US$
• Stock of raw material 0.50 M. US$
• Working capital 4.25 M. US$
• Contingency 0.50 M. US$
23
Ethanol ProjectEthanol Project: Project IRR: Project IRR
Raw material cost(US$/ton) 47.5 50 52.5 55 57.5
75 26.6% 30.2% 33.9% 37.5% 41.1%87.5 21.5% 25.0% 28.6% 32.2% 35.8%100 16.6% 20.0% 23.5% 26.9% 30.5%
112.5 12.2% 15.3% 18.6% 21.9% 25.4%125 8.3% 11.2% 14.1% 17.3% 20.5%
Ethanol price (cent/litre)
75
87.5
100
112.
5
125
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
IRR
Raw material cost
Revenue : Ethanol Project
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Ethanol ProjectEthanol Project: Barriers: Barriers
• Security of raw material • Technology
– Proven technology– Efficiency– Contractor– EPC (Turn-key)
• Marketing– Uncertainty price– Buying agreement (non-firmed)
• High Investment Cost
Project BarriersProject Barriers
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Ethanol ProjectEthanol Project: Barriers: Barriers
• Government Policy
• Commercial Bank Policy
External BarriersExternal Barriers
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Ethanol ProjectEthanol Project: Barriers: Barriers
• Security of raw material Through Contracts
• Technology Through proven technologies/
Bank guideline
• Marketing Through Contracts
• High Investment Cost Equity Fund
Removal of BarriersRemoval of Barriers
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Mr. Anat Prapasawad
Executive Officer
Business Development Department
TMB Bank Public Company Limited
Thank you
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