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Final Workshop Jakarta, March 2006

Supported by the European Commission through the EC – ASEAN Energy Facility. Innovative Financial scheme for sustainable development of RE in Rural Area in Indonesia, Philippines & Vietnam (IFRERA). Final Workshop Jakarta, March 2006. Overview. Project data sheet. Financing :

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Final Workshop Jakarta, March 2006

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  1. Supported by the European Commission through the EC – ASEAN Energy Facility Innovative Financial scheme for sustainable development of RE in Rural Area in Indonesia, Philippines & Vietnam (IFRERA) Final Workshop Jakarta, March 2006 Overview

  2. 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

  3. 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

  4. 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

  5. Project status – Indonesia (1)

  6. Project status – Indonesia (2) 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$

  7. Project status – Indonesia (3) • 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

  8. Project status – Indonesia (4) • 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

  9. Project status – the Philippines (1)

  10. Project status – the Philippines (2) • 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

  11. Project status – the Philippines (3) • 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

  12. Project status – the Philippines (4) 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

  13. 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

  14. 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.

  15. SWOT Conclusions Strengths • 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. Weaknesses Opportunities Threats

  16. Thank you

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