Risk Identification and Mitigation for Small Scale Renewable Energy Power Projects in Indonesia

Transcription

1 Risk Identification and Mitigation for Small Scale Renewable Energy Power Projects in Indonesia Prepared by: Bill Meade Director, Tetra Tech (USA) CLEAN POWER ASIA April 2013 Bangkok, Thailand

2 Presentation Overview Tetra Tech industry leader in renewable energy USAID Indonesia Clean Energy Development Project Status of the Indonesia renewable energy small power market and context for developing projects Project development process, financing and contracting structures Managing development, construction and operational risks Project development outlook

3 Tetra Tech Industry leader in Renewable Energy Tetra Tech key offerings In the past 10 years, involved on over 1000 power projects including almost 100 hydro projects, 500 wind projects and over 100 utility scale solar projects Over 30 energy construction projects since 2005, approaching a billion dollars in revenue and representing over 3000 MW Over 25,000 MW of renewable generation we have worked on is either in operation or scheduled for construction Grid connection feasibility studies for over 350 renewable energy projects Supporting offshore renewable energy projects in 10 jurisdictions along the Atlantic, Gulf, and Pacific coasts and in the Great Lakes of North America Page 3

4 ICED Approach RE Small Power Sector in Indonesia Clean Energy Sectors / Market Policy & Coordination Enabling a conducive policy environment to develop CE projects 1 2 Project Development Provide technical assistance to all stakeholders in developing CE projects Government / Policy Makers PLN (Utilities Company) Private Sectors Capacity Building & Public Outreach Developed capacity to all stakeholders & increase CE awareness Archive number 3 ICED Target 4 million tons CO2e avoided 120 MW installed capacity At least $120 million public and private funding leveraged At least 20 small and medium sized projects implemented 1.2 million persons with increased access to clean energy $250 million in reduced subsidy due to tariff increase and replacement of diesel fuel 3

5 ICED approach to facilitate RE project development Identify viable CE Projects Proven technologies and commercial applications Lessons learned and success stories Increase awareness and capacity ICED Advise project sponsors Feasibility studies and design Project development guidelines, standard contracts Implement CE policies & Incentives Facilitate commercial financing Project due diligence and risk mitigation

6 RE Small Power market is shaped by stakeholders ICED Partners in Small Power Market Business 26 Hydro Developers 4 Biogas Developers 2 Biomass Developers 2 Wind Developers 3 Solar PV Developers Financing Central Bank Indonesia Ministry of Finance 5 Commercial Banks 2 Syariah Banks 5 Financial Institutions 4 Private equity funds 3 Development Finance Institutions 6 Policy Ministry Energy Ministry Agriculture Bappenas PLN HQ & Regional Provincial & Regency Gov Observations Limited number of successful operating grid-connected projects Projects are characterized as small but complex in terms of site, resource and technology Growing interest from both domestic and foreign sources of financing Challenges in raising equity and with bank loan collateral requirements Regulatory uncertainty (Feed in Tariffs) stalling development activities Greater capacity needed in developers, banks/fis, PLN, Provincial/Regional government

7 Megawatts (MW) Renewable Energy Small Power Projects Characteristics Installed Capacity from RE Small Power Projects Discovery Phase Growth Phase Maturity Phase ICED 500 0

8 ICED project inventory status as of March 2013 ICED Project Inventory By Provinces (Number of Projects) Total 171 Projects ICED Project Inventory By Provinces (In Megawatt Equivalent) Total 1,235 Megawatts ACEH NORTH SUMATERA RIAU OTHER PROV ACEH NORTH SUMATERA RIAU OTHER PROV BIOGAS EE PV BIOGAS EE PV BIOMASS HYDRO WIND BIOMASS HYDRO WIND

9 ICED project pipeline status as of March 2013 Total 62 Projects ICED Project Pipeline By Provinces (Number of Projects) Total 420 Megawatts ICED Project Pipeline By Provinces (In Megawatt Equivalent) ACEH NORTH SUMATERA RIAU OTHER PROV ACEH NORTH SUMATERA RIAU OTHER PROV BIOGAS HYDRO WIND BIOGAS HYDRO WIND BIOMASS PV BIOMASS PV

10 P1 Project Development Stages 6-12months 7-8 months Max 1 Year 1-2 Years Project Initiation Feasibility Study PPA/ Contracts Financing Construct. COD Projects take 3 to 5 years from project initiation to commercial operation date (COD Under the MEMR Reg. No. 14/2012, Project Sponsor may enter into a PPA with PLN through a direct appointment process, using a standard renewable energy PPA for a fixed term (period) and at power purchase prices set by regulated feed in tariff (FIT) under MEMR Reg. No. 4/2012. While purchase price is fixed, it can be levelized or front loaded per guidance from PLN Director Decree. The PPA process has been standardized, and includes interaction with PLN and Ministry of Energy and Mineral Resources

11 RE Small Power Financing and Contracting Structure

12 Identification of Internal Risk Elements Development Phase Construction Phase Operation Phase Project is found not feasible e.g., technically not feasible, site is not accessible or commercially not viable Delay in closing the financing e.g., not able to close financing within 12 months of signing the PPA Required Permits and Consents are unavailable e.g. forestry right, water use right, land use right, environmental approval Developer is unable to close construction contract or supply contract with vendors Significant change in technical of scope of works, design or specifications resulting Change Order which in turn leads to cost escalation or delay Fund shortfall e.g. developer does not contribute equity as originally planned Project permit cancelled due to safety or environmental issue Contractor or equipment supplier project or defaults Off-taker does not dispatch or curtails project or payment default of Off-taker Project company does not maintain the permits and consents as required by law Sponsors abandon the project or hands over the to an incompetent company

13 Identification of Internal Risk Elements (cont.) Development Phase Construction Phase Operation Phase Access to site is not ready or available. Flawed construction, installation leading to performance shortfall to meeting PPA terms, schedule delay or large cost over-run Grid connection is not ready or will not be available. Forced outages due to equipment failure, grid problems, substandard operation and maintenance or project does not meet the performance standards required under the PPA. Grid instability causes significant outage problems. Geotechnical or sub surface condition materially different from what was assumed leading to significant cost increase or delay that makes project unviable Hydrology failure makes the project cash flow below forecasted level and makes the project economics unviable.

14 Identification of External Risk Elements Development Phase Construction Phase Operation Phase Force Majeure e.g. flood, earthquake Change in law e.g. new taxation regime or regulations of equipment import Force Majeure e.g. flood, earthquake Change in law e.g. new taxation regime or regulations of equipment import Project permit cancelled due to safety or environmental issue Project cost escalation due to increase in financing cost, adverse exchange rate (applicable if import of equipment is significant), high labor cost, high procurement cost Force Majeure e.g. flood, earthquake Change in law e.g. new taxation regime or regulations of equipment import Project company does not maintain the permits and consents as required by law Operating cost escalation due to increase in interest cost, inflation, adverse exchange rate (mainly applicable for foreign IPPs incurring loss due to repatriation of dividend to offshore accounts). Financial market disruption Financial market disruption Financial market disruption

15 Small Scale Renewable Energy Project Risk Mitigation Risk Type Project viability Project approval Project schedule Cost overruns Resource/feedstock availability Project performance Off taker risk Project sponsor failure risk Mitigation Approach Independent review of Feasibility Study (technical and financial assumptions) Experienced developer/consultants, adequate development budget Proper project planning, penalties in construction, equipment supply contracts EPC and other contract terms Adequate resource assessment (e.g., hydrology, wind, biomass), secure resource rights, long term feedstock supply agreements Equipment performance contracts, equipment supplier involved in operations Off taker guarantees, insurance, contract terms regarding dispatch/curtailment Bank/investor take over

16 ICED assists partners realize the potential of RE small power in Indonesia Identifying potential projects, reviewing feasibility studies, training in assessing project viability and due diligence GIS mapping of resources, projects, substations and 20 kv network Maintaining an inventory of proposed RE projects under development, sharing with interested banks and investors Supporting the development of standardized PPA(s) and interconnection procedures, guidelines and agreements Facilitating meeting between ICED partner RE developers and Banks/FIs Calculating the contribution of RE projects in terms of capacity, investment, subsidy reduction, access, and GHG emissions

17 For more information, contact: Bill Meade Chief of Party, ICED Project Director, Tetra Tech