Experience of DEDE s ESCO Fund in financing RE projects in Thailand

Transcription

1 Experience of DEDE s ESCO Fund in financing RE projects in Thailand Suwaporn Sirikoon Chief Executive Director Energy for Environment Foundation Seminar on Financial Schemes for Renewable Energy Projects co-organized by Delegation of the European Union to Thailand and Department of Alternative Energy Development and Efficiency, Ministry of Energy At Landmark Hotel, Bangkok 27 th November

2 Presentation Outline About E for E ESCO Fund and its facilities Process to assess, approve and monitor projects under ESCO Fund Projects as approved for investing under E for E s management RE financing models from ESCO Fund s projects 2

3 About E for E An independent not-for-profit organization, founded in 2000 Missions: To support both government and private sectors in activities relating to renewable energy as well as energy and environment conservation To promote heat and power generation from renewable energy and other alternatives by providing policy recommendations to the government and providing information/financial /technical assistance to project developers and financial institutions To disseminate information, knowledge and innovation and demonstrate technologies relating to renewable energy and energy conservation To organize the projects awarded from ENCON Fund E for E s services : Technical Advisory, Financial Advisory, Information & Outreach Service and Policy Study Fund manager of ESCO fund, hired and appointed from DEDE 3

4 E for E s Services Technical Cell Financing Cell Information & Outreach Cell Policy Cell Providing technical advisory services such as technical feasibility studies of the RE power plants and EE projects, technical trouble-shooting services and any other services in the course of the project development. Providing financial advisory services including sources of fund, seeking projects for the keen investors, the financial feasibility studies, and preparing financial proposals of RE and EE projects. Providing right information on RE, EE, and general energy issues to the specific target groups and general public, providing energy issues relating articles for media and the website and also organizing community relations program for energy project development. Providing advisory services about policies and regulations concerning the RE and EE projects and the revision of rules and policy framework to the policy makers. RE and EE Project Consultancy Service Knowledge Service RE and EE Policy Development 4

5 Policy instruments to promote energy efficiency and renewable energy Oil Shortage Prevention and Alleviation Act Energy Conservation Act 1992 Industrial Product Act Electricity Generating Authority Act (amendment 1992) Energy Industry Act 2008 Oil Fund Energy Conservation Fund Price incentive for biofuels Soft loans DSM bidding ESCO venture capital fund Investment subsidy Technical assistance Building codes Labelling for buildings Standards for appliances Labelling Utility DSM program SPP/VSPP regulation Adder to normal tariff Permits for CHP/DG/RE TGO CDM, carbon trading 5

6 About ESCO Fund Established by Department of Alternative Energy Development and Efficiency (DEDE) in 2008, under the financial support from Energy Conservation Promotion Fund (ENCON Fund) Aim to encourage investment in energy efficiency and renewable energy projects in Thailand Managed by TWO fund managers; - Energy for Environment Foundation (E for E) - Energy Conservation Foundation of Thailand (ECFT) Period ; Phase 1 : October 2008 September 2010 Phase 2 : October 2010 December 2012 Size of Fund : 500 Millions baht for each phase Fund amount in responsibility of E for E million baht in phase million baht in phase 2 6

7 Supporting Facilities of ESCO Fund Energy Conservation Promotion Fund (ENCON Fund) 500 Million Baht ESCO Fund Investment Committee Fund Managers: 1. E for E (300 Million Baht) 1. ECFT (200 Million Baht) ESCO Venture Capital Equity Investment Equipment Leasing Carbon Credit Facility Technical Assistance Credit Guarantee Facility 7

8 Equity Investment Co-Investment ESCO Fund Owner / ESCO RE/EE Project Subcontract Dividend/ Return Sub contractor -Equipment -Installation / Maintenance Investment in equity part of Energy Efficiency and Renewable Energy Project Size of investment: 10%-50% of total equity or project cost but limited to 50 MB per project Not as a Majority Shareholder Return : dividend and capital gain Investment period: 5 7 years or until owner ready to buy share back, or find a new strategic partner, or list in SET/MAI, but limited to 7 years Exit Price: Put Option and Call Option or Market price BOD-seat is needed 8

9 Leasing Contract Equipment Leasing ESCO Fund RE/EE Project Equipment purchase agreement Principal and Interest Repayment Producer/ Supplier/ ESCO Long-Term Leasing Service in Purchasing equipment for energy efficiency and renewable energy Providing 100% of equipment cost Repayment within 5 years Interest rate at 4% per annum Equipment ownership belongs to EfE till complete repayment Energy Performance Contract Equipment purchase agreement Principal and Interest Repayment ESCO Fund ESCO Co.,Ltd (Energy Service Company) Share Saving RE/EE Project Leasing Contract Leasing Contract 9

10 Carbon Credit Facility E for E facilitate project owners in developing CDM and accessing to CER buyer at lower service rate Project Owner ERPA / CDM Revenues LoI CER Buyer E for E (ESCO Fund) Remark: E for E helped develop a Project Idea Note (PIN) and find CER buyer for Solar Power (Korat 1) Co., Ltd., one of ESCO Fund s co-invested projects. 10

11 Credit Guarantee Facility ESCO Fund (by E for E) guarantees commercial bank for project loans, limited to 10 million baht Service charge at 1.75% pa. of guarantee amount Loan guarantee term not more than 5 years Credit Guarantee Contract ESCO Fund Paid Fee RE/EE Project Credit Facility Agreement Credit Guarantee Contract Bank Remark: - Same principle as the Small Business Credit Guarantee Corporation (SBCG) - However, according to the risk management principle, EFE allows project developers to choose one between Equity Investment and Credit Guarantee Facility and all developers decide to choose Equity Investment. 11

12 Primary Conditions for considering the Projects Conditions for Equity Investment Conditions for Equipment Leasing 1. Security of fuel supply in long term 1. Reliability of Technology and Equipment 2. Technological Reliability 3. Good financial profile of investors and reasonable return of project 4. Obtaining Government License /Permit for power plant/ Community Acceptance or related license according to the regulation 2. Guarantee saving and Equipment Performance Guarantee Contract 3. Reliability of entrepreneurs/company financial statement 4. Personal Guarantee/ Bank Guarantee 5. Requirement Documents - Feasibility Study Report which including Project Cost, Technology usage, Financial Structure, Return of Project and Fuel Supply Management - Financial Statement for the last three year of Shareholders - Loan/ Credit Facility Agreement or Term Sheet from bank - Environment and Safety Assessment report or Environment related report - Community Acceptance Report or reliable Community Acceptance Plan 5. Requirement Documents - Feasibility Study Report which including Project Cost, Saving Calculation Method, Payback Period, Project s Return, How the equipment works, Specification of Equipment, M&V Plan - Copy of electricity bill for the last three year of Company - Guarantee Saving Agreement 12

13 Approval Process Project Approval Process ENTREPRENEURS / ESCO / INVESTOR Financial Instruments/services EQUITY INVESTMENT (1) EFE s Board of Director days (2) DEDE Subcommittee Propose the Project (Every 3 Month) Submit an Application ESCO VENTURE CAPITAL EQUIPMENT LEASING CARBON CREDIT FACILITY days (3) Investment Committee Approval/ SHA preparation CREDIT GUARANTEE FACILITY TECHNICAL ASSISTANT Submit Shareholders Agreement/Contract Drawdown Process ESCO Fund Budgeting From ENCON Fund Signed contract ENTREPRENEURS / ESCO / INVESTOR Investment contribution 500 Million Baht Drawdown (45-60 days) Barrier : Approval process is not flexible and takes long time 13

14 Project Verification and Monitoring Before Develop the Project During Construction Period Project Risk Mitigation on Technical, Financial, Environmental and Social Issue Financial Issue: by Financial Feasibility Study and Due Diligence/ Credibility of Investor/others source of fund/ Shareholders Structure Technical Issue: by Technical Feasibility Study/ Fuel Potential/reliability of technology and machinery Environmental and Social Issue: by site survey/requiring the IEE, ESA, EIA Study/Requiring Public Acceptance/ Government Regulation/Permit Project Approval determined on risk management and mitigation of all above issues in the appropriate level Construction Performance Following the conditions under the Shareholders Agreement and EPC Contract Requiring Environmental Standard and Public Hearing/Acceptance Site Visitation/Spot Check Construction Performance Report During Operation Period Operation Performance Following the condition under the Shareholders Agreement Manage through the company Board of Director and Shareholders which have a seat for ESCO Fund Representative Company Annual Report/Financial Statement Site Visitation/Spot Check 14

15 Project as Approved by Investment Committee: Phase I Projects under ESCO Fund (I) approval 15 Projects Energy Efficiency 8 Projects Chiller Solar Thermal Voltage Regulator 2 Projects SHAW Method of Air Conditioning Process High Efficiency Motor Renewable Energy 7 Projects Biomass Power Plant Steam Turbine 7.5 MW (Wood Chip) Biomass Power Plant Co-generation 5.3 MW (Para Wood Chip) Solar Farm 6.1 MW x 3 Projects 0.9 WM x 1 Project Variable Speed Drives 2 Projects Biogas (30 kw) (Leasing Gas Engine) 15

16 Project as Approved by Investment Committee: Phase II Projects under ESCO Fund (II) approval 38 Projects ( Million Baht) Energy Efficiency 30 Projects - Variable Speed Drives (5 Projects) - LED/VSD/T5/Evaporative Cooling System (1 Project) - LED/Heater/T5/Voltage Regulator/ Evaporative Cooling System (1 Project) - LED (6 Projects) - Demand management (Fluoresave) (2 Projects) - Voltage Regulator (5 Projects) - Chiller/Voltage Regulator/LED (1 Project) - Voltage Regulator/Variable Speed Drives (1 Project) - Chiller (2 Projects) - Chiller/LED (1 Project) - Chiller/High Efficiency Motor/Voltage Regulator/ Variable Speed Drives (2 Projects) Renewable Energy 8 Projects Biomass Power Plant Steam Turbine ( 1 Projects ) Biomass Power Plant Gasification ( 2 Projects ) Biogas ( 3 Projects) Micro Hydro Power ( 1 Projects) Biomass + Biogas (1 Projects) Note: Project Status at November

17 RE financing models from ESCO Fund s projects Solar Power (Korat1) Co.,Ltd - Installed Capacity : 6.1 MW (Solar Farm) - Location : Nonsung District, Nakornratchasima - Project Cost : 700 MB - COD : April 20 Equity Structure THAI FA 14% EFE 14% IFC 20% Solar Power 52% IFC, 7.53% Solar Power, 19.97% EFE, 5.48% Thai Fa 5.37% K-Bank 60% Solar Power has 34 solar PPAs. 10 projects are already COD and the rest are under construction and development. CASE 1 First new technology chosen in Thailand First large-scale solar farm project in Thailand Use proven PV module with efficiency warranty. EfE provided technological knowledge and acted as technical assistance to bank. Debt : Equity = 60 : 40 Bank required cash deposit and Personal Guarantee. As a RE promoter, despite obtaining low return (<12%), EFE still decided to invest in this project. Success of this project creates Thai banks confidence to provide loan financing, resulting of a lot of solar farm projects come out. The other projects of Solar Power company (SPCG) EFE invested in Project 2-3, as bank required Debt : Equity = 70 : 30 Company receives the Syndicated Loan. Company listed in Thai stock market MAI. Under the process of developing Infrastructure Fund. Be able to get Equity Finance from bank. 17

18 RE financing models from ESCO Fund s projects CASE 2 : Proven & Commercialized technology True Energy Power Lopburi Co,.Ltd - Installed Capacity : 7.5 MW (Biomass Power Plant) - Location : Lopburi Province - Project Cost : 400 MB - COD : Nov 2010 CASE 3 : first new technology with ESCO s performance guarantee Plan Ecoenergy Co,.Ltd - Installed Capacity : 5.3 MW (Biomass Cogeneration) - Location : Yanta Khao district, Trang - Project Cost : 330 MB Equity Structure Equity Structure E+Co 6% EFE 6% E+Co 15% EFE 15% True Energy 70% Para veneer (Sawmill) 5% Plan toys 13% EFE 40% Plan toys 42% Para. 18% SME Bank 60% True Energy 28% KTB Bank 70% EFE 12% ESCO-service fee takes 5% of project cost Presently, 80 SPP and VSPP biomass power plants supply electricity to the grid in Thailand Banks have a knowledge about Biomass Power Plant. Debt : Equity = 60 : 40 or 70 : 30 Debt Ratio depends on financial creditability and the main business of project developer. According to heat temp. that sawmill requires, the project was designed to use gasification technology. ESSCO (EEI) is responsible for technology selection & procurement, and managing project with guarantee of 80% revenue during repayment period 18

19 RE financing models from ESCO Fund s projects CASE 4 : Project with 100% equity Supreme Energy Wiang Kaen Co,.Ltd - Installed Capacity : 1 MW (Biomass Power Plant) - Location : Wiang Kaew District, Chiang Rai - Project Cost : 65 MB - Status : Cancelled Stepwise Energy Manangement Co,.Ltd - Installed Capacity : 1 MW (Biogas Power Plant) - Location : Pudsa district, Nakorn Ratchasima - Project Cost : 40 MB - Status : Under construction Supreme 32% EFE 28% Private Fund 40% EFE 25% Stepwise 75% Small-scale with not-commercialize based project Bank requires collateral guarantee equal to the amount of loan, debt : equity = 50:50 and high interest rate. EFE helped find foreign private fund to invest in project replacing bank loan (100% Equity). The developer (technology owner) stopped the project, due to necessity to develop other project, first. Feedstock : Waste water from community alcohol-refining factories. Developer decided to use 100% equity due to short pay-back period and not obtaining good condition from bank. 19

20 Energy for Environment Foundation (E for E) 99/305 Thetsaban Songkhro Road, Lat Yao, Chatuchak, Bangkok Tel : Fax : efe@efe.or.th ; escofund@efe.or.th 20