CDM COOK STOVE PROJECT FUEL EFFICIENT COOKING & CLIMATE CHANGE IN INDONESIA BY PT ENERXI INDONESIA Project Description Draft Version 10.5 1 June, 2010 Contact DEXIA Carbon Fund Managers S.A. Clemens Huettner T: +44 20 3189 2085 M: +43 664 152 9922 clemens.huettner@dexia-carbon.eu Contact GlobalBDA Winfried Ursin M: +43 664 432 8087 F: +43 662 229 0879 winfried.ursin@globalbda.com
INHALT Purpose of Document... 2 Notes... 9 The Project... 3 The Stove... 5 Funding... 6 Global BDA... 7 Global Carbon Markets & Project Commentary by Dexia Carbon Capital S.a.r.l.... 8 PURPOSE OF DOCUMENT The project participants seek to attract support for all necessary steps: - Individuals as material and immaterial supporters ( Business Angels ) as well as private investors - Companies and Corporations as material and immaterial supporters. The project supports corporate social responsibility and environmental awareness of organisations and can be used to offset the carbon emissions - Venture and Private Equity Capital to fund the project development and stove distribution phases - Carbon Compliance Buyers and Carbon Funds to co-fund project development and buyers of CERs The paper outlines the necessary activities and related costs for the distribution of 300.000 fuel efficient cooking stoves in Indonesia. Since the project is highly scalable, also larger and smaller than described project sizes can be realized. Please contact for any further information GlobalBDA Winfried Ursin M: +43 664 432 8087 F: +43 662 229 0879 winfried.ursin@globalbda.com Please visit http://www.stoveproject.com and globalbda.securespsites.com/publicstove CDM COOK STOVE PROJECT INDONESIA PAGE 2
THE PROJECT The projects seeks to distribute 300.000 fuel efficient stoves to households in Indonesia in the years 2010 and 2011. The stoves are designed to reduce the usage of fossil fuels and wood. The project features a number of positive impacts, both globally and to the local population, such as: Figure 1: Common Bali Fireplace 1. Reduction green house gas emissions 2. Reduction of fuel costs for individual households, especially in the midst of raising fossil fuel prices 3. Enhancement of family well-being by avoiding respiratory and eye diseases caused by burning the commonly used fuel kerosene, wood or even charcoal in inefficient open stoves inside houses 4. Reduction of deforestation in wood and charcoal burning scenarios Figure 2: SAVE80 Cooking Stove The distribution of 120.000 stoves will reduce emissions by more than 350.000 tons of CO2 per year or more than 3,5 million tons over a period of 10 years. In a second phase a further 280.000 stoves will be distributed in already selected project areas in Bali, Sulawesi and Java. This will bring the total reduction of carbon emissions to over 7 million tons. 95% of households in the proposed project in Bali, Sulawesi and Java use wood in three stone cooking stoves. The projects will replace traditional stoves with highly efficient wood burning stoves. Each stove reduces CO2 emissions by up to 3.3 tons per year. It is envisaged to start a parallel tree planting program to ensure that the firewood comes from sustainable sources. The project will earn Certified Emission Reduction CER according to the Clean Development Mechanism CDM, a key tool of the international Kyoto Protocol to combat climate change. CER are tradable emission rights, which can be sold on the international emission trading market. Buyers of CER are developed countries or industrial sectors in these countries, which have the opportunity to offset some of their emission reductions targets with CER from projects in developing countries. CDM COOK STOVE PROJECT INDONESIA PAGE 3
Once the project is fully documented in a Project Design Document - PDD it will undergo a due diligence and validation process by an international certification firm (e.g. TÜV, SGS) before being registered with the United Nations Framework Convention on Climate Change (UNFCCC), the international Kyoto Protocol authority. Only then the achieved emission reductions can be certified and become tradable The Project Proponent PT Enerxi has so far undertaken, in conjunction with a Bali based NGO, Yayasan Sinar Matahari, demonstration events for the new cook stoves in numerous villages Figure 3: Bupati (Head of Regency) Presentation Cooking Stove covering at least 16,000 households. The projects will be developed by Indonesians for Indonesians together with the village population and local, regional and national government support. The Project Proponent has developed excellent relations with the Bupati (Head of Regency / County), which is essential for the project logistics, distribution of the stoves and the monitoring of the continued usage of the stoves. Monitoring of the continuous usage of the stove will be overseen by the Project Proponent and his team and the NGO, involving the traditional Kabupaten (village chief) network. Figure 4: Presentation Cooking Stove Project to local population CDM COOK STOVE PROJECT INDONESIA PAGE 4
THE STOVE The Fuel Wood Efficient Cooking Stove (Model: SAVE80) used by the projects is a portable stove developed, patented and prefabricated by a German manufacturer. The stove will be assembled locally to create employment and income. It has a nominal effective thermal power of 1.5 kw and needs only about 250 g of small brittle sticks of wood to bring 6 litres of water to the boil, 80% less than traditional fire places. Figure 2: SAVE80 Cooking Stove On one side near the upper rim there is a quadratic port for feeding fuel into the burning chamber. After lighting, air is sucked in and enters the burning chamber from below. The design ensures preheating of the air and a complete combustion with no visible smoke and only small amounts of ash. Exhaust air outlets are on the side opposite the feeding port. The stove is made of stainless steel and weighs about 4 kg. Wood in small pieces, diameter and length about that of a finger, is fed into the stove through the quadratic opening. Smoke is seen only immediately after kindling. The stove is suitable for cooking, frying, heating and sterilising water and for baking flat bread. After reaching the boiling temperature, food for instance rice can be transferred to the Wonderbox, a device for retained-heat cooking. There the rice will continue to simmer until it is well cooked. In the meantime, the SAVE80 can be used to prepare the sauce. The Wonderbox is made of expanded polypropylene, unbreakable, stackable, lightweight, fitting the 8-litres pot of the SAVE80 and keeping the temperature for a long time. After 2 hours the temperature decreases from 100 C to about 90 C, after 12 hours it is still 65 C. The Wonderbox allows Figure 3: Rice simmering in the Wonderbox important energy savings in addition to the savings by the SAVE80. The SAVE80 components are shipped in large packages to reduce volume. A 40-ft container HC (High Cube) can accommodate the components for 1,400 stoves with equipment. Assembling of the stoves is done in a workshop at the site of destination. This simple task will be done by the beneficiary households themselves. Industrial production in Germany allows compliance with European quality standards. The stove itself is used already by UNHCR (United Nations High Commissioner for Refugees) in Somali refugee camps and in similar locations. Once the project starts, it is planned to transfer the production of the SAVE80 to Indonesia, which will improve the economics of the project significantly. This will be done under the auspices of the German manufacturer. Right now, the investment calculation of the project is based on German production costs. CDM COOK STOVE PROJECT INDONESIA PAGE 5
The average household income in the project area is around 50EUR/month. The SAVE80 is not available on the local market but would cost approximately 80 Euro per stove. Therefore, in absence of the project, villagers are not able to purchase the stoves, resulting in continued emission of Green House Gases from either fossil fuels (mainly kerosene) or much higher usage of wood. Figure 4: Fuel Wood for SAVE80 Cooking Stove FUNDING Funding of the stoves will be realized by the sale of generated CER. However, upfront financing is needed, as it will take one year, to start with the CER generation. The Project Proponent operates in a network of individuals and organisations, which have focused on this issue for a couple of years. The main barrier for large scale success however is the costs for the stoves, for distribution and related logistics and ongoing assistance for usage and maintenance. The implementation of the Kyoto protocol and related carbon market mechanisms has created new opportunities to restart this initiative. Figure 5: Fire Wood for open Fireplaces The main phases of the project are: A. Project Development and Certification: Funds will only be spent on successful completion of the previous task. The certification process is extensively regulated by UNFCCC authorities and completely transparent. The project seeks to partner with companies, which has successfully registered a CDM cook stove project. The return for participation in this Venture Phase will be highest. Equity participation at this stage will also lead to participation in all future projects. B. Stove Distribution: once certainty is achieved that the project will be registered, the fuel efficient stoves will be purchased and distributed. Whereas the project development phase requires 15% of the total funding requirement, the stove distribution requires 85% of the funds needed. CDM COOK STOVE PROJECT INDONESIA PAGE 6
The funding requirements are: A. PROJECT DEVELOPMENT VENTURE FINANCING 1st. 2nd. 3rd. 4th. 5th. Completion of a detailed baseline study of the current usage of non-renewable biomass by the local population to calculate the achieved emission reductions by the distribution and usage of stoves. This study will be performed by the Indonesian Center for Biodiversity and Biotechnology ICBB located at the Bogor Agricultural University in Indonesia. PT Enerxi has already commissioned ICBB to undertake the necessary studies. Development of the Project Design Document (PDD) by an experienced CDM Project Developer. PT Enerxi has already short-listed a number of suitable consultants. The project due diligence process by TÜV Nord (validation in CDM terminology). PT Enerxi has already shortlisted TUEV Nord. Operational funding for the Indonesian organisation (PT Enerxi) to support above activities and manage local relationships like local governments (regencies), local partners and Indonesian national authorities. Project Management services to manage the project activities internationally between all relevant parties. (GlobalBDA). B. PROJECT FINANCING INVESTMENT PHASE 1st. 2nd. Purchase and distribution of the stoves. Monitoring of the usage of the Save 80 stoves in each household for up to 1 year. Opportunities exist to participate in the different phases of the project. Returns on Investment (RoI) are achieved by CER Revenues or an Equity Stake in PT Enerxi. In total, for 4 projects 9,9m EUR are required to cover the above mentioned costs. 1,5m is required to finance the project development cycle. 7.8m are needed to fund the purchase and distribution of the fuel efficient stoves. GLOBAL BDA GlobalBDA is a Business Development Agency supporting businesses and projects with a focus on renewable energy, carbon markets as well as IT and outsourcing. The main geographical focus is Asia and Europe. GlobalBDA is engaged by the stoveproject to develop business plans, relationships to investors and buyers in the carbon market. GlobalBDA is also involved in building the organisational and management framework for the stove project supporting PT. Enerxi. GlobalBDA is based in Salzburg, Austria and has extensive experience working in Asia and Eastern and Western Europe. CDM COOK STOVE PROJECT INDONESIA PAGE 7
GLOBAL CARBON MARKETS & PROJECT COMMENTARY BY DEXIA CARBON CAPITAL S.A.R.L. The EU ETS emission reduction targets are more than ambitious. While the current market is rather long (covered installations are not short due to the effects of the financial crisis on producing industries), Dexia expects a much shorter market environment after 2012, with much higher than todays market prices. Next to the European Emission Trading Scheme ( EU ETS ), there are a number of other carbon trading schemes, which allow for the inflow of CER, such as the Japanese emission trading scheme, the global voluntary emission trading scheme, the to-come Australian emission trading scheme and others. The European Commission has made clear, that the EU ETS is a core element of the European strategy to reduce Greenhouse Gas Emissions, which the commission wants to reduce by 20% by 2020 (based on 1990 emission figures). This creates a continuous demand for CER in the EU ETS up to 2020. However, the EU imposed import limits on CER, which, according to current statistics, will not be met. Further, there is a certain risk that EU authorities may limit the unexceptional acceptance of CER from 2012 to 2020 (the so-called post- Kyoto phase, as the Kyoto Protocol will phase-out in 2012) and certain project types may be restricted. However, following this discussion very closely, Dexia is of the opinion, that CER out of the PT Enerxi Cooking Stove Projects will be admitted to the EU ETS post 2012. 30,00 25,00 20,00 15,00 10,00 5,00 0,00 CER Price Development Figure 6: CER Forward December 2010 Price Development The project has already attracted a buyer for a large portion of the generated CER for the period 2010 to 2012 of the first four projects. Dexia Carbon Capital S.a.r.l. ( Dexia ), a Luxembourg based Carbon Fund, is committed to purchase the CER. Dexia is a EUR 50 Mio Fund, which invests in carbon assets across different geographies, technologies and emission trading schemes. Dexia has been active in the market for several years and is an experienced carbon investor with considerable knowledge when it comes to carbon project risk assessment. Next to its engagement in the PT Enerxi activities in Indonesia, Dexia is invested in a number of further carbon abatement projects in South East Asia and Latin America. CDM COOK STOVE PROJECT INDONESIA PAGE 8
NOTES This document contains forward-looking statements. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that PT Enerxi s actual financial condition, results of operations and cash flows, and the development of the industry and markets in which PT Enerxi operates, may differ materially from those made in or suggested by the forward-looking statements contained in this document. This document is only intended as a basis for further discussion. The information in this document is based on reliable sources. PT Enerxi or its advisor BDA Global, however, do not guarantee the correctness of all data and deny any responsibility for disadvantages that could result directly or indirectly from the usage of this document or its contents. Neither this document nor any copy hereof may be distributed in any jurisdiction where its distribution may be restricted or prohibited by law. Potential Investors should consult their own legal and tax advisors prior to investing in the described project. Given the economic and market risks, there can be no assurance that PT Enerxi and/or the described projects will achieve its investment objectives. Past performance is not a guarantee of future results. CDM COOK STOVE PROJECT INDONESIA PAGE 9