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

2. 2 Innovation Energie Développement - IED 50% funded by the EC

3. 3 Innovation Energie Développement - IED 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

4. 4 Innovation Energie Développement - IED 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

5. 5 Innovation Energie Développement - IED Stakeholders and impact on beneficiaries  Stakeholders and beneficiaries : –Local developers : implementation packages of SHP for business development –Local authorities and communities : Beneficial consequences on those who do not have access to electricity –National utilities and authorities : New scheme of economic and financial analysis; Regulatory framework review and analysis  Outputs : –FS documents and related implementation documentation (tender technical, financial, contractual and BIM) –Reports, Workshop proceeding and newsletters, Participation in regional meetings within the framework of existing groups – HAPUA, NRSE SSN, AEBF/SOME

6. 6 Innovation Energie Développement - IED 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

7. 7 Innovation Energie Développement - IED Project status – Indonesia (1)

8. 8 Innovation Energie Développement - IED 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$

9. 9 Innovation Energie Développement - IED 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

10. 10 Innovation Energie Développement - IED 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

11. 11 Innovation Energie Développement - IED Project status – the Philippines (1)

12. 12 Innovation Energie Développement - IED 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

13. 13 Innovation Energie Développement - IED 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

14. 14 Innovation Energie Développement - IED 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

15. 15 Innovation Energie Développement - IED 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

16. 16 Innovation Energie Développement - IED 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.

17. 17 Innovation Energie Développement - IED SWOT Conclusions  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. Strengths Weaknesses Opportunities Threats

18. 18 Innovation Energie Développement - IED Thank you