©EEI 2007 All Rights Reserved Strictly confidential – For discussion purposes only Excellent Energy International Co., Ltd. (Thailand) 1 Private sector needs UNFCCC workshop on best practices with conducting TNAs By Mr.Arthit Vechakij, Managing Director Hotel Arnoma, Bangkok, Thailand June 2007

2 ©EEI 2007 All Rights Reserved Mr. Arthit Vechakij Managing Director Excellent Energy International Co., Ltd. (EEI) Director ESCO Ventures Co., Ltd. (EV) Preident Association Energy Efficiency Consultant (AEEC) Address: 475 Sri Ayudhaya Rd., Rajthevee Bangkok Thailand Phone: Fax: Cell: Speaker ESCO Ventures

3 ©EEI 2007 All Rights Reserved Agenda  About EEI  Problems encounter during Project Development phase  Suggested Resolutions Objective:  To share Project Development Experience (Obstacles and suggested Resolutions) relating to ESCO (Energy Service Company) business …  From One company = EEI  In One country = Thailand -But hope it would be a good case study for all of us global wide Objective:  To share Project Development Experience (Obstacles and suggested Resolutions) relating to ESCO (Energy Service Company) business …  From One company = EEI  In One country = Thailand -But hope it would be a good case study for all of us global wide

4 ©EEI 2007 All Rights Reserved About EEI  An Investment Partner in Energy Efficiency Management  Provide Investment/Engineering Consulting Services and promptly fund under Energy Performance Guaranteed Contract (EPC) in the innovative field of Energy Service Company (ESCO)  Develop integrated energy efficiency and productivity improvement project with attractive return on investment  Guarantee success and return on investment from the beginning to the end of project payback period  Achieved reputation for being the most highly regarded ESCO in Thailand and was selected for the pilot ESCO project of Thailand in 1999 EEI, stands for Excellent Energy International Co., Ltd. (Thailand), is: EEI Is the first ESCO in Thailand that successfully implements ESCO project with excellent base of support from the Thai Government & the World Bank.

5 ©EEI 2007 All Rights Reserved Business Case Example: Large scale investment – Big Saving Start Savings: Nov 02 Located: Kangkoi, Saraburi Bangkok Produce Merchandising Public Co., Ltd. Energy Conservation Measure (ECM) Project Investment Cost= MB Energy Cost Savings= 47.0 MB/Year Payback Period= 4.5 Years IRR= 20.5 % NPV 0%)= MB  Cogeneration 4.5 MW (Fuel: Natural Gas)  Motor Optimization  Lighting Control

6 ©EEI 2007 All Rights Reserved The listed company on the Stock Exchange of Thailand with the registered paid-up capital of Baht million, specialized in financial investment which so far emphasizing in Property investment. EEI World Class Partners EEI has been established in Thailand since 1999 by three major partners and key investors. The largest energy research institute in United States, with 30 years of proven success, is recognized as a world leader in creating innovation technology and environmental solutions for the energy industry and society. EPRI spends 18,000 Million Baht per year for research and development facilities to develop and conduct research on energy and industrial technology. A premier engineering firm in United States, as the provider of technically, environmentally and financially sounds end-use solutions for energy companies, government agencies, and industrial and commercial establishments.

7 ©EEI 2007 All Rights Reserved Performance Guaranteed One-Stop Service Total Integration Services Well Recognized by Government & Private Sector Sources of funds Share Risks, Losses and Benefits Specialist/Expertise Various Proven Technology Measurement & Verification System (M&V) Why EEI ESCO?

8 ©EEI 2007 All Rights Reserved Our Clients Nanyang Textile, Knitting, Energy Sun Food International Bangkok Produce Merchandising Siam Oil & Fat Muangthong Aluminuim Industrial Thonburi Automotive Assembly Plant Nongbuafarm Country Home Village

9 ©EEI 2007 All Rights Reserved Business Case Example: ESCO Shared Savings – ESCO & Client Co-Invest SS Cogen Technology & Investment Optimization Products: Modified Starch, Glucose Low Season: April-June Expansion Plan: new glucose unit & spray dryers Sahasin is located in Chanthaburi, which is about 260km to the South East of Bangkok Sahasin is …  One of the top 3 glucose manufacturer in Thailand (25,000 ton per year)  One of the top 5 producers of modified starch (15,000 ton/year)  Expansion of a new glucose plant (100 MT/day) totaling over 200 MT/day  Expected sales to grow from 600 MB in 2004 to 1,400 MB in 2009 with 15% gross margin.

10 ©EEI 2007 All Rights Reserved Start Savings: Mar 07 Located: Chanthaburi Province Sahasinwattana Cogeneration Co., Ltd. Energy Conservation Measure (ECM) Project Investment Cost= 150 MB Energy Cost Savings= 42 MB/Year IRR= 26 % Contract Period= 8 Years  Cogeneration 1.7 MW, 25 TPH (Fuel: Palm Shell & Coal) Business Case Example: ESCO Shared Savings – ESCO & Client Co-Invest

11 ©EEI 2007 All Rights Reserved Structure of Sahasin Cogen Co., Ltd. Sahasin Cogen Sahasin ZONE3 – Import & Income Tax Exempt Land Leasing Agreement - Sahasin Cogen to rent land from Sahasin EEI Energy Performance Contract (Guaranteed Saving) Engineering (IGA) and Implementation Phase -Project Development Reimbursement Phase -Guarantee Savings to cover full investment + interest -Compensate Deficit Savings -Get shared saving on Performance Steam and Electricity Sales & Purchase Agreement Condition: -Minimum Steam Take -Sahasin to purchase the facility at the 9 th years for xx MB Steam Tariff: -Price varied with fuel (No Risk on Fuel Price!) Shareholder Agreement Structure -FE Clean 64% -ESCO Ventures 20% -Noppanun Intertrade 16% -Capital Calls -Board, Right, Vote -Dividend payout after debt services Loan 80 MB EXIM Loan Agreement Interest Rate: - Year 1-3: prime rate + 0.5% - Year 4-7: prime rate - Term: 7 years - Grace Period 14 months PP&E 141 MB ESCO Ventures* Noppanun FE Clean Equity 85 MB 17 MB 13.6 MB 54.4 MB 60% UV 25% EEI Group 15% OneAM Blended with Low Interest Rate through MoE ENCON Fund

12 ©EEI 2007 All Rights Reserved Agenda  About EEI  Problems encounter during Project Development phase  Problems as encountered by EEI (as a Project Developer)  Problems as encountered by other Project Developer  Problems as encountered by other key players  Suggested Resolutions

13 ©EEI 2007 All Rights Reserved 10 Key Success Factors for ESCO in developing Energy Efficiency Project 1.Overall System Efficiency 2.Emission Control under Environmental Regulation 3.Optimization Design (on client point of view, not on supplier point of view) 4.Feasibility on all necessary factor under the fact basis 5.Long-term Price Performance Evaluation Basis 6.Competitive & Transparent Procurement Process 7.Qualified Measurement & Verification System 8.Rigid Commissioning Procedures 9.Good Contract Management 10.Good Investment Option Pre-Development and Project Development Phase

14 ©EEI 2007 All Rights Reserved During the Project Development phase, there are various of problems encountered by each key player as tried to summarize below 1. Project Developer 2. Knowledge Supplier (i.e. Hardware / Software) 3. Financier (i.e. Investor & Financial Institute)  Unsuitable Skill in Technical, Financial, Legal, Commercial  Suffer from high Development cost and effort before cashing (maybe with premium) far later on  Concern on releasing Intellectual Property Rights Protection (IPR Protection)  Enforceable Legal Binding (e.g. MoU, Contract, …)  Lack of Support from other players (See all in #2 and #3 below )  Concern on releasing Intellectual Property Rights Protection (IPR Protection)  Enforceable Legal Binding (e.g. MoU, Contract, …)  Environment (Economics – Global wide & Nationwide, Political Situation, Regulation)  Enforceable Legal Binding (e.g. MoU, Contract, …)  Chicken & Egg (paying development fee first vs. seeing the project in detail first)  Believable Financial Return (which mostly requires higher development effort)  Committed Financier partner (if not one equity investor / one bank for 100% cash)  Environment (Economics – Global wide & Nationwide, Political Situation, Regulation) Zoom into the problems

15 ©EEI 2007 All Rights Reserved Agenda  About EEI  Problems encounter during Project Development phase  Suggested Resolutions

16 ©EEI 2007 All Rights Reserved Suggested Resolutions are actually counteracting all those known-for-a-long-time problems… 1. Project Developer 2. Knowledge Supplier (i.e. Hardware / Software) 3. Financier (i.e. Investor & Financial Institute)  Unsuitable Skill in Technical, Financial, Legal, Commercial  Suffer from high Development cost and effort before cashing (maybe with premium) far later on  Concern on releasing Intellectual Property Rights Protection (IPR Protection)  Enforceable Legal Binding (e.g. MoU, Contract, …)  Lack of Support from other players (See all in #2 and #3 below )  Concern on releasing Intellectual Property Rights Protection (IPR Protection)  Enforceable Legal Binding (e.g. MoU, Contract, …)  Environment (Economics – Global wide & Nationwide, Political Situation, Regulation)  Enforceable Legal Binding (e.g. MoU, Contract, …)  Chicken & Egg (paying development fee first vs. seeing the project in detail first)  Believable Financial Return (which mostly requires higher development fee)  Committed Financier partner (if not one equity investor / one bank for 100% cash)  Environment (Economics – Global wide & Nationwide, Political Situation, Regulation) Zoom into the problems Suggested Resolutions and How PFAN may help Coaching Training Guidebook Supporting Development Fund Supporting Financial Closure  Simply to close a deal  Assure Financier Confidence  Eliminate Technical Risk (and all other risk)  New Innovation could make project more feasible  Comfort Developer effort  Simply to close a deal  Assure Financier Confidence  Eliminate Technical Risk (and all other risk)  New Innovation could make project more feasible  Comfort Developer effort Benefit

17 ©EEI 2007 All Rights Reserved Mr. Arthit Vechakij Managing Director Excellent Energy International Co., Ltd. (EEI) Director ESCO Ventures Co., Ltd. (EV) Preident Association Energy Efficiency Consultant (AEEC) Address: 475 Sri Ayudhaya Rd., Rajthevee Bangkok Thailand Phone: Fax: Cell: Thank you and Contact ESCO Ventures