1 Innovation Energie Développement Innovative Financial scheme for sustainable development of RE in Rural Area in Indonesia, Philippines & Vietnam (IFRERA) Dr. Tuan NGUYEN, IED Dissemination and Training workshop, Hanoi December 19-20, 2005 Supported by the European Commission through the EC – ASEAN Energy Facility Overview

2 Innovation Energie Développement Project objectives  Develop small-scale hydropower based rural electrification in area not yet covered by the main grid systems  Develop a “ready to implement” package and ESCO implementation modality for investors in RE projects –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

3 Innovation Energie Développement Project facts data  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 foundations (Netherlands) –Agency for Environment & Energy Management (ADEME, France) –Institute of Energy (IE, Vietnam) –MBA (Philippines)

4 Innovation Energie Développement Stakeholders and impact on beneficiaries  Stakeholders and beneficiaries : –Local developers : Fully 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 –Tender documents (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

5 Innovation Energie Développement Project’s activities  Tec. FS Studies / reviews (as applicable)  Economic Analysis / review  Analysis of the Regulatory, Legal and Fiscal Framework  Financial Analysis  Local level integration  Preparation of full implementation package  Dissemination, management and reporting

6 Innovation Energie Développement Project’s Scope  Indonesia : The institutional and contractual frameworks were negotiated locally. Promising sites have been identified and screened in Sulawesi. The need and interested of the local authorities is established; a national developer was identified; financial and contractual schemes are to be developed   The Philippines: A full batch of sites has been identified and developed at the pre F/S stage and 1 sites to technical and economic F/S. The issue now is of mobilising interested national developers / investors and integrating in the framework under development. EIA & SIA is underway   Vietnam: A number of sites have been pre-identified. Looking at the approaches under development in Indonesia and the Philippines, the technical FS of one site proposed by IoE was validated and a contractual framework proposed  More information will be presented in following presentations.

7 Innovation Energie Développement Project status – Indonesia (1)

8 Innovation Energie Développement Project status – Indonesia (2) In the Sulawesi province of Indonesia, the three identified sites have the following characteristics :  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 Innovation Energie Développement Project status – Indonesia (3)  In Indonesia, the implementation package is adapted to the situation where the PLN is the main authority  It’s daughter company IP is the identified developer, willing to invest 30% equity.  A financial analysis was conducted based on the criteria, assumptions and method wished by IP.  The objective of this study : to identify the PPA tariff price that enables IP’s profitability target (IRR = WACC + 5%).

10 Innovation Energie Développement Project status – Indonesia (4)  The most sensitive variables are investment costs and hydrology.  Recommendations : Invest 100% in US$, PPA in US$ (if possible).

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

12 Innovation Energie Développement Project status – the Philippines (2)  The Catanduanes Power system is isolated from the main grid. The distribution is in the hands of FICELCO (32,724 customers).  The Lower Dugui site is located in the mountainous area spreading on the north of Virac  Pinst = 3.1 MW & 11.4 GWh  Investment : 393 millions pesos (7.1 million US$)  Criteria for investment (Power One Corporation POC – private investor) : Overall discounted cost < Bunker C diesel reference cost.

13 Innovation Energie Développement Project status – the Philippines (3)  The Lower Dugui MHPP price is very sensitive to the discount rate that POC will choose, the cost of access to capital that POC faces.  With access to a cost of capital of 7%, Lower Dugui is already competitive with the March 2005 oil price of 13 Peso/L

14 Innovation Energie Développement 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; GWh/y  More information will be presented in details in following presentations : –IoE/ Krong Pa 2 developer on development of Krong Pa 2 –ETC on EIA and SIA –IED on Economic and financial analysis

15 Innovation Energie Développement 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 for local partners involvement, for accurate data collection.  Need for private funding.  Regulatory frameworks are being adapted to foster investments in RE resources.  Demand growth is sustained.  The demand growth is very fast. This triggers quick returns on investment.  Collaboration with government bodies at both the local and national levels.  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

16 Innovation Energie Développement Thank you