RENEWABLE ENERGY/ENERGY EFFICIENCY AND THE CDM

Transcription

1 RENEWABLE ENERGY/ENERGY EFFICIENCY AND THE CDM Break-out Groups Session - Geothermal Dr. Hardiv H Situmeang International Workshop World Bank September 13 14, 2006 The Ballroom, Four Seasons Hotel, Jakarta

2 INTERNATIONAL BEST PRACTICE 1997 APEC WORKSHOP 4 CRITICAL SUCCESS FACTORS NEEDED TO SUCCESSFULLY ATTRACT IPPS 1. Transparency 2. Predictability 3. Reduction of Risk 4. Promotion of Competition

3 HOW INVESTORS RANK PRIORITIES WHEN INVESTING IN A DEVELOPING COUNTRIES Legal framework defining the rights and obligations of private investors 3.57 Consumer payment discipline and enforcement Availability of credit enhancement or guarantee from Government and/or multilateral agency Independence of regulatory institution and processes from arbitrary government interference Administrative efficiency - lead time to get necessary approvals and licenses Judicial independence - degree of perceived independence from government influence Tenure and stability of elected officials in political process Regulations that clearly define and allow exit for investors in infrastructure Investment grade credit rating for long-term forex debt Negative perceptions and resistance to private investment amongst members of civil society (trade unions, press, NGOs) Sector in transition to a competitive market structure Country ranking in Transparency International's Corruption Perception Index Cost and available tenors to borrow in domestic banking market Reliance on a competitive bidding process to select project investor/purchaser Ability to vertically integrate with other segments of the energy chain (upstream generation or downstream distribution; gas supplies; power exports; etc) Energy and Mining Sector Board Discussion Paper, Paper No 6, May 2003 WORLD BANK

4 TYPICAL STRUCTURE OF IPP PROJECT GOVERNMENT PROJECT SPONSORS LENDERS: EXPORT CREDIT AGENCIES COMMERCIAL BANKS Guarantee Letter Support Letter Sponsors Commitments Shareholders Agreement Loan Agreement Security Package PURCHASER Power Purchase Agreement PROJECT COMPANY Security Agreement SECURITY TRUSTEE, COLLATERAL AGENT O&M Agreement Construction Contract OPERATOR Fuel Supply Agreement Performance Bond CONTRACTORS FUEL SUPPLIERS BONDING BANK

5 A LENDERS S APPROACH TO MANAGING A PROJECT S MAJOR RISKS MARKET RISK ECONOMIC RISK Demand Potential Payment Risk Funds Availability Interest Rates Exchange Rates Inflation PROJECT CONSTRUCTION COMPLETION RISK SPECIAL PURPOSE COMPANY Delays Cost Overruns Site Availability PROJECT PERFORMANCE Sponsor Commitment Technology Assurance Equipment Performance Input Availability Management Performance Skilled Labor/Operator Performance Debt Service Coverage Security Ongoing Compliance OVERALL RISK SUPPORT POLITICAL RISK FORCE MAJEURE

6 FULL RECOURSE STRUCTURE LENDERS PROJECTS SPONSORS OFF TAKERS [If Different From Project Sponsors] Project Sponsors remain 100% liable for debt service payments and thus the lenders rely on the general credit of the sponsor for loan repayment and price the financing in line with its credit worthiness. CONTRACTORS [EPC, O&M, Fuel Supply, Etc] Lenders have full recourse to the other available assets of the Project Sponsors rather than recourse only to fund related to the particular project.

7 LIMITED RECOURSE STRUCTURE EPC Contractor O & M Contractor Fuel Supply Contractor (s) Project Sponsors Equity Injection Project Vehicle Off-taker (if different from project sponsors) Loan Guarantee / Security (Standby Credit or cash) The lenders rely on discrete cash flow and other assets belonging to the project vehicle. This scheme shows relatively tough structure. The more layer of protection required by the lenders, the higher risk of default perceived by the lenders. Lenders Government Political Guarantee Guarantee Export Credit Agency / Multilateral Bank(s) The lenders requires layers of protection, from the Government, Multilateral Banks and/or Export Credit Agency and the Project Sponsors itself.

8 NON RECOURSE STRUCTURE EPC Contractor O & M Contractor Fuel Supply Contractor (s) Project Sponsors Equity Injection Project Vehicle Off-taker (if different from project sponsors) The lenders have sufficient confident not to require guarantee from the project sponsors and the Government. This indicates that the lenders are sufficiently comfortable with the political risk and other risks. Lenders Loan Guarantee Export Credit Agency / Multilateral Bank(s)

9 BREAK-OUT GROUPS - GEOTHERMAL PROJECT FINANCING STRUCTURE OF LEYTE OPTIMIZATION PROJECT OF ORMAT Inc. Performance Undertaking PHILIPPINES GOVERNMENT IFTRIC OPERATOR (ORMAT) TURNKEY CONTRACTOR (ORMAT) Transfer of Asset After Year 10 PNOC PROJECT COMPANY LEYTE OPTIMIZATION 50 MW Geothermal Project US $ 49 M Capacity & Energy Payment Equity US $17 M OWNER ORMAT LEYTE Investment Insurance CONSTRUCTION LENDERS (ING, Leumi, Hapoalim, IDB) Political Cover POLITICAL RISK INSURER (US EXIM) TERM LENDER (Eximbank)

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11 GEOTHERMAL POTENTIAL RESOURCE RESERVE Spekulatife Hipotetise Probable Possible Proven (MW) (MW) (MW) (MW) (MW) Sumatera Jawa Bali NTB-NTT Sulawesi Maluku Papua Kalimantan TOTAL

12 Plant Location Installed Capacity (MW) Turbine/ Generator Commen cement Date Power Plant Operator Steam Filed Operator AWIBENGKOK SALAK ANSALDO ANSALDO ANSALDO FUJI FUJI FUJI PLN PLN PLN UGI/PERTAMINA UGI/PERTAMINA UGI/PERTAMINA UGI/PERTAMINA UGI/PERTAMINA UGI/PERTAMINA UGI/PERTAMINAUGI/ PERTAMINA UGI/PERTAMINA KAMOJANG DARAJAT MITSUBISHI MITSUBISHI MITSUBISHI MITSUBISHI/FUJI MITSUBISHI PLN PLN PLN PLN AI/PERTAMINA PERTAMINA PERTAMINA PERTAMINA AI/PERTAMINA AI/PERTAMINA DIENG 1 LAHENDONG Binair 1 SIBAYAK 1 Wayang Windu , ANSALDO Thermodyn ALSTHOM Geothermal Thermal Co. FUJI PERTAMINA BPPT PLN PERTAMINA UGI PLN & PERTAMINA BPPT PERTAMINA PERTAMINA UGI/PERTAMINA GEOTHERMAL POWER PLANTS

13 BREAK-OUT GROUPS - GEOTHERMAL Salient Issue of Indonesia s Geothermal Development Facts: High potential, and Clean and Indigenous energy resource Why Indonesia s geothermal resource is still relatively slow to be developed comparing to fossil fuel generations? What are the barriers?

14 BREAK-OUT GROUPS - GEOTHERMAL PROBABLY Investment climate is not conducive enough to geothermal resource development, Appropriate institutional & regulatory framework, Financing availability, Availability of credit enhancement, Fiscal instruments or system incentive, Pricing: to guarantee a certain fair return level, High risk (the nature of geothermal development, high up-front development cost), Other project s major risks, Capabilities (at national and local level), A constraint to establish an appropriate project scheme, and CER revenues is not sufficient enough to boost the return.

15 BREAK-OUT GROUPS - GEOTHERMAL Let s discuss your observations and experiences.

16 Terima Kasih