Armstrong South East Asia Clean Energy Fund LP Solar Energy South East Asia Financing Small Power Projects 26 th November 2014 Fund Executive Summary Sector focus Fund premise & rationale Growing energy demand in SE Asia Increasing need for clean & sustainable energy Opportunity for greater resource efficiency Region underserved by private capital Armstrong Fund established to meet this clear market opportunity Armstrong Fund Fund Size $164 m Investors: IFC, AMC, EIB, DEG, FMO, Proparco, Asian Corporate, Unigestion & Obviam SE Asian renewable energy & resource efficiency Investment strategy Clean energy assets, using commercially proven technology Investment Size US$ 5 25 million Expansion capital - at least 90% investment in post-permitting projects Majority control by investor syndicate - minority only if influential 2
Fund Overview Investors 3 Solar SE Asia Investment Activity Country Reasons for Delay in 2013/14 What Has Changed in 2014 Thailand Philippines Indonesia Policy: No issuance of FiT allocation for solar Development: Rooftop hosts waiting for proof of concept Policy: Limited solar allocation, First Come First Served rule and funding mechanism for FiT not established Development: Off-takers slow to execute bilateral PPAs pending proof of concept Policy: Proposed increase to hydro FiT rate New FiT rate agreed (Aug 2014) Approval committee formed for FiT allocation Announced plans for significant PPA issuance. Agreements being signed / tender processes starting. FiT-ALL Fund & implementing regulations near finalization Announcement that Solar FiT quota to be increased to 450MW; formal increase and applicable tariff rate expected to be issued soon First bilateral solar PV project with Socoteco I due to commence construction shortly New FiT rate and new implementation rules issued Standard PPA to be issued to further streamline process Increasing cost competitiveness & key policy commitments in Thailand and the Philippines now underpinning a base for strong growth in Southeast Asia. 4
Solar Policy & Growth Policy implementation slow but progressing; Energy security concerns & cost competitiveness driving sharp rise in announced PPA issuance over next 12 months; Government sponsored FiT rates reflecting move to unsubsidized energy Thailand (Fixed 17.6c /kwh 20 yrs), Philippines (~Fixed 20c/kWh 20 yrs); Grid parity allowing expansion into higher potential bilateral DG and industrial/commercial rooftop segments (13.0c/kWh + PPI); Source: Thailand Dept. of Alt. Energy (DEDE), Indonesia Ministry of Energy, Philippines Dept. of Energy and AAM estimates. 5 Solar Tariffs & Competitiveness Source: AAM estimates. General power prices in all SEA markets forecast to rise >> CPI reflecting increasing cost of fuel mix (LNG & diesel) and need to reduce subsidies. Reductions in system costs and costs of financing continue. Solar PV power now possible @ $0.13/kWh (20% reduction YoY) driving growth at all scales both public & private. 6
Financing Solar Matching Needs Sector Focused Funds Offer: Development funding; Contracted equity funding against clear milestones supports developer with flexible & responsive financing; Specialized financial & execution support. Sector Focused Funds Seek: Experience + initial pipeline with clear entry and exit terms; Alignment & compatibility; Opportunity to build execution capacity and capability. Risk / WACC Permits Licenses Site ID Team Surveys Feasibility Confirmed Entry point for Sector Focused Investors Engineering Equity financing EPC Debt Legal PPA Approval More typical entry point for Investors Financial Closure Financing Solar Summary For Investors Price competitiveness move to growth potential of unsubsidized opportunities; Market maturing increased knowledge of risks & opportunities; Price discovery shortening development timelines. For Developers Financing increasingly flexible & available; Opportunity to build capacity platform. Combined Positive feedback of scale - lower costs, lower risks, lower financing costs, lower tariffs, increased demand.
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