Esco in Indonesia

DEVELOPING ESCO IN INDONESIA
CHALLENGE AHEAD
JUDIANTO HASAN
JOGYAKARTA 29 MARET 2012
I NTRODUCTION
M ARKETING & L EGAL I SSUES
Energy Law No 30/2007 Gov Regulation no 70/2009 Presidential Instruction no. 13/2011 Climate Change : Indonesia to 26 41
GO GREEN
O PPORTUNITIES
Current:

Lightings HVAC Retrofits Building Control Systems Motors and Drives Chiller and Boiler Upgrades
Trend :

Thermal Storage/Load Shaping Generation Efficiency Improvement On-site Power Generation (Distributed Generation, CHP, Cogeneration) Power Quality Industrial Processes (e.g., compressed air systems)
P HASES OF D EVELOPMENT: O PPORTUNITIES R EALIZATION

Time
Initial Phase Transition Phase Actualization Phase
corporate behavior Regulatory constraint Reactive Results are unimportant and not monitored
Implementation of policies that transform into business results Shift from reactive to proactive Economic benefits begin to emerge
EE & EC becomes core value Economic results are consistent and measurable Proactive adherence in key business systems
Data Information Knowledge Action
B ARRIERS
Energy Efficiency Market is Not Developed Enough to Motivate Local Banks to Invest in Setting up EEP Lending Infrastructure. Legal frame work to safeguard contracts or indemnify against a breach in contract need to be developed. Understanding of banking sector of EEPs and their payback potential
Difficult to depart from conventional asset based lending (EEP is Project Cashflow-Based Lending for ESCO)
Fund with favourable rates and repayment terms Low electricity tariff Lack of knowledge of potential clients Tendering process
ESCO M UST M ANAGE R ISKS

Development Construction Technology Operations & Maintenance Performance (Savings)
R ISKS
Savings Guarantee to Customer that the turnkey costs of implementing and financing the EEPs will be paid-from-savings.
The financial model of a classical Performance Contracting Solutions
P OTENTIAL F INANCING M ECHANISM

Equity Capital for ESCOs
RDPT (Special Purpose Mutual Fund Type)

Venture capital for corporate and/or project equity
Guarantee Fund
Leasing
Payment Security Mechanism
Mechanism to secure the cash flows from energy savings
for debt service

Streamlined (Program-based) approach for small projects
Development of standardised project approval parameters
that mitigate risks on a portfolio basis
A LT 1 : P UBLIC S ECTOR
International Institution
Repayment Loan Exec Agency loan PSM Repayment Guarantee Mechanism loan Lenders PSM Repayment Small Projects EE Projects (large) ESCO
GOI
A LT 2 : P RIVATE S ECTOR
International Institution
Fees/int Credit Guarantee loan Exec PSM Agency Repayment
GOI
EE Projects (large) ESCO
Guarantee Mechanism (unfunded) loan Lenders PSM Repayment Small Project(s) (Borrower)
G UARANTEE
FUNDS
Objective: Encourage EE lending through subsidized credit risk of bank

Advantages:
Alleviate barriers: collateral requirements, high risk of new technologies, risk of long-term lending Build bank capacity in EE loans
Work best:
Banking sector well developed and liquid

Risk of EE loans is main barrier Sufficient demand for loan financing
EQUIPMENT SUPPLIER CREDIT & EQUIPMENT LEASING

How it works:
Supplier designs and implements project & measures performance

Equipment supplier credit:

Customer owns equipment Customer pays lump-sum or over time based on energy savings
Equipment leasing:

Supplier owns equipment until full repayment Customer pays lease payments
A CTION
LINES TO FOSTER
ESCO
MARKET DEVELOPMENT
Standardize contracts for ESCOs.
Standardize measurement and verification for ESCO projects.

Conduct ESCO demonstration projects. Promote energy performance contracting in SOEs and government buildings. Develop a third-party financing network. Establish an equipment-leasing organization.
Strategy to strengthen the ESCO industry

1. Promotion Outreach and education to increase awareness of the benefits of performance contracting financial institutions, energy end users (particular associations) manufacturers and distributors
2. Strengthen the offer of ESCOs by

Establishing a Loan Guarantee Fund Estblishing Special Fund (RDPT)
Help establish a financing mechanism that will allow ESCOs to bundle several projects and reduce transaction costs
Establish a line of credit to finance projects
S TRATEGY TO
STRENGTHEN
C ONT....
Foster establishment of strategic alliances to To assist Indonesian ESCOs to access international financing more easily and increase their equity after sharing the debt with the international counterpart
Help
build local capacity by transfer of know how
WASTE WATER FLOW CHARTS - PULP AND PAPER EE PROJECT *)

WASTE WATER INFLUENT
Flocculation
Primary Clarifier
Cooling Tower
Equalization Tank
Biogas Flare
REACTOR
Conditioning Tank Anaerobic Effluent to Aerobic
BOILER ENGINE
ELECTRICITY TO PROCESS
Aerobic Treatment
RIVER
ESCO Conservation Benefit s : Case WWT-Plant No. 2 IKS a. New Electricity Supply b. Saving electricity of Aerobic Treatment c. Saving CO2 emission CDM d. Etc
KEY POINT INFORMATIONS :

Waste Water Quantity = 40,000 m3 per Day Est. Biogas generated at 30,000 Nm3/day (max), (corresponding approx 810 GJ/day of Heat , eqv. to 240~360 ton LP steam/day.) Est. Electricity Saving Gains = 20 MwH per Day Est. New Electricity supply from Engine = 2000-2500 Kw Est Electricity Cost = US$ 80 / MwH Est. Steam Cost = 8~9 USD/GJ Est CO2 Saving 100,000 Ton per Year CDM , Est. price at 10~15 Euro per ton Est. Project Cost = US$ 15 20 Million *)
*) Subject to further Detail Study
ESCO FLOW CHARTS - PULP AND PAPER ESCO PROJECT
ENERGY SAVING FACILITIES

During The Contract Period
Facilities Operator (Esco Team , Joint Team w Client or Outsource)
Client Self Fin 30% as down payment, by progress claims, majoring drawn after commissioning *)
Installment based on Shared Saving Model, secured by CAMA (Cash Management Agreement)
Measure ment and Verificati ons
Service Contract Facilities Installation Operator Payment of Service Fee
FINANCIAL INSTITUTIONS OFFSHORE ESCO PARTNER
ESCO (ESPC)
Ownership of EE Main Facilities Attractive IRR under International Agreement
Incentive / Subsidies possible obtained from GOI (subject to Regulations) *) Client Option for Earlier ESCO Period and Purchase ESCO Asset , such as with Bank Refinancing *)
Constructions Work Company Equipment Manufacturer
*) To Be Discussed, prior to shorter ESCO Period
RESUME FEASIBILITY STUDY REKOMENDASI PENGHEMATAN ENERGI

FEASIBILITY STUDY NO. PABRIK GULA JENIS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
KREMBOONG PESANTREN BARU LESTARI GEMPOLKREP NGADIREJO KEDAWOENG ASEMBAGOES PRADJEKAN PAGOTTAN SOEDHONO REDJOAGUNG KREBET BARU KARANGSUWUNG JATITUJUH JUICE HEATER BOILER VACUUM PAN SISTEM METERING ELMO VSD PUTERAN BOILER BOILER BAGASSE DRYER BOILER BAGASSE DRYER BAGASSE DRYER BOILER BAGASSE DRYER EVAPORATOR TERSANA BARU MESIN UAP KE TURBIN UAP 6 unit @ 100 kW 80 ton/jam uap 70 ton/jam uap 40 ton/jam bagasse 28 ton/jam uap 40 ton/jam bagasse 24 ton/jam bagasse 40 ton/jam uap 20 ton/jam bagasse 100 ton/jam NE 450 kW (BHP) 12,5 milyar 50 milyar 40 milyar 3,2 milyar 20 milyar 3,1 milyar 2,5 milyar 12,3 milyar 2 milyar 10 milyar $791.826
PARAMETER KEEKONOMIAN INVESTASI

300 juta 39 milyar 9 milyar 2 milyar
KAPASITAS
80 ton/jam NE 66 ton/jam uap 40 ton/jam NK
IRR
14% 26 21% 45% 12% 14% 24% 13,3 19% 25% 10% 49% 17% 29% 10% 13
PI
1,9 4,0 4,2 9,9 1,3 1,9 4,3 1,7 2,6 3,7 1,3 14 2,2 4,7 1,4 1,4
POT (tahun)
7,9 3,8 6,9 2,0 9,0 7,9 0,2 8,4 5,8 4,1 10 1,7 6,8 3,3 12,8 8,7
KETERANGAN
Layak; Direct contact juice heater Layak. Layak; Penggantian VP no.1 dan 2 Layak; Diseluruh stasiun Simulasi. Layak; Puteran high grade Layak; Ganti boiler TR ke boiler TM Layak; Boiler eksisting efisiensi rendah Layak; Exclude pneumatic system Layak; Ganti boiler TR ke boiler TM Layak; Exclude pneumatic system Layak; Exclude pneumatic system Layak; Ganti boiler TR ke boiler TM Layak; Exclude pneumatic system Simulasi. Layak.
MODEL PEMBIAYAAN
CONTRACT : Consortium + CLIENT
EXECUTION
PT. INDRA KARYA Project Consultant SCHNEIDER INDONESIA Project Management and Implementation
BUSINESS MODEL
SCENARIO 1 : Shared Shavings 1. Client 20 - 25 % 2. Consortium 75 - 80 %
SCENARIO 2 : 1. DP : 30% 2. Leasing 70 % Duration 3 - 5 Years
CLIENT Targeted Segment Targeted Saving Saving Contract Duration
: : : :
Textile Company Motor for Fan and Pump 25 - 30 % Rp.28.500,000 / Months Client 30 % : Rp. 8.450,000 / Months , ESCO 70 % : Rp. 20.050.000 : 36 Months
C ONCLUSION
Many ESCO opportunities around, and becoming bigger and complex in the near future Need to establish financial mechanism
Overcome barriers through sinergy
THANK YOU
www.apkenindo.com

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DEVELOPING ESCO IN INDONESIA

P HASES OF D EVELOPMENT: O PPORTUNITIES R EALIZATION

Data Information Knowledge Action

ESCO M UST M ANAGE R ISKS

P OTENTIAL F INANCING M ECHANISM

RDPT (Special Purpose Mutual Fund Type)

Mechanism to secure the cash flows from energy savings

for debt service

Development of standardised project approval parameters

that mitigate risks on a portfolio basis

EE Projects (large) ESCO

Objective: Encourage EE lending through subsidized credit risk of bank

Banking sector well developed and liquid

EQUIPMENT SUPPLIER CREDIT & EQUIPMENT LEASING

Supplier designs and implements project & measures performance

Standardize contracts for ESCOs.

Standardize measurement and verification for ESCO projects.

Strategy to strengthen the ESCO industry

2. Strengthen the offer of ESCOs by

Establishing a Loan Guarantee Fund Estblishing Special Fund (RDPT)

build local capacity by transfer of know how

WASTE WATER FLOW CHARTS - PULP AND PAPER EE PROJECT *)

Conditioning Tank Anaerobic Effluent to Aerobic

KEY POINT INFORMATIONS :

*) Subject to further Detail Study

ESCO FLOW CHARTS - PULP AND PAPER ESCO PROJECT

ENERGY SAVING FACILITIES

Facilities Operator (Esco Team , Joint Team w Client or Outsource)

Service Contract Facilities Installation Operator Payment of Service Fee

FINANCIAL INSTITUTIONS OFFSHORE ESCO PARTNER

Constructions Work Company Equipment Manufacturer

*) To Be Discussed, prior to shorter ESCO Period

RESUME FEASIBILITY STUDY REKOMENDASI PENGHEMATAN ENERGI

PARAMETER KEEKONOMIAN INVESTASI

SCENARIO 1 : Shared Shavings 1. Client 20 - 25 % 2. Consortium 75 - 80 %

SCENARIO 2 : 1. DP : 30% 2. Leasing 70 % Duration 3 - 5 Years

CLIENT Targeted Segment Targeted Saving Saving Contract Duration

Overcome barriers through sinergy

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