Milo Sjardin - Financing Energy Access

7/31/2019 Milo Sjardin - Financing Energy Access

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CLEAN ENERGY FORUM ASIA, JUNE 2012 1/ / / /

/ / / / / / / / / / / / / / / / / / / / / / / / / / / /

FINANCING ENERGY ACCESS

ASIA CLEAN ENERGY FORUM

MANILA

4 JUNE 2012

MILO SJARDIN


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TOP 50 MANDATED LEAD ARRANGERS FOR CLEANENERGY PROJECT FINANCE, 2011 ($m)

Source: Bloomberg New Energy Finance

Government/Agency21,381

Other1,533

Europe16,976

Japan 3,660

US 3,539

Commercialbanks24,845

Other 670

Total

48,429

European banks hitby debt crisisJapanese and USbanks more active

Basel III rules areslowly beingimplemented

Loan tenors willshorten to meet funding

requirement rules

Rates will rise due toincreased capitalrequirements

2012


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SOUTH-EAST ASIA, NEW ASSET FINANCE ONLY,200411 ($BN)


Note: Includes corporate and government R&D, and small distributed capacity. Adjusted

for re-invested equity. Does not include proceeds from acquisition transactions

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2004 2005 2006 2007 2008 2009 2010 2011 2012

Q1

Malaysia

Philippines

Vietnam

Indonesia

Thailand

$2.8bn? =

75% yoygrowth Thailand very

attractive due to hightariffs, long termtarget, local financingand good grid access

Malaysia isattractive, butdevelopment iscapped

Indonesia

particularly interestedin geothermal, butimproving for solarand wind

KEY POINTS


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WHAT HAS WORKED

Combination of attractive short-term incentives with long-termenergy goals to provide more policy certainty

Provision of power purchase agreements (PPA) with good

default protection (eg, payment security fund)

Electricity market structure that is open to independent power

producers and allows for easy access to the grid

Strong involvement of domestic banking sector (Thailand) as

they are more comfortable with country risks and

multilateral/bilateral financing (eg, Indonesia)

POLICY

POWER

MARKET

FINANCE

PPA


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0.1

1

10

100

1 10 100 1,000 10,000 100,000 1,000,000

historic prices experience curve Chinese c-Si module pricesThin-film experience curve First Solar thin-film module cost

1976

1985

2003

2006

2012

2012

THE PV MODULE EXPERIENCE CURVE, 19762012 ($/W)

Source: Paul Maycock, Bloomberg New

Energy Finance, FSLR filingsNotes: Inflation adjustment using US PPI, R2 of c-Si regression = 0.94, R2 of FSLR regression = 0.98

MW (log)

PRICES DROPPED 75%SINCE 2008, 45% IN 2011

2014: ANOTHER 25%?


7/20CLEAN ENERGY FORUM ASIA, JUNE 2012 7/ / / /

SOLAR SYSTEM PRICES IN DIFFERENT REGIONS ($/W)


Subsidy

reductions,competition,deployment

c-Si module price

$2.83

$1.01

$5.20

$2.70

California host-owned

residential $7.95

$5.97

$6.62 Japan residential $6.69

0

1

2

3

4

5

6

7

8

9

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12

Germany (100kW or less)



OFF-GRID: THE TRUE COST OF DIESEL


$0.40/kWh Operational cost of fuel alone

770M People who pay $1/litre+ for diesel fuel

5-12% Annual growth of the off-grid diesel market

150GW Off-grid diesel generation market

$409billion Cost of fossil fuel subsidies to governments



0%

5%

10%

15%

20%

25%

30%

0.3 0.5 0.7 0.9 1.1 1.3

DIESEL GENERATION VERSUS OFF-GRID HYBRID PV-DIESEL SYSTEM

Sources: Bloomberg New Energy Finance, marketplayer interviews, Deutsche Gesellschaft fr

Internationale Zusammenarbeit (GIZ)

Assumptions: hybrid diesel generator operates for 12.5 hours per day on 50 cloudy days peryear, battery bank sized to night time energy consumption, insolation 1400 kWh/kW/year, allprices are assumed constant in real terms (see associated research note for more details).

$/litrediesel

IRR

Real IRR$/litreSouth-East Asia

$/litreLatin America

$/litreSub-Saharan

Africa

Emergingmarkets loan


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0%

5%

10%

15%

20%

25%

30%

0.3 0.5 0.7 0.9 1.1 1.3

REFLECTING THE TRUE COST: INDONESIA

Sources: Bloomberg New Energy Finance, marketplayer interviews, Deutsche Gesellschaft fr

Internationale Zusammenarbeit (GIZ)

$/litrediesel

IRR

PT PLNBond 10.4%

$/litre

Cost to IndonesianGovernment

Real IRR

Assumptions: hybrid diesel generator operates for 12.5 hours per day on 50 cloudydays per year, battery bank sized to night t ime energy consumption, insolation 1400kWh/kW/year, all prices are assumed constant in real terms (see associated researchnote for more details).

Emerging

markets loan


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THE OPPORTUNITY FOR OFF-GRID SOLAR


150GW Size of off-grid diesel generation market

660GW PV capacity to replace that diesel market

860GWh Of batteries to make PV storage systems

80%% of lead acid battery manufacturing

capacity 860GWh represents

Solar capacity alone worth $2 trillion


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COPYRIGHT AND DISCLAIMER

This publication is the copyright of Bloomberg New Energy Finance. No portion of this document may bephotocopied, reproduced, scanned into an electronic system or transmitted, forwarded or distributed in any

way without prior consent of Bloomberg New Energy Finance.

The information contained in this publication is derived from carefully selected public sources we believe are

reasonable. We do not guarantee its accuracy or completeness and nothing in this document shall be

construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment of

the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg New

Energy Finance. The opinions presented are subject to change without notice. Bloomberg New Energy

Finance accepts no responsibility for any liability arising from use of this document or its contents. Bloomberg

New Energy Finance does not consider itself to undertake Regulated Activities as defined in Section 22 of the

Financial Services and Markets Act 2000 and is not registered with the Financial Services Authority of the UK.


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THANKS

MILO SJARDIN, [email protected]


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OFF GRID POPULATION CONCENTRATION IN AFRICA ANDASIA

Source: National Geophysical Data

Center, Bloomberg New Energy

Finance.

120100806040200

Off-grid population concentration(persons per sq-km)

SIX HIGHEST OFF-GRID POPULATIONS

COUNTRY OFF-GRID POPULATION (m)

India 405

Bangladesh 95

Indonesia 81

Nigeria 81

Pakistan 70

Ethiopia 67

Annualspend onfuel-basedlighting inAsia:$23bn

Annual spend on fuel-basedlighting in Africa: $17bn


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GLOBAL AVERAGE LCOE FOR RENEWABLES, ($/MWH)

Source: Bloomberg New Energy FinancePrices are in nominal dollars

0

50

100

150

200

250

300

350

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012

Wind - offshore

Wind - onshore

Natural gas

Coal

Utility-scale

Solar PV (cSi)(cSi tracking)


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SOUTH-EAST ASIA, NEW ASSET FINANCE BY COUNTRY,200411 ($BN)




2.7

2.3

1.1 1.0

0.2

-0.1%

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Thailand Indonesia Vietnam Philippines Malaysia

SEA % of world


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SOUTH-EAST ASIA, NEW ASSET FINANCE BY FINANCIER,200411 ($BN)




54.5

22.7

14.7

5.8

2.3Development banks

SEA commercial

banks

Western banks

Japanese

commercial banks

Multinationals

31.1

29.4

17.9

14.7

6.92Japan

SEA

Multilateral

International

Other

Major financiers by type of organisation Major financiers by country


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0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

Solar Wind Biomass Geothermal

LCOE Tariff Mid-LCOE

THAILAND LCOE AND RENEWABLE SUBSIDY ($/KWH)

Adder for solar,

wind, biomass,not geothermal

Solar and windtariff attractive

relative to LCOE

No project sizelimitation on solar

Costs incorporate10% IRR and

exclude grid

connection costs

Notes: Tariff only appears where available. Solar represents PVCsi technology, Wind represents onshore, Biomass covers biomass incineration, gasification and municipal waste-to-energy technologies, Geothermal represents geothermal flash technology.


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INDONESIA LCOE AND RENEWABLE SUBSIDY ($/KWH)

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

Solar Wind Biomass Geothermal

LCOE Tariff Mid-LCOE

FiT for geothermalcapped, but likely

to increase

FiTs for wind andsolar estimated

solar likely to be

higher

Small generationtariff for other RE

varies by location,

grid connection

Project size limitedto 10MW under

small gen tariff


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INDIA: CHASING SOLAR RETURNS


Note: Maharashtra and Gujarat have feed-in tariffs of INR 11.16/kWh ($0.21/kWh) and INR

10.37/kWh ($0.19/kW)respectively. Projects in Karnataka, Rajasthan and Orrisa are allocated on the

basis of competitive bidding with average rates of INR 8/KWh in Karnataka and Rajasthan and INR

8.5/kWh in Orrisa. We have assumed a 12 year repayment period with no moratorium in all cases

expect the first where interest rate of 8.5% is accompanied by15 year tenure and 1 year moratorium.

0%

5%

10%

15%

20%

25%

30%

35%

8.5

%(1

5years

tenu

re) 8

.5%

9.0

%

9.5

%

10.0

%

10.5

%

11.0

%

11.5

%

12.0

%

12.5

%

13.0

%

13.5

%

14.0

%

Maharashtra

Karnataka

Gujarat

Rajasthan

Orrisa

Costofdebt

Equity IRR

Many large projects onbalance sheet due tohigh cost of debt

Debt at 12-14%, but

can be 8-9% withmultilateral funds inclcurrency hedge

Counterparty risk,partly due to weakRPO enforcement

Lack of resource andperformance data, andlittle experience EPC

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