Click to edit Master title style

Click to edit Master title style Rice Husk to Electricity

Power Generation from 100% Biomass in Cambodia A proposal for SOMA Group prepared through the

ORIX Global Leaders Programme, July 2013

ORIX Global Leaders Programme 2013

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Cambodia’s leading industrial conglomerate

with a focus on the country’s development

Japanese financial services group with a

presence in 34 countries

Hong Kong based leading provider of experiential executive learning

programmes

New entity set up under SOMA Group focusing on renewable

energy development in Cambodia

Background: Rice Industry in Cambodia

• Government aims to export 1 million tons of rice by 2015 (400% increase in 3 years)

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Massive increase in rice milling out put is expected in the coming years

0

200000

400000

600000

800000

1000000

1200000

2011 2012 2013 2014 2015

• Cambodia has significant biomass energy resources including rice husks.

• Exports of milled rice is expected to increase from 0.2 million tons in 2012 to 1 million tons by 2015 (A 400% increase in 3 years).

• At the same time, electricity tariffs are high and only 50% of Cambodians have access to power.

• Rural electrification is even lower, at less than 30%.

Biomass Energy in Cambodia

Rice husk biomass energy will exploit Cambodia’s skyrocketing rice production to electrify rural areas.

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Biomass Energy

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Biomass Power Generation Technology

• Existing solutions – Gasifier + Hybrid Diesel Engine

• SOMA Energy’s solution: 100% loose rice husk gasifier & genset

• Advantages of the new solution – loose rice husk: eliminates the need for

extra energy inputs through pelletising and gasification

– 100% diesel free: further reducing power generation costs required by users

– Byproduct: ash and bio-char, can be used as soil enhancer, potential to generate additional income for users and provide value to Cambodian agriculture

– Lower carbon emission: generally more environmentally friendly and provides potential opportunities in carbon offsets and credits

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The gasification process converts the feedstock, such as rice husks, into Producer Gas, ready to feed into the power generator

Biomass Power Generation Technology

If fully developed, the biomass gasification technology in Cambodia using rice husks has great potential to address the country’s energy security.

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Ankur Scientific Energy Technologies Pvt. Ltd.

GE-Waukesha VHP 5904

The retooled GE Waukesha gas engine is compatible with 100% synthetic gas produced from biomass gasification for power generation

Vision of SOMA Energy

• SOMA Energy strives to be a leader in renewable energy development in Cambodia and to be the catalyst for promoting biomass energy solutions

• SOMA Energy aims to be the pioneer in biomass power generation, therefore contributing to rural economic development and prosperity throughout Cambodia

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SOMA Energy is a renewable energy company

SOMA Energy Value Proposition • SOMA Energy is committed to providing the rural Cambodian population with

clean and low-cost electricity (compare to HFO) generated from renewable biomass gasification, to fulfill the growing demand for electricity

• SOMA power generation uses 100% loose rice husk – an agri-byproduct, turning agri-waste into electricity and reducing the overall consumption of diesel and HFO in power generation

• By providing access to affordable electricity, SOMA Energy is also playing a key role in promoting rural economic development

• SOMA energy projects supports the rice industry in Cambodia by providing affordable and stable source of electricity, stablising paddy supply for mills, reducing post-harvest wastage and leveling the seasonal rice price fluctuations

• By providing better drying and storage facilities (both energy dependent) and management services, SOMA intends to reduce wastage, prevent paddy from flowing to neighbouring countries through unregulated channels and increase the income of the rice farmers in Cambodia

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Key Stakeholder Analysis The key stakeholders that SOMA Energy needs to consider engaging include:

• Technical partners: Provider of gasifier (Ankur, SME Renewables), provider of power generator (GE)

• Financial Partners: corporate investors, PE firms, development agencies, banks, mutual funds

• Clients: rice mills, local grid operators and power distributors, local factories, local households, national grid

• Suppliers: rice mills (husk), rice traders (paddy)

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Supplier management with the mills to secure the supply of rice husks is key to SOMA’s stakeholder management

Biomass Energy Generation Challenges : • Supply chain management • Secure supply and transportation of

rice husks • Price volatility of feedstock • Lack of renewable energy policy and

incentives for producers • Limited access to financing • Expanding national electricity grid • High transportation cost relative to the

value of commodity

Biomass Energy in Cambodia

Policy environment and feedstock management are the main challenges facing Cambodia’s biomass energy industry

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Option #1: Rice Mill Installation (Schematic)

Local Electricity Distributor

Farmers

Husk + Reduced electricity Tariff Rice Mills

Grid

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Paddy

Industrial Electricity Users

Option #2: Remote Electrification (Schematic)

Farmers

Rice Mill

Grid

Power Generation

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Local Electricity Distributor

Industrial Electricity Users

Paddy

Husk

Option #3: Rice Storage & Electricity (Schematic)

Farmers

Rice Mill

Grid

<Power Generation> <SILO>

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Industrial Electricity Users

Paddy

Paddy

Husk + Reduced electricity Tariff

Local Electricity Distributor

Options IRR (10 years)

Net investment US$ mil.

Cumulative net income US$ mil.

1. Generation Unit at Rice Mill Cluster

13.9% 3.16 2.90

2. New Mill + Generation Unit

15.2% 6.34 6.39

3. Silo + Generation Unit 20.0% 7.90 10.9

Comparison of 3 Options Option #3 of building and operating silos presents the best rate of return among the three business models, but also requires the largest initial capital investment. Options #2 can be considered in areas rich in paddy but lacking in power, as well as alongside Option #3. Option #1 is suitable for regions with relatively higher concentration of existing mills.

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All three options provide a favorable IRR

Comparison of 3 Options Fincial

Performance

FeedstockStability

Social BenefitEase of

Operation

Least CapitalRequest

Option 1

Option 2

Option 3

Option 3 is recommended as it provides greatest overall benefit, in spite of requiring higher investment and technical expertise

Three options have been compared against criteria including financial and social benefits, as well as investment and key operational considerations

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Option #3: Financial Projection • Capital Investment Requirement: US$ 7.90 million • IRR: 20.0% in 10 years • Payback Period: 5 years • Expected annual revenue: US$ 13.88 million • Expected annual net profit: US$ 1.27-1.30 million

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2.00

4.00

6.00

8.00

10.00

12.00

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Mill

ion

USD

Accumulated Profit

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Risk Analysis and Mitigation: External Risks

Risk Type Description Likelihood Impact Risk Mitigation

Market Risk

Expansion of National Grid

High Medium

• Be aware of the future expansion plan of the national grid

• carefully select project sites to prevent clashing with grid in the next 5-10 years

Establishment of Secondary

Market for Biomass

High High

• Signing of long term captive contract with rice mills to secure supply of feed stock

• Targeting major rice producing provinces

• Locating the power plant close to source of feedstock (within 20-30 km radius)

• Investing in drying and storage facilities

Competition Medium Low • Diversification of business scope

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Risk Analysis and Mitigation: External Risks

Risk Type Description Likelihood Impact Risk Mitigation

Policy Risk

Current lack of regulation on

renewable energy

High Low

• Influence the government to make renewable-related policies

• Better cost-management to compete with traditional sources of power generation

Unfavorable policy change on biomass

energy solutions

Low Low

• Expand business into other renewable solutions and services

• Move from direct energy provider to energy services

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Risk Analysis and Mitigation: Internal Risks

Risk Type Description Likelihood Impact Risk Mitigation

Management Risk

SOMA lacking experiences

in power business

Medium Low

• Employ experienced staff to run and operate the energy business

• Acquire technical know-how from the technical partners i.e. GE, Ankur, SME to equip SOMA staff

Lack of financial

independence and

transparency

Medium Medium

• SOMA energy should be an independent entity from SOMA Group

• SOMA Energy should be responsible in keeping its own financial statements

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Risk Analysis and Mitigation: Internal Risks

Risk Type Description Likelihood Impact Risk Mitigation

Funding and Capital

Risk

Delay in recovery of investment

Medium High

• Strengthening cash flow to be in better position to deal with unexpected situations

• Secure some of the financial liabilities and obligation through insurance, etc.

Lack of sufficient funding

Medium Medium

• Increasing the financial transparency of SOMA Energy

• Establishment of robust financial and risk management policies

• Collaborate with international partners to explore various funding methods

Working capital

locked up in inventory

High High • Establishment of rainy day fund • Sourcing of extra credit lines

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Cambodian Biomass & SOMA Energy

• Cambodia can be a catalyst for new biomass energy solutions

• SOMA Energy can be a pioneer in rural economic development

• Renewable energy can develop before conventional energy infrastructure becomes entrenched

• Contact SOMA to get more details on investment or partnership opportunities

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The time for biomass energy is NOW

THANK YOU! សូមអរគុណ! Our team wishes the best for SOMA Group and Cambodia!