12 b03 idi,idi infrastructures indonesiafsreportingmeeting

7/28/2019 12 B03 IDI,IDI Infrastructures IndonesiaFSReportingMeeting

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Client Confidential Not to Be Distributed Outside Client Organization Without Prior IDI ConsentClient Confidential Not to Be Distributed Outside Client Organization Without Prior IDI Consent

Consultative Meeting on Reports of Joint CreditingMechanism Feasibility Studies 2012 in Indonesia

Small-scale Hydropower Projects

February 21, 2013


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Client Confidential1

Small Hydro Power Project

Project Site Location

Toba

Lake

PJ site

Site Location North Sumatra

Average Water Flow 21 m3/sec

Capacity Factor 62%

Generation Capacity 5MW * 2

Electricity Generation 57GWh/year

Project Information

Waterway

Headpond

Penstock

Powerhouse

Small Hydro Power Project Structure

Source: NEDO. Micro Hydro Power Installation Guide Book


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Project Outline (2)- IDIs Support Proposal Util izing Joint Crediting Mechanism

IDI proposes to utilize J apanese financial and technology support as well as application of simplemechanism for realizing better development of small Hydro & value of emission reductions.

IDIs Support Proposal

Creditworthiness ofthe developer

Few FinancialInstitution takingconstruction risk

Developer's lack ofexperience in smallhydro /underestimation ofengineering aspect

Severe cash flowwhen the repaymentof loan is huge

Issue #1 Issue #2 Issue #3 Issue #4

Financial SupportJ apanese Financial ProvidersIncluding Energy Fund SharingConstruction Risk withDevelopers

Joint Crediting Mechanism

Simple MRV

Positive Approach (eligibility)

Japanese TechnologyWell Experienced J apanese

Consulting Company Providing

Reliable Technology & Knowhow


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Project Outline (3)- Financial Support & Technology Support from Japan

Asset

SeniorLoan

Equity

Funding Gap

Asset

SeniorLoan

Equity

Equity orMezzanine

Financial Support

Possibility of J apanesefinancial support

Technology Support

Permit

Permit

Permit

PPA

Financing

Construction

Operation

Pre-F/S

F/S

Review of

Designs, etc

Equipment

Trouble

Possible application ofJ apanese technology &knowhow

Construction

Trouble

Senior lender can only provide about 70% of totalproject cost as senior loan in general

Developers need finance provider to fill the gap as

they may have project pipeline

Limit 70%

Need toredo surveys

/ designs

Some developers underestimate importance ofengineering, and end up redoing studies/designs

Experienced J apanese company involvement from

early stage will help successful development


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JCM draft MRV Methodology Proposed by IDI- Reference Scenario

Eligibility

Greenfield small hydro power project of 20,000 kW and under that is replacing gridand/or use of diesel power plant and equipped with meters for power generation= Positive Approach

Reference

Scenario(1)

Reference

Scenario

(2)

Reference Scenario can be (1), (2), or combination of (1) & (2)

GRID

Small Hydro

Power Plant

Operation ofExisting Power Plant

New Power Plant

OperationofExisting DieselPowerPlant

FactorySmall HydroPower Plant

Substitute for Grid

Substitute for Diesel


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JCM draft MRV Methodology Proposed by IDI- Reference Scenario Calculation

Reference

Scenario

(1)

Calculation

ElectricityGeneration(kWh/year)

EmissionFactor (Grid)(tCO2/kWh)

EmissionReduction

(tCO2/year)

Reference

Scenario(2)

Calculation

Electricity

Generation(kWh/year)

Efficiency

Diesel Power(GJ /kWh)

Emission

Reduction(tCO2/year)

Emission

Factor (Diesel)(tCO2/GJ )

Reference

Calculation

for F/S PJ

(1)5,000 kW * 2

GenerationCapacity

8,760h

Hours/year

62%

CapacityFactor

0.000748tCO2/kWh

EmissionFactor (Grid)

40,625 tCO2/y

EmissionReduction

Electricity Generation (kWh/year)

Substitute for Grid

Substitute for Diesel


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JCM draft MRV Methodology Proposed by IDI- Important Feature / Early Verification

Issuesto be

Addressed

Early Verification

Electricity Generated

for First Three Months(kWh/3months)

Electricity Generation

for the Year(kWh/year)

Emission

Reduction(tCO2/year)

ImportantFeature

Credit TransferMechanism

Up to G to GDiscussion on the

Design of mechanism

Risk of OverVerification

Early verification may estimatemore/less emission reductionthan actual amount for the year

Instead of having to wait one or two years for verification,

this methodology enables to have early verification and possibly early revenue


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Early Verification / Approach to Solve Issues Identif ied- In case of substitute for Grid

Start of

CommercialOperation Electricity generated:

(kWh/3months)

M1 M2 M3Water flow

monitored (m3/s)

Historical averageWater flow

MHA1 MHA2 MHA3

Emission(tCO2/year)

Possible Revenue Timing

within the same year

Coefficient k takes the minimumnumber of each month rate and 1

By monitoring 3 months of electricity generation and water flow,this methodology can estimate amount of emission for the year for verification

Emission per year

(tCO2/year)Electricity per year

(kWh/year)Conservative

coefficient (k)

Emission Factor(tCO2/kWh)

Using conservative coefficient reduces the risk of estimatingemission reduction more than the actual reduction amount

Year 1


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Why Early Verification & Possible Early Revenue for Developers Matter?

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Regular Repayment Schedule by the local banks

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Balloon Type Repayment Schedule

Interest

Principle

Interest

Principle

9 Regular repayment schedule by the local banks start with huge amount of repayment (Year 1)

making it difficult for developers to repay.9 There are some cases where Indonesian financial institution allows balloon type schedule.

9 However, it still creates refinance risk at the end year (Year 6).

9 Our proposed methodology helps developers by providing option to conduct verification within

the Year 1 and possibly receive revenue within the same year9 Therefore, credit revenue would help developers to finance their project, and the earlier the

revenue comes in, the more projects can be financed and developed.

Revenue line Revenue line


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Summary

Four issues regarding small hydro power developmentare identified based on thelocal stakeholders opinion and IDI assessment

IDIs support proposal addresses each issue by bringing J apanese finance support,

J apanese technology and J oint Crediting Mechanism.

IDI has met with more than 15 respectable developers, and their total capacityexceeds 100MW, which have potential to reduce emission of roughly 400,000tCO2/year

There are many more small hydro developers and projects in Indonesia, andIndonesia has abundant hydro resources that can be utilized for development

J CM scheme has the potential to push great number of small hydro power project

developments

Thank you

12 b03 idi,idi infrastructures indonesiafsreportingmeeting

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