Cambodia’s First Utility-scale Solar Plant(or a history of solar power financing in SE Asia in 10 minutes)

Shuji Hashizume, Senior Investment SpecialistAsian Development Bank1 Feb 2017

Renewable EnergyDeveloping sources of renewable energy and encouraging energyefficiency

Sustainable agribusinessPromoting environmentallyfriendly food production,processing, and distribution

HealthSupporting private providersof high-quality and affordable health care

InfrastructureCatalyzing economic growth and social equity via conventional energy, waste, water, transport, and telecommunications facilities

Finance & capital marketsProviding better access tohigher-quality financialservices across Asia’sdeveloping markets

EducationBuilding human capitalthrough the expansion ofbasic and higher education services

ADB Private Sector Operations Department (PSOD) - Key Sectors of Focus

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Debt

Equity

DonorFunding

Technical Assistance

Instrument Typical Size Typical terms

• 7 years (corporate) to 15+ years (project)

• LIBOR / ADB cost of fund in local currency + credit spread

• Security on capex financed

When is it relevant?

• Established company with large balance sheet, strong cash flow

• Possibility to mobilize cofinancing under B-loan or risk participation

• 25% ownership maximum• Board seat• Minority protection rights• Put on the parent company

• Growing company in a pre-IPO or pre-trade sale situation

• Long term loan at concessional interest rate to be “blended” with ADB financing

• First loss cover

• Whenever donor funds managed by ADB are available

• Applicable for climate mitigation and adaptation projects or low-income countries

• For project preparation TA, reimbursable at closing

• For capacity development TA, non-reimbursable grant

• For projects in need of additional, concessional financial assistance (for example, technical assistance to contract farmers)

$10M--$250M

$2M--$75M

$3M – $40M

$0.5M – $1M

PSOD’s Products and Services

2

Guarantees$20M--$250M (PCG)

$400M (PRG)

• Partial credit guarantees: market based, fees based off lenders’ margin

• Political risk guarantees: market based, fees based off reinsurance market

• Where other lenders are more efficient than ADB in (i) mobilizing local currency, or (ii) reaching target customers (partial credit guarantees)

• In frontier markets (political risk guarantees)

PSOD Approvals and Cofinancing since 2010 Commitments as of 31 December

OCR Approvals $, billions $, billions

PSOD’s Operations, 2010-2016

3

Parallel Debt & Equity

B Loans

Trade & Supply Chain Finance

Guarantee Cofinancing

Official Cofinancing

1.6 1.7 1.81.6

1.9

2.6 2.5

2010 2011 2012 2013 2014 2015 2016

Risk Transfers

2010 2011 2012 2013 2014 2015 2016E

2.3

4.2

6.0

2.9

4.8

5.6

4.8

4.3 4.4 4.5 4.65.1

5.6

6.9

2010 2011 2012 2013 2014 2015 2016E

Outstanding Balance Undisbursed Commitments

5.35.5

6.6

6.2

7.2

7.9

8.7

PSOD’s 2016 Approvals, by Industry Sector PSOD’s 2016 Approvals, by Geography

PSOD’s Operations in 2016, At-a-Glance

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$2.5billion

South Asia $865 million

35%

Southeast Asia

$664 million 27%

Central and West Asia

$601 million23%

East Asia $345 million

14%

Regional $27 million

1%

$2.5billion

$2.5billion

Other Energy$900 million

35%

Clean Energy$614 million

25%

Finance$593 million

24%

Water and Other Urban

Infrastructure Services

$200 million 8%

Agriculture$145 million

6%

ICT $50 million

2%

$2.5billion

50 projects$8.0B of direct ADB assistance

ADB Private Sector in E&SE Asia (2010-2016)Approvals*

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Beijing

n Renewables/Efficiencyn Water/Sanitationn Conventional Energyn Social Infrastructure

n Telecom/ICTn Agribusinessn Urban/Transport

Multi-sector

Transaction Focus

People’s Republic of China ($3,674m)

nChina Gas Phase IIIn Jilin Wind nSonghua River Basin nMunicipal Water (CWA)nAgricultural and Municipal WTE nDynagreen WTE nSonghua River Basin Phase 2 nTianjin Cold Chain Devt

n East Jakarta Water n Sarulla Geothermal n Rantau Dedap Geothermal

Indonesia ($1,282m)

Myanmar ($1,027m)n Connectivity Infra Devtn Yangon Urban Renewal

& District Cooling n Mingyan Natural Gas Power n Nationwide Telecom n Telecom Towers

Thailand ($1,051m)

nBangchak Solar PowernSolar Power Project (NED) nNong Saeng Natural Gas-fired PowernAyuthaya Natural Gas-fired Power nProvincial Solar nTheppana Wind nCentral Thailand Solar nSubyai Wind nNE Thailand Wind nDistributed Commercial Solar Power nGrid-parity Rooftop Solar

n Mactan-Cebu Airport n Burgos Wind n Tiwi-MakBan Geothermal

Green Bonds

Philippines ($317m)

Pacific ($49m)

Regional ($45m)

n SE Asia Energy Efficiency n Distributed Energy Storage

(Fluidic)

50 projects$8.0B of direct ADB assistance

Cambodia ($20m)n Spice Value Chainn Cambodia solar

Lao PDR ($566m)n Nam Ngum 3 Hydropowern Nam Ngiep 1 Hydropower

nUrban-Rural Water (CWA II) nWastewater Reuse nChina Gas Phase III nGreenhouse (Le Gaga) nRural Smart Wastewater nSME Industrial Wastewater nWestern Counties Water n Integrated Wastewater

n Bemobile Expansion

n Muara Laboh Geothermaln Tangguh LNG Expansion

*Figures reflect total ADB approvals (OCR and other)

5

6

Best Project FinanceDeal in Asia

Asia Power Deal of the Year

Asia-Pacific Power Deal of the Year

Asia Project Finance Deal of the Year INTERNATIONAL

FINANCIAL LAW REVIEW

Best Project Finance Deal

Best Deal of the Year

Asia Project Finance Deal of the Year

SEAsia Project Finance Deal of the Year

Asia Power Deal of the Year

Asia-Pacific TransportDeal of the Year

Asia-Pacific Deal of the Year

Best Project Financing in Asia

Asia-Pacific RenewablesDeal of the Year

Asia-Pacific HydroDeal of the Year

Project Finance Dealof the Year

Project Finance Deal of the Year

Asia-Pacific PowerDeal of the Year

Best Project Financing

Asia-Pacific WindDeal of the Year

Best Deal of the Year

Asia Project Finance Deal of the Year INTERNATIONAL

FINANCIAL LAW REVIEW

Deals of the Year

Debt Market Deal of the Year (Midsize)

Asia-Pacific PPPDeal of the Year

Landmark Infrastructure Deals: Projects in E&SE Asia

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Nationwide Telecommunications Project (Myanmar, 2014)

Mactan-Cebu Int’l Passenger Terminal Project (Philippines, 2015)

PRC Wastewater Treatment and Reuse Project (PRC, 2015)

Sarulla Geothermal Power (Indonesia, 2014)

Nam Ngiep 1 Hydropower (Lao PDR, 2014)

Burgos Wind Power (Philippines, 2014)

Dynagreen Waste-to-Energy(PRC, 2013)

Ayudhaya Natural Gas Power (Gulf U-Thai) (Thailand, 2012)

NED Solar - Solar Power Project Thailand (Thailand, 2010)

Nam Theun 2 Hydropower (Lao PDR, 2005)

Approvals (deal count)

Sou

thea

st A

sia

East

Asi

aP

acif

ic

PRC

Mongolia

Thailand

Indonesia

Laos

Cambodia

Malaysia

Myanmar

Philippines

Regional

Pacific

2007 2008 2009 2010 2011 2012 2013

Transaction (including CTF and B-loans)

B-loan expansion approval

20152014 2016

4 4 5 5 4 8 5 11 8 9Total

Broad Regional Coverage

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NED Solar Power Project (2010)ADB Assistance: $63 million equivalent loan inThai Baht

Co-financing: $2 million grant from ADB’s CleanEnergy Financing Partnership Facility (CEFPF)

Sponsor: CLP Group, Mitsubishi, and EGCO

Key Features: First large (73MW), utility-scalesolar power generating facility in SoutheastAsia. ADB’s first forward starting swap. 5-yearautomatically renewable power purchaseagreement with Electricity GeneratingAuthority of Thailand.

Development Impact: Diversifies Thailand'senergy mix by broadening production andconsumption of renewable energy. Strengthensenergy security and reduces reliance on fossilfuels.

$ = US dollars.

It all began in Thailand with a grant…

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ADB AssistanceADB loan Thai Baht-denominated loan for $63 million equivalent (25% of project cost) 18 years tenor, back-ended equity injection, non-recourse project financing Attractive fixed rate in Thai Baht covering all disbursements and locked-in over

the entire 18 years tenorADB grant $2 million grant from ADB’s Clean Energy Financing Partnership Facility (CEFPF)

to cover any contingency costs

Points of Interest

First large, utility-scale solar power generating facility in Southeast Asia

CEFPF grant component of investment- $2 million covering a portion of the contingency financing in the event that it has to be drawn down.

Contingency funds cover risks that are directly related to total project capital expenditure, which are high for renewables - resulting in incremental risks and constitute a barrier to Project financing/ implementation.

NED Solar Power Project (contd.)

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Project Features

44.5 MW gross capacity at a single site in Ayutthaya province

Multicrystalline photovoltaic technology

5-year automatically renewable PPA with EGAT under the SPP program and with PEA under the VSPP program

Adder incentive (feed-in tariff) of B8 per kWh for 10 years from COD

Thai Baht-denominated loan for $134 million equivalent

Corporate finance, full-recourse to Bangchak Petroleum’s balance sheet

Bangchak Solar Power Project (2010)

2nd project in place but it was corporate finance…

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Project Features Sponsor: Bangchak Petroleum

Total capacity of 50 MW (gross) using multicrystalline PV technology, across 2 sites in Chaiyaphum & Ayutthaya

4 standard (5-year automatically) renewable energy PPAs with PEA under the VSPP program Adder incentive (feed-in tariff) of B8 per kWh for 10 years after COD

ADB Assistance

Thai Baht-denominated loan for $25.2 million equivalent & $12.6 million

(CTF concessional loan), 18-year tenor

Limited-recourse project finance basis

ADB's first private sector CTF project

Provincial Solar Power Project (2012)

Then there was CTF…

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$ = US dollars.

Central Thailand Solar Power Project (2013)

ADB Assistance: $53 million loan

Co-financing: $33 million co-financing loanthrough the Clean Technology Fund

Sponsor: EGCO Holding Co., Ltd.

Development Impact: The solar powerproject, ADB’s fourth in Thailand, has threemain sites in Nakhonpathom and Suphanburiprovinces, which have been developed underThailand’s “very small power producer”program that buys renewable energy frompower plants to provide clean energy to thegrid. With the new solar power plants, morethan 66,000 tons of carbon dioxide equivalentemission will be avoided every year duringthe first 10 years of operations.

Then there was CTF… (contd.)

1212

Distributed Commercial Solar Power (2016)

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$ = US dollars

Client: Stumpf Energy.ADB Assistance: $47m loan in baht.Key Features:• ADB’s first investment in grid-parity solar in Thailand.• Rollout and operation of multiple solar PV installations on rooftops of commercial and/or

industrial buildings owned or leased by host companies in Thailand up to an aggregate capacityof 100 MW.

• The project will demonstrate the viability of the business model of solar projects on rooftops ofcommercial and industrial buildings that do not require feed-in-tariff subsidies in Thailand. Thiswill lead to unlocking of vast potential to scale up distributed solar photovoltaic installations,particularly in Thailand’s growing manufacturing sector.

• The project will contribute to the diversification of energy mix by adding renewable energycapacity, strengthen energy security, and reduce reliance on fossil fuel in Thailand.

Now we have reached grid parity for solar rooftop in Thailand…

Grid-Parity Rooftop Solar (2016)

$ = US dollars

Client: Weng Group and Sunseap Group.ADB Assistance:: $44m project loan in dollars or baht.Key features:• ADB’s second investment in grid-parity solar in Thailand.• Rollout and operation of multiple solar PV installations on rooftops of commercial and/or

industrial buildings owned or leased by host companies in Thailand up to an aggregate capacityof 100 MW.

• The project will demonstrate the viability of the business model of solar projects on rooftops ofcommercial and industrial buildings that do not require feed-in-tariff subsidies in Thailand. Thiswill lead to unlocking of vast potential to scale up distributed solar photovoltaic installations,particularly in Thailand’s growing manufacturing sector.

• The project will contribute to the diversification of energy mix by adding renewable energycapacity, strengthen energy security, and reduce reliance on fossil fuel in Thailand.

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Now we have reached grid parity for solar rooftop in Thailand… (contd.)

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• Stable regulatory framework

• Well-developed PPA regime underpins private sector participation in power sector

• Strong offtaker credibility (for utility-scale solar)

• Renewables incentives encourage investment in new technology space

• Long-term financing improves financial viability

• First as a grant, then CTF as a concessional loan with long tenor

• Now it can be grid parity

Project Capacity (MW)

Solar Power Project (NED) 73

Bangchak Solar Power Project 44

Provincial Solar Power Project 50

Central Thailand Solar Project 57

Distributed Commercial Solar Power Project 100

Grid-Parity Rooftop Solar Project 100

Total 424

ADB’s Thailand Portfolio in Solar

Summary of the success in Thailand

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Opportunities

Promising resource: average irradiation of 5 kWh/sqm per day, technical potential estimated at 8.1 GW

Energy shortage: reliance on diesel and imports from neighboring countries in many areas which are often expensive and unstable, rapid increase in demand

Global trend: growing pressure following Paris Agreement that developing countries should also do more renewable energy

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Challenges

Cost: renewable energy used to be expensive as compared with other conventional options

Policy: government priority to improve electrification rate and increase generation capacity with “no subsidy” principle (i.e. no FIT)

Grid integration: national grid still being build and its capacity to take volatile generation from RE remains a question

Commercial financing: securing long-term commercial financing remains a challenge due to perceived political risks and nascent local banking sector

So Cambodia, finally… Where are we now?

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Project feature and timeline RFP for 10 MW solar power project in Bavet near border with Viet Nam issued

in February 2016

National grid has not reached the area, relying on import from Viet Nam. Acute energy shortage for SEZs

20-year take-or-pay PPA with EDC

First utility-scale solar, and first international competitive tender for renewable energy in Cambodia

Interest from international investors from Thailand, France, and Singapore

A consortium led by Sunseap from Singapore won the bid at a non-escalating tariff of $0.091/kWh

PPA awarded in August 2016

Smaller in size but no issue of grid integration

Completion expected by June 2017, scheduled COD in PPA August 2017

Solar Project in Bavet – the first utility-scale solar power project in Cambodia

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Cambodia Solar Power (2016)

$ = US dollars

Client: Sunseap Group and SchneiTec.ADB Assistance: $3.6m loan; $3m B-loan.Cofinancing: $3.25m loan by the Canadian Climate Fund for the Private Sector in Asia (CFPS) underthe Clean Energy Financing Partnership Facility.Key features:• The project is the first utility-scale solar power plant in Cambodia, and the first competitively

tendered renewable energy IPP project in the country.• The project will increase the electricity supply to meet the demand, address the problem of

imbalance of electricity supply between the dry and wet seasons, and improve the reliability andstability of Cambodia’s power supply.

• The tariff is highly competitive at below average supply cost without FIT or any othergovernment subsidy, evidencing solar’s grid parity.

Solar Project in Bavet (contd.)

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$ = US dollars

ADB Assistance and Value Addition ADB was engaged early in the bidding process and contributed to a successful

bid of the project in a transparent manner and at a competitive price 18-year limited-recourse project financing ADB also mobilizes an international commercial bank loan in a market where

long-term financing remains a challenge The concessional loan from the Canadian Climate Fund for the Private Sector in

Asia a key (senior pasi-passu but with concessional interest rate)

Solar Project in Bavet (contd.)

Takeaways for Cambodia Solar Sector and SREP Relevance Government/EDC needs grid-parity tariff for renewable energy due to its fiscal

constraint and “no subsidy” principle Bavet Project evidences this can be achieved for solar, however a concessional

loan is still needed (similar to CTF stage in Thailand), hence SREP fund is very much needed

It is expected that this project will unlock the solar potential in Cambodia with more projects in larger scale, and ADB PSOD plans to mobilize SREP for these

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