GEF/UNDP/DOE CBRED PROJECT“Philippines: Capacity Building to Remove Barriers to
Renewable Energy Development”
Presentation by :
Market Service CenterBusiness Planning & Development
Subcontract
Presentation to REIACDOE-AVR
September 27, 2005
REIAC Concerns1. Organizational Form of the Spin-Off Organization (SOO) a. Organizational Options
b. Fund utilization restriction/Retained Earnings c. Seed Fund
strategies for solicitation
2. Compatibility of Organizational Form of SOO with Provision of Services
3. Spin-Off Trigger Indices 4. Product Mix (services offered)5. Financial Projections for SOO
Strategies for Sustainability6. Transitory Provisions7. Contingency Plan
1. Organizational Form of the Spin-Off Organization
a. Organizational Options1. Government Corporation with Charter2. Government Corporation under the Corporation
Code3. Private Corporation (Stock Corporation)4. Private Corporation – (Non-Stock Corporation)5. Private Corporation – (Non-Stock, Non-Profit) a. Association b. NGO c. Foundation
a. Organizational Options1. Government Corporation with Charter
These corporations are created by an Act of Congress and their establishment will be a lengthy process; not a reasonable option.
2. Government Corporation under the Corporation Code
Its creation is a lengthy process as proven by the effort to establish the PNOC RE subsidiary.
It is subject to government control and political pressure and hence not attractive to target private RE sector clients.
3. Private Corporation (Stock Corporation) It is primarily organized for profit, hence its
management will be focused mainly on the interests of the corporation which will redound to its stockholders.
4. Private Corporation (Non-Stock) Donors may deduct 5-10% of their
contribution/ donation to non-stock corporations from their taxable net income
5. Private Corporation (Non-Stock, Non-Profit)a. Association - Organized for the benefit of its members - Will offer bias towards services that will benefit its
members - Interest of the private RE project developer may be
sacrificed and not served.
b. NGO - Organized for the advocacy of specific
ideals/interests and represent specific sector/s of society
- Interest of the private RE project developer may be sacrificed and not served.
c. Foundation Established to maintain charitable,
educational, scientific, etc. activities through extending grants or endowments, but may also include undertaking projects aimed at advancing the development of these sectors.
Donations made to a foundation will be deductible in full (100%) from the donor’s gross income. This privilege could attract more donors to the foundation than to a regular non-stock corporation.
Administration expense may not exceed 30% of the total expenses.
A Foundation is the most appropriate type of organization for MSC mainly for following reasons :
Not viewed as a competitor of the RE Industry
Can accept fund donations and projects from national, bilateral and multilateral donors/sources to help support its operation
Donors can deduct 100% of their donations/contributions from their taxable income
Conclusion of Organization Study
b. Fund utilization restriction/Retained Earnings
A foundation will have no retained earnings because it will use all of its funds for projects.
Administrative expenses may not exceed 30% of total expenses
b. Fund utilization restriction/Retained Earnings
Per DOST, there are accepted ways of allocating more funds for administrative costs. Specifically, this is done by considering portions of the admin cost as part of project implementation cost. Per DOST, this approach is widely used and have not encountered problems in compliance to the 30/70 restriction for funds allocation.
1. Conduct donors’ meeting to solicit required seed money of Php 1 MM and pre-operating expenses
2. Offer Funds (3 Funds) monitoring services to DOE for a fee which may include a commitment from DOE to allocate a portion of interests earned by the LGF for the required seed money and pre-operating expenses of the Foundation.
c. Financial Strategies for Sourcing SEED Fund of the Foundation
F in an ce an d A d m in is tra t ion
M an ag erK n ow led g e M an ag em en t
P ro jec t S u p p ort S ta ff
P ro jec t S u b c on trac to rs
P ro jec t M an ag er
M an ag erO p era tion s
M an ag erB u s in es s D eve lop m en t
E xec u tive D irec to r
B oard o f Tru s tees
Table of OrganizationDoc. No.: TO Rev. No.: 0Effective Date:Copy No.: Page 1 of 1
Controlled Copy Uncontrolled Copy
MSCF
2. COMPATIBILITY OF ORGANIZATIONAL FORM WITH PROVISION OF SERVICES
Type of Service Private Corporation Foundation1. Facilitation of permits,
licenses, clearances and approvals (e.g. from DOE, NWRB, DENR, ERC, NCIP)
Can be provided as a service by a private corporation.
Can be provided as a service by a foundation.
2. Information Services2.1 Information
Search/Provision of processed information
Being profit-oriented, this service may not be attractive to a private corporation since maintenance of data base is costly while fee for provision of such service is relatively low because of current practice of accessing information for free or at cost.
Regardless of profit, a foundation will offer this service since it is needed by the RE private sector and is precisely one of the reasons why the MSC was conceptualized.
2.2 Access to private data bases
Owners of private data bases may be hesitant to provide access to a private corporation because of concern on possible competition in the use of the data base.
Because a foundation carries out activities to support the development of its sector, it could have easier access to private data bases since it shall also be passed on to private RE project developers.
Type of Service Private Corporation Foundation3. Project Development
Services3.1 Proposal Packaging Can be provided as a service by
a private corporation.Can be provided as a service by a foundation
3.2 Loan facilitation Can be provided as a service by a private corporation.
Can be provided as a service by a foundation.
3.3 Brokering the rehabilitation of NEA-hydro plants
Can be provided as a service by a private corporation.
Can be provided as a service by a foundation.
3.4 Conduct of FS in partnership with private consultants and project developers
A private corporation may be viewed as a competitor by private consultants offering the same service.
A foundation is less viewed as a competitor by the nature of its service personality.
3.5 Fund syndication Can be provided as a service by a private corporation.
Can be provided as a service by a foundation.
Type of Service Private Corporation Foundation4. Business Systems
Process Improvement4.1 Advisory services and Conduct of Capacity Building/Enhancement Program
It is likely that the range of expertise required to provide this service to the RE industry will not be present within the private corporation and it will need to engage the services of external experts. A private corporation may not have the ability to undertake an agreement with universities and R&D institutions to tap the latter’s technical staff. There is also the issue of proprietary rights over intellectual properties.
A foundation will be in the best position to arrange manpower sharing with universities/R&D institutions, provided it is willing to provide the partner institutions some financial support.
5. Web hosting Can be provided as a service by a private corporation.
Can be provided as a service by a foundation.
3. Spin-off Trigger Indices MSC staff has completed the proposed
capacity building program
Capacity Building for MSC Staff Loan Proposal Packaging Permits/Licenses Processing Understanding ISO 9001 Operation of the MSC’s Management System Project/Quality Planning Management System Auditing Document Control Permits/Licenses Processing
COMPLETED HAVE NOT BEEN COMPLETED
Fundamentals of RE RE Project Development & Management RE Project Financing RE Database Management System Dynamics of RE Market Entrepreneurial Skills RE Technology Design, Installation and
Maintenance CDM
COMPLETED HAVE NOT BEEN COMPLETED
3. Spin-off Trigger Indices MSC staff has completed the proposed
capacity building program
Organized and conducted 2 Donors’ meeting 1 for potential private donors 1 for potential bilateral/multilateral donors
Spin-off Trigger Indices (cont’d.)
Relationships built with at least 6 potential subcontractors
Relationships built with at least 6 financial institutions
Relationships built with at least 8 potential customers/companies
Signed MOA with donor of PhP1M endowment fund and pre-operating expenses
4. Provided the following services/product mix:
Information services Permits/Clearances/Licenses Facilitation Project Development Services Web Hosting Project Finance and Fund Syndication-
related services Advisory Services/Training & Workshops
on Business Systems Process Improvement
Spin-off Trigger Indices (cont’d.)
Provided the following number of services:
Information services 24 Permits/Clearances/Licenses Facilitation 20 Project Development Services 8 Web Hosting 8 Project Finance and Fund Syndication- 0
related services Advisory Services/Training & Workshops 0
on Business Systems Process Improvement
TOTAL 60
Spin-off Trigger Indices (cont’d.)
5. Financial Projections for Foundation
Strategies for Sustainability
1. Conduct donors’ meetings to solicit donations/grants to help support its operating expenses
2. Offer Funds (3 Funds) monitoring services to DOE for an annual fee which may come from the unused portion of interests earned by the LGF.
Financial Strategies for Sourcing Supplementary Fund for the Foundation
6. Transitory Provisions1. Phasing-in Strategy – Interim MSC simulates
the operation of the SOO by providing services to the RE industry
2. Asset Transfer – All equipment purchased for the MSC shall be transferred to the Foundation through a Deed of Donation from UNDP.
3. Personnel Transfer – Services of IMSC staff shall be terminated at the end of operation of IMSC. They will however be given priority in hiring personnel for the MSCF, if they qualify. Years of service with the IMSC shall not be transferred to the Foundation.
7. Contingency PlanIf the MSCF is not sustainable, the following
are fallback options:
1. Continue to operate as a Foundation with scaled-down operation aimed at sustainability
2. Dissolve the Foundation – Transfer all MSCF assets to the DOE and DOE continues the functions of the MSCF
Cost Benefit AnalysisRenewable Energy Policy Framework Target
= 10 MMBFOE= 4,697 MW
Assuming MSC provides services to 10% of the projects:Total MW = 469 MWMMBFOE = 1 MMBFOEForex Savings = 50 million USD or equivalent to 2.75 Billion Pesos
Potential MT CO2 emissions avoided = 310,440At 7 USD per MT CO2 = 2.2 USD million
