Innovation Energie Développement

IFRERA-Intermediate progress MeetingIFRERA-Intermediate progress Meeting

Activity in IndonesiaActivity in Indonesia

SULAWESI PROJECT PRESENTATION

LYON, JULY 20th 2005

Innovation Energie Développement

General context of the project

Demand : 35 GWh, peak load 9MW

77% is Residential consumption, the main driver for growth.

Current supply : exclusively diesel engines (12MW), with increasingly high operating costs.

The project considers the interconnection of 4 currently independent systems in order to:

improve supply stability provide 24h supply ease energy placement higher public relations profile (IPO)

Three run-of-the-river, mini-hydro sites have been identified in the South-East Sulawesi Island of Indonesia.

Sambilambo : 3.1 MW Mikuasi 1.8 MW Rate Limbong 1.3 MW

6.2 MW

Innovation Energie Développement

Feasibility study achievements

Project sizing optimized (max. energy placement over project lifetime). Full energy placement occurs in 2012 with 43 GWh supplied.

The national authority (DJLPE) and the local authority (mayor of Mikuasi) are supportive of the project because of development opportunities.

Staging of investment costs by item

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2005

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in 1

,00

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Overhead

Engineering services

Access Road

20kV line

Cost of E/M works

Cost of civil works

Project development

The potential developer is Indonesia Power (IP), and is now negotiating a PPA with the national utility PLN, based on the IFRERA F/S.

Total investment package : US$10m 30% equity injection 50% USD and 50%

Rupiah investment

Innovation Energie Développement

Financial Analysis and Results

A financial analysis was conducted based on the criteria, assumptions and method wished by IP.

The objective of this study : to identify the PPA tariff price that enables IP’s profitability target (IRR = WACC + 5%)

At US$53/MWh : price is lower than end-customer prices and competitive with diesel engines.

MWh cost in $US

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Diesel generationmax cost

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IFRERA project

Innovation Energie Développement

Sensitivity study (1/2)

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53

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5454

69

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Reference price

Hydrology (80%)

Investment costs (+15%)

Inflation (10% instead of 8%)Lower demand growth (50%)

Investment currency 100% Rp

Investment currency 100% $US

Risk mitigation price $US/MWh

Innovation Energie Développement

Sensitivity study (2/2)

Worst case scenario : 100% Rupiah investment, leading to US$ 82/MWh (uncompetitive price)

100% USD investment leads to PPA price = US$45/MWh, but the project is very much exposed to exchange rate risks.

Conclusion : to improve competitiveness it is preferable to invest in US$ as much as possible, WHILE mitigating the exchange rate risk with PLN in PPA arrangements (by agreeing on a PPA price in US$ for example).

Innovation Energie Développement

Open questions for debate

How could the IFRERA team help the project to reach achievement stage ?

What could be drawn from this experience for economic and financial training sessions in Asia ?

Other questions …

Sensitivity analysis: compare the evolution of the oil price and the impact on diesel generation price.