Thailand ESCO Pilot since 1999 ESCO Excellence Award · PDF fileBoQ and Detail Cost Estimation...

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Strictly confidential – For discussion purposes only

Financing Scheme for ESCO:

Case Studies from Thailand

by Excellent Energy International Co., Ltd.

Thailand ESCO Pilot since 1999

ESCO Excellence Award 2009-2011

- March 29, 2012-


2 Strictly confidential – For discussion purposes only

Speaker

Mr. Arthit Vechakij

Managing Director

Excellent Energy International Co., Ltd (EEI)

475 Siripinyo Building, 12th Fl, SriAyudhya Rd,

Thanon Phyathai, Rajthevee, Bangkok 10400

Tel: 02- 2013466-7

Fax: 02- 2013465

Email: [email protected]

Website www.eei.co.th

mailto:[email protected]

http://www.eei.co.th/



Excellent Energy International Co., Ltd. (EEI):

Introduction, Profile, Portfolio & Awards

A well-known ESCO (Energy Service Company) in Thailand established since 1999 with the registered capital of 26 MB

An ESCO who offers guaranteed-payback on EE/RE/AE*projects for clients in various Industries and Commercial buildings

The first one, and only ESCO in Thailand who

successfully implemented “Thailand ESCO Pilot

Project” with excellent base of support from the

Thai Government & the World Bank.

*Energy Efficiency/ Renewable Energy/ Alternative Energy

An ESCO with Over 5,000 MB of on-going projectsdistributed over Cogeneration system, Renewable Energy, Energy Management Information System (EMIS), Heat Recovery projects, etc

Awarded 3 consecutive years of “ESCO

Excellence Award 2009 - 2011”, by The

Federation of Thai Industries, supported by

the Ministry of Energy, to the leading ESCO

of Thailand.

The only ESCO in Thailand whom was invited to contribute a regional perspective as a Co-writer in the new book of World-God Mother of ESCO, Dr. Shirley Hansen!!! Namely “ ESCOs Around The World: Lessons Learned in 49 Countries”

Some of EEI Clients



Financing Scheme for ESCO in Thailand:

Agenda

1. Financing Scheme for ESCO project

2. ESCO Role for Financial Closure

3. ESCO Business Cases

4. Conclusion




What is ESCO?

ESCO is an Energy Service Company is a commercial business providing a broad

range of comprehensive energy solutions including designs and implementation of

energy savings projects, energy conservation, energy infrastructure outsourcing, power

generation and energy supply, arrange financing for projects and risk management for

which performance contract and Measurement and Verification is a core part to

ensure that the project technical performance is fully guaranteed during the

contract period

ESCO provides energy efficiency management under Energy Performance

Contract (EPC) among

If net savings LESS THAN guaranteed

amount, ESCO will be responsible to that losses

ESCO will guarantee the net savings to cover

project cost for fixed period (e.g. Loan period)

If net savings MORE THAN guaranteed

amount, Net Profit will be shared among

client, ESCO, and Investor.

ESCO Energy Performance Contract : EPC




Type of ESCO Business Investment

ESCO Guaranteed Savings: The investment

is provided by the Entrepreneur with the

savings are guaranteed by ESCO and the

energy savings will be shared in agreed

proportionate.

ESCO Shared Savings: The investment

provided by ESCO, the savings are

guaranteed by ESCO, the energy savings

will be shared in agreed proportionate and

the end of project period, Entrepreneur will

own the project right completely.



Guaranteed Savings

Total Savings

Old Energy Cost New Energy Cost

No extra expense required for ESCO investmentTotal Investment Cost will be handled by EEI ( ESCO) / Investor solely. The payback to the project come only from Monthly Savings achieved.

Guarantee InvestmentEEI guarantees that total investment will be paid up by Savings*

Share risk, share loss, share benefitDuring the contract period, Client, Investor and EEI (ESCO) will share the savings achieved

Client owns the Asset ‘til its life-timeAfter the contract period, the asset will be totally transferred to client. All the savings gained goes to client only.


ESCO Performance Guaranteed Concept

O&M Expense

Energy Cost(New)

O&M Expense

Other Energy Expense

Other Energy Expense

Bank Loan

Client as Equity

Equity

ESCOShared Saving

TotalEnergy Expense




Agenda




4. Conclusion




ESCO Role for Financial Closure

Financial

Barriers

Technical

Barriers

Management

Barriers

Accessibility to financial resources

Limited Credit line

Concern on Liquidity

Financial source was reserved and/or

delegated to other projects which are

direct to core business

Financial Institutes (FI) have realized in all

risks of energy saving project , so ESCO

help FI to assess project risks before loan

granting.

Unfamiliar to Energy

Efficiency Technologies

Lack of confidence in the

unfamiliar technology

Lack of manpower to

develop the project

Bad experience from the

previous project ( Non-

Qualify Consultant/EPC)

A short list of technology

owners domestically.

Imported technologies are

more difficult to do O&M.

Costly after-sale services.

Lack of time and focus to

initiate/ oversee the

project

Company policy not to

invest in non-core

business project

Unable to acquire

professional service from

qualified consultant due to

lack of budget

Lack of internal capability

to manage an Energy

Saving Projects

ESCO can support the project stakeholders by

identifying and mitigating common project

barriers/ risks and achieving the financial

closure

ESCO &

Equity Fund

ESCO &

Equity FundESCO



Strategy

Process

& KnowledgePeople

Technology

To successfully discover the value of ESCO business and ultimately deliver the value to client and

country, an ESCO company needs to commit to the Strategy and drive it through the development of

People, Process, and Technology.



Human Resource:

• Executive

• Sales & Marketing

• Business Development

• Legal & Accounting

• Project Manager

• Engineer

• Specialist

• 3rd Party

Technology enables and supports governance of alignment and adherence to the corporate strategy.

In ESCO Business, Technology is an enabler, an answer, but not the driver!

• Client Strategy – Relationship & Trust

• Market Strategy – Shotgun, Clustering, or Segmentation, 4P, 7H

• Product Strategy – One fit all, or Tailored Made

• ESCO Strategy – Partnership, Alliance, PR, etc.

Process:

• ESCO Business Process

• ESCO Technical Process

• ESCO Contracting Process

• ESCO Business Development

Knowledge:

• Financial Management

• Project Management

• Engineering & Technical

• Risk & Contract Management

• Customer’s Decision Making and Procurement Practice

• Policy, Regulation, and Privilege

• Cogeneration

• Power Quality

• Solar and Ozone

• Refrigeration & HVAC

• Industrial Power Systems Study

• Heat Pump

• Motor

• Boiler

• Lighting

• HV Substation

• Heat Recovery

• Ozone Application



Investment

Grade Audit

(IGA)

Bidding &

Procurement

Implementation

Operation &

Maintenance

2

3

4

5

Conceptual Design

BoQ and Detail Cost Estimation

Feasibility Study

Detail, Comprehensive, Bankable

Bid Design, Request for Proposal (RFP)

Bid Evaluation

Equipment Contract Finalization

Detail Engineering Review

Construction Supervision

Installation Management

Commissioning

Project Management Consultant

(PMC)

ESCO Performance Guaranteed

Service

Investment & Financial

Arrangement

Project Management Consultancy and Owner

EngineeringGuaranteed Savings Fee

Post Commissioning

O&M Supervision (remote)



1-3 Months

1-3 Months

3-24 Months

1 – 8 Years

Project

Development

Project

Implementation

Project

Operation

Project

Initiation

Notice to Proceed

Sign EPC

1

Financial

Closure

Key Content – IGA Report(Investment Grade Audit)

Executive Summary

IntroductionEnergy Consumption Profile(Current & Future)

Selected ECM(s)

- ECM Introduction

- Conceptual Design <--> Technical Feasibility- Detail Financial Analysis <--> Financial Feasibility

- Legal Feasibility

- Commercial Feasibility

- Risk Identification & Risk Mitigation

- M&V Plan

- Project Schedule

- Supplier List




Agenda




4. Conclusion




Structure of ESCO Guaranteed Savings Model

Equity

Client

BOI 2/2011

Import & Income

Tax Exempt 3

Years

ESCO

Energy Performance

Contract: EPC

(Guaranteed Saving)

Engineering (IGA) and

Implementation Phase

-Project Development

Reimbursement Phase

-Guarantee Savings to

cover full investment +

interest

-Compensate Deficit

Savings

-Get shared saving on

Performance

Client

Equity

100%

Loan

Bank

Loan Agreement




Example of ESCO Guaranteed Savings Model for

Big Investment Scale

Natural Gas Co-Generation Project

CP-Meiji Co., Ltd.


Cogeneration Power

Plant, 2 MW, 1.4

TPH, Gas Engine (GE)

(Fuel: Natural Gas)

Project Investment Cost = 88 MB

Energy Cost Savings = 20 MB/Year

Payback Period = 4.4 Years

IRR 15 Years = 23%

Start Savings: 2008

CPF Foods Co., Ltd. (Minburi 2)



Payback Period = 4 Years

IRR 15 Years = 24%

Start Savings: 2012


Bangkok Produce Merchandising Public Co., Ltd.

(Phase # 2)

Start Savings: 2012

Project Investment Cost = 130MB



IRR 15 Years = 28%

Cogeneration Power

Plant, 4 MW, 2.8


(Fuel: Natural Gas)


Cogeneration Power

Plant, 4 MW, 2.8


(Fuel: Natural Gas)



Cogeneration Power Plant 4.5 MW,6.3 TPH Industrial Waste Management

to Energy Project

Asia Recycle Technology Co.,Ltd. (ART)




IRR 20 Years = 18.88%

NPV @ 6.5%Discount Rate = 915 MB

Asia Recycle Technology Co.,Ltd. (ART) is the second largest

industrial waste disposal company, which confined in EEI to

be a consultant for Industrial Waste Management to Energy

Project. This is the first project in Thailand that produces

electricity from industrial waste.


Example of ESCO Guaranteed Savings Model for

Big Investment Scale



New CompanyClient

ESCO & VSPP:

Import & Income

Tax Exempt

Land Leasing Agreement

(if any)

- New Energy Company to

rent land from Client

ESCO

Energy Performance

Contract

(Guaranteed Saving)

Engineering (IGA) and

Implementation Phase

-Project Development

Reimbursement Phase

-Guarantee Savings to

cover full investment +

interest

-Compensate Deficit

Savings

-Get shared saving on

Performance

Energy Performance

Contract

(Shared Savings)

-Profit sharing (in excess

of guaranteed amount)

-Transfer shares to client

at end of Term or buy out Shareholder Agreement

Structure

-Client 75%

-Other Investors 25%

-Capital Calls

-Board, Right, Vote

-Dividend payout after debt

services

Power Purchase

Agreement & Steam

Sales Agreement

-Electricity & Steam Tariff

-Term & Minimum take

Other Investors

Client

Equity

25%

75%

Other

Purchaser

Energy Purchase

Agreement

Loan

BankLoan Agreement

Fuel Supply Agreement:

-Fuel Price

-Term & Minimum give


Structure of ESCO Shared Savings Model



Thanyarungroengchai Rice Mill (Thailand)

Co., Ltd. (TRCCE)




IRR 15 Years = 23%

NPV (0% Discount Rate) = 1,586 MB

Start Savings = June 2011

TRCCE has developed the Biomass Cogeneration Power Plant with

Rice Husk which is the TRCCE by-product. EEI has been engaged

into the ESCO Performance Guaranteed Contract since 2009. The

project has started to save in June 2011. EEI provide the complete

solution of project management, bidding & procurement,

construction and installation supervision, commissioning

supervision until the measurement and verification. The plant

contributes the gross electrical power generation of 7.8 MW

together with the steam 45 ton per hour.

Cogeneration Power Plant

7.8 MW, 45 TPH, High Pressure Boiler & Steam

Turbine Generator (HP-STG) (Fuel: Biomass)


Example of ESCO Shared Savings Model for Big

Investment Scale




Example of ESCO Shared Savings Model for Big

Investment Scale

Boon Chareon Green Energy (BGC)




IRR 15 Years = 12.9 %

NPV (15 Year DR@7%) = 128 MB

Start Savings = May 2013

Boon Chareon Panit Limited Partnership is a big rice mill entrepreneur in

Suphanburi province. He realizes the advantage of biomaterial, which is

left from milling and agriculture in the neighborhood.

Therefore, Cogeneration Power Plant, Gasification(GF) which can

produce electricity 5.3 MW., is an interesting and worthwhile investment.

Before singing Energy Performance Contract (EPC) in Guaranteed Saving

Option, EEI had written the Investment Grade Audit Report to ensure the

project’s possibilities about technique, finance and government rules and

regulations.

Cogeneration Power Plant

5.3 MW, 3.4 TPH Gasification (GF)

(Fuel: Biomass)



Pataya Food Energy Co., Ltd. (PFE)

Low Pressure Boiler 15 TPH

(Fuel: Solid Fuel)




IRR 15 Years = 34.74 %

NPV @ 8%Discount Rate = 168 MB

Start Savings = Feb 2012

As future crude oil price still go up and the policy of the executive

of PFI foresee the importance of cost reduction for competitive

advantages, EEI has approved by PFI to study and analyze

reduction cost of energy trend. The Low Pressure Boiler (LPB)

project is the first Energy Conservation Measure (ECM) selected by

PFI to proceed implementation. LPB use such solid fuel to replace

existing Heavy Fuel Oil (HFO) boiler to reduce the expenses of

energy because of cheaper and higher heating value of solid fuel

comparing to HFO.


Example of ESCO Shared Savings Model for

Medium Investment Scale



Chiller Replacement

237 RT

Heat Pump

500 watt




IRR 10 Years = 29.24 %

NPV (10 year DR @ 8%) = 15.90 MB

Start Savings = December 2008

End of Contract Period = February 2014

Grand China Princess Hotel Bangkok

(GCP)

Located: China Town, Bangkok, Thailand

ECM: Heat Pump

GCP got the best opportunity to execute energy conservation

project with supporting investment capital in this Project from

ESCO Venture Co.,Ltd, the Investment company affiliated to EEI.

Implementing ESCO Shared Saving Option, not only GCP could

utilize their capital to focus in their core business but also they

will have project assets transferred at the end of contract.


Example of ESCO Shared Savings Model for Small

Investment Scale




Agenda




4. Conclusion



Conclusion:

Thailand’s Financing results & lesson learned &

trend

1) As the Financing Facilitator; ESCO provides all qualified fact & information of

investment and financing conditions to the project owner. These information

normally provided by the IGA – Investment Grade Audit Report which includes :

Schedule, Measurement & Verification, Legal and Risk, Technical, Financial and

Commercial content.

2) Support investors to understand the behavior & culture of investment with EE & RE

business in Thailand

3) Support the proper financing model/structure which matches to each project

conditions & limitations

4) Create Win-Win solution for all project’s stakeholders to certify project sustainability

5) Leverage project benefit by blending government privileges



Thank You

Excellent Energy International Co.,Ltd12th Fl., Siripinyo Bldg., 475 Sri-Ayudhaya Rd.,

Thanon Phyathai, Rajthevee, Bangkok, THAILAND, 10400

T. +66 (0) 2201 3466-7, +66 (0) 2640 0270

F. +66 (0) 2201 3465

http://www.eei.co.th



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