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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-
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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
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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
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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
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Financing Scheme for ESCO in Thailand:
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
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Financing Scheme for ESCO in Thailand:
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.
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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.
Financing Scheme for ESCO in Thailand:
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
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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
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Financing Scheme for ESCO in Thailand:
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
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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.
Financing Scheme for ESCO in Thailand:
ESCO Role for Financial Closure
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
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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)
Financing Scheme for ESCO in Thailand:
ESCO Role for Financial Closure
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
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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
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Financing Scheme for ESCO in Thailand:
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
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Financing Scheme for ESCO in Thailand:
Example of ESCO Guaranteed Savings Model for
Big Investment Scale
Natural Gas Co-Generation Project
CP-Meiji Co., Ltd.
Natural Gas Co-Generation Project
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)
Project Investment Cost = 132 MB
Energy Cost Savings = 32 MB/Year
Payback Period = 4 Years
IRR 15 Years = 24%
Start Savings: 2012
Natural Gas Co-Generation Project
Bangkok Produce Merchandising Public Co., Ltd.
(Phase # 2)
Start Savings: 2012
Project Investment Cost = 130MB
Energy Cost Savings = 37 MB/Year
Payback Period = 4 Years
IRR 15 Years = 28%
Cogeneration Power
Plant, 4 MW, 2.8
TPH, Gas Engine (GE)
(Fuel: Natural Gas)
Natural Gas Co-Generation Project
Cogeneration Power
Plant, 4 MW, 2.8
TPH, Gas Engine (GE)
(Fuel: Natural Gas)
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Cogeneration Power Plant 4.5 MW,6.3 TPH Industrial Waste Management
to Energy Project
Asia Recycle Technology Co.,Ltd. (ART)
Project Investment Cost = 576 MB
Energy Cost Savings = 150 MB/Year
Payback Period = 6.1 Years
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.
Financing Scheme for ESCO in Thailand:
Example of ESCO Guaranteed Savings Model for
Big Investment Scale
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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
Financing Scheme for ESCO in Thailand:
Structure of ESCO Shared Savings Model
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Thanyarungroengchai Rice Mill (Thailand)
Co., Ltd. (TRCCE)
Project Investment Cost = 573 MB
Energy Cost Savings = 126 MB/Year
Payback Period = 4.5 Years
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)
Financing Scheme for ESCO in Thailand:
Example of ESCO Shared Savings Model for Big
Investment Scale
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Financing Scheme for ESCO in Thailand:
Example of ESCO Shared Savings Model for Big
Investment Scale
Boon Chareon Green Energy (BGC)
Project Investment Cost = 380 MB
Energy Cost Savings = 65 MB/Year
Payback Period = 6 Years
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)
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Pataya Food Energy Co., Ltd. (PFE)
Low Pressure Boiler 15 TPH
(Fuel: Solid Fuel)
Project Investment Cost = 70 MB
Energy Cost Savings = 23 MB/Year
Payback Period = 3 Years
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.
Financing Scheme for ESCO in Thailand:
Example of ESCO Shared Savings Model for
Medium Investment Scale
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Chiller Replacement
237 RT
Heat Pump
500 watt
Project Investment Cost = 7 MB
Energy Cost Savings = 2 MB/Year
Payback Period = 3.5 Years
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.
Financing Scheme for ESCO in Thailand:
Example of ESCO Shared Savings Model for Small
Investment Scale
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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
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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
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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