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Hotel Arnoma, Bangkok, Thailand 27-29 June 2007

Hotel Arnoma, Bangkok, Thailand 27-29 June 2007. Private sector needs ------------------------------------------- UNFCCC workshop on best practices with conducting TNAs By Mr.Arthit Vechakij, Managing Director. Speaker. ESCO Ventures. Mr. Arthit Vechakij Managing Director

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Hotel Arnoma, Bangkok, Thailand 27-29 June 2007

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  1. Hotel Arnoma, Bangkok, Thailand 27-29 June 2007 Private sector needs-------------------------------------------UNFCCC workshop on best practices with conducting TNAsBy Mr.Arthit Vechakij, Managing Director

  2. Speaker ESCO Ventures Mr. Arthit VechakijManaging Director Excellent Energy International Co., Ltd. (EEI) Director ESCO Ventures Co., Ltd. (EV) Preident Association Energy Efficiency Consultant (AEEC) Address: 475 Sri Ayudhaya Rd., Rajthevee Bangkok 10400 Thailand E-mail:arthit@eei.co.thPhone: +66-2-201-3466-7 Fax: +66-2-201-3465 Cell: +66-81-806-8233

  3. Agenda • About EEI • Problems encounter during Project Development phase • Suggested Resolutions • Objective: • To share Project Development Experience (Obstacles and suggested Resolutions) relating to ESCO (Energy Service Company) business… • From One company = EEI • In One country = Thailand • But hope it would be a good case study for all of us global wide 

  4. About EEI EEI, stands for Excellent Energy International Co., Ltd. (Thailand), is: • An Investment Partner in Energy Efficiency Management • Provide Investment/Engineering Consulting Services and promptly fund under Energy Performance Guaranteed Contract (EPC) in the innovative field of Energy Service Company (ESCO) • Develop integrated energy efficiency and productivity improvement project with attractive return on investment • Guarantee success and return on investment from the beginning to the end of project payback period • Achieved reputation for being the most highly regarded ESCO in Thailand and was selected for the pilot ESCO project of Thailand in 1999 EEI Is the first ESCO in Thailand that successfully implements ESCO project with excellent base of support from the Thai Government & the World Bank.

  5. Business Case Example:Large scale investment – Big Saving Bangkok Produce Merchandising Public Co., Ltd. Project Investment Cost = 188.4 MB Energy Cost Savings = 47.0 MB/Year Payback Period = 4.5 Years IRR = 20.5 % NPV (DR @ 0%) = 418.6 MB Energy Conservation Measure (ECM) • Cogeneration4.5 MW (Fuel: Natural Gas) • Motor Optimization • Lighting Control Start Savings: Nov 02 Located: Kangkoi, Saraburi

  6. EEI World Class Partners EEI has been established in Thailand since 1999 by three major partners and key investors. The largest energy research institute in United States, with 30 years of proven success, is recognized as a world leader in creating innovation technology and environmental solutions for the energy industry and society. EPRI spends 18,000 Million Baht per year for research and development facilities to develop and conduct research on energy and industrial technology. A premier engineering firm in United States, as the provider of technically, environmentally and financially sounds end-use solutions for energy companies, government agencies, and industrial and commercial establishments. The listed company on the Stock Exchange of Thailand with the registered paid-up capital of Baht 515.11 million, specialized in financial investment which so far emphasizing in Property investment.

  7. Why EEI ESCO? Key Decision Factor Well Recognized by Government & Private Sector Total Integration Services Various Proven Technology Performance Guaranteed One-Stop Service Measurement & Verification System (M&V) Sources of funds Specialist/Expertise Share Risks, Losses and Benefits

  8. Our Clients NongbuafarmCountry Home Village Sun Food International Nanyang Textile, Knitting, Energy Thonburi Automotive Assembly Plant Muangthong Aluminuim Industrial Siam Oil & Fat Bangkok Produce Merchandising

  9. Business Case Example:ESCO Shared Savings – ESCO & Client Co-Invest • SS Cogen Technology & Investment Optimization Products:Modified Starch, Glucose Low Season:April-June Expansion Plan:new glucose unit & spray dryers Sahasin is located in Chanthaburi, which is about 260km to the South East of Bangkok Sahasin is … • One of the top 3 glucose manufacturer in Thailand (25,000 ton per year) • One of the top 5 producers of modified starch (15,000 ton/year) • Expansion of a new glucose plant (100 MT/day) totaling over 200 MT/day • Expected sales to grow from 600 MB in 2004 to 1,400 MB in 2009 with 15% gross margin.

  10. Business Case Example:ESCO Shared Savings – ESCO & Client Co-Invest Sahasinwattana Cogeneration Co., Ltd. Energy Conservation Measure (ECM) Project Investment Cost = 150 MB Energy Cost Savings = 42 MB/Year IRR = 26 % Contract Period = 8 Years • Cogeneration 1.7 MW, 25 TPH(Fuel: Palm Shell & Coal) Start Savings: Mar 07 Located: Chanthaburi Province

  11. Structure of Sahasin Cogen Co., Ltd. FE Clean EXIM 54.4 MB 60% UV25% EEI Group15% OneAM ESCOVentures* Loan Agreement 17 MB Interest Rate:- Year 1-3: prime rate + 0.5% - Year 4-7: prime rate Noppanun 13.6 MB - Term: 7 years - Grace Period 14 months Loan80 MB Equity85 MB Steam and Electricity Sales & Purchase Agreement Energy Performance Contract (Guaranteed Saving) • Condition: • Minimum Steam Take • Sahasin to purchase the facility at the 9th years for xx MB • Engineering (IGA) and Implementation Phase • Project Development Shareholder Agreement • Reimbursement Phase • Guarantee Savings to cover full investment + interest • Compensate Deficit Savings • Get shared saving on Performance • Structure • FE Clean 64% • ESCO Ventures 20% • Noppanun Intertrade 16% • Steam Tariff: • Price varied with fuel (No Risk on Fuel Price!) • -Capital Calls • Board, Right, Vote • Dividend payout after debt services Blended with Low Interest Rate through MoE ENCON Fund Sahasin Cogen Sahasin EEI PP&E141 MB ZONE3 – Import & IncomeTax Exempt Land Leasing Agreement - Sahasin Cogen to rent land from Sahasin

  12. Agenda • About EEI • Problems encounter during Project Development phase • Problems as encountered by EEI (as a Project Developer) • Problems as encountered by other Project Developer • Problems as encountered by other key players • Suggested Resolutions

  13. 10 Key Success Factors for ESCO in developing Energy Efficiency Project • Overall System Efficiency • Emission Control under Environmental Regulation • Optimization Design (on client point of view, not on supplier point of view) • Feasibility on all necessary factor under the fact basis • Long-term Price Performance Evaluation Basis • Competitive & Transparent Procurement Process • Qualified Measurement & Verification System • Rigid Commissioning Procedures • Good Contract Management • Good Investment Option • Pre-Development and Project Development Phase

  14. Zoom into the problems During the Project Development phase, there are various of problems encountered by each key player as tried to summarize below 1. Project Developer • Unsuitable Skill inTechnical, Financial, Legal, Commercial • Suffer from high Development cost and effort before cashing (maybe with premium) far later on • Concern on releasing Intellectual Property Rights Protection (IPR Protection) • Enforceable Legal Binding (e.g. MoU, Contract, …) • Lack of Support from other players (See all in #2 and #3 below ) 2. Knowledge Supplier (i.e. Hardware / Software) • Concern on releasing Intellectual Property Rights Protection (IPR Protection) • Enforceable Legal Binding (e.g. MoU, Contract, …) • Environment (Economics – Global wide & Nationwide, Political Situation, Regulation) 3. Financier (i.e. Investor & Financial Institute) • Enforceable Legal Binding (e.g. MoU, Contract, …) • Chicken & Egg (paying development fee first vs. seeing the project in detail first) • Believable Financial Return (which mostly requires higher development effort) • Committed Financier partner (if not one equity investor / one bank for 100% cash) • Environment (Economics – Global wide & Nationwide, Political Situation, Regulation)

  15. Agenda • About EEI • Problems encounter during Project Development phase • Suggested Resolutions

  16. Zoom into the problemsSuggested Resolutions and How PFAN may help Suggested Resolutions are actually counteracting all those known-for-a-long-time problems… 1. Project Developer • Supporting Development Fund • Supporting Financial Closure • Unsuitable Skill inTechnical, Financial, Legal, Commercial • Suffer from high Development cost and effort before cashing (maybe with premium) far later on • Concern on releasing Intellectual Property Rights Protection (IPR Protection) • Enforceable Legal Binding (e.g. MoU, Contract, …) • Lack of Support from other players (See all in #2 and #3 below ) • Coaching • Training • Guidebook 2. Knowledge Supplier (i.e. Hardware / Software) • Concern on releasing Intellectual Property Rights Protection (IPR Protection) • Enforceable Legal Binding (e.g. MoU, Contract, …) • Environment (Economics – Global wide & Nationwide, Political Situation, Regulation) Benefit 3. Financier (i.e. Investor & Financial Institute) • Simply to close a deal • Assure Financier Confidence • Eliminate Technical Risk (and all other risk) • New Innovation could make project more feasible • Comfort Developer effort • Enforceable Legal Binding (e.g. MoU, Contract, …) • Chicken & Egg (paying development fee first vs. seeing the project in detail first) • Believable Financial Return (which mostly requires higher development fee) • Committed Financier partner (if not one equity investor / one bank for 100% cash) • Environment (Economics – Global wide & Nationwide, Political Situation, Regulation)

  17. Thank you and Contact ESCO Ventures Mr. Arthit VechakijManaging Director Excellent Energy International Co., Ltd. (EEI) Director ESCO Ventures Co., Ltd. (EV) Preident Association Energy Efficiency Consultant (AEEC) Address: 475 Sri Ayudhaya Rd., Rajthevee Bangkok 10400 Thailand E-mail:arthit@eei.co.thPhone: +66-2-201-3466-7 Fax: +66-2-201-3465 Cell: +66-81-806-8233

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