OVERVIEW OF THE CFP PROCESS Co-Financing Grants for Commercial Renewable Energy Projects in Indonesia Jakarta, 3 rd February 2015
Disclaimer This presentation is to facilitate the Q&A by providing an overview of the principles and procedures in the Call for Proposal document which was released on 16 th January, 2015. Participants are advised to review in depth the Call for Proposal document, as it provides the full details for this call. In case of any discrepancy between this presentation and the Call for Proposal document, the requirements specified in the Call for Proposal document shall prevail Any updates or amendments to the Call for Proposal and replies to written questions submitted by prospective applicants shall be issued by MCA-Indonesia on its website. Participants are advised to follow these updates.
Presentation Contents Introduction Key Features of Co-Financing Grants Overview of the CfP Q&A
INTRODUCTION
Key Objectives of GP Project 1 Increasing productivity and reducing reliance on fossil fuels by expanding generation from Renewable Energy (RE) Increasing 2 productivity and reducing land-based greenhouse gas emissions by improving land use practices and management of natural resources.
Purpose of RE Co-Financing Grants Object Fulfill the goals of the GP Project by increasing short term commercial private RE investment in grid-connected projects that can be substantially completed by 1 st April, 2018. Nature As cash grant to reduce the investment required to meet the Project s capital cost. Will be disbursed during the construction phase of the Project based on agreed milestones. Total funds ~ US$ 100 Million, disbursement by 1 st April, 2018
Projects to support Invitation Summary On-grid renewable energy (RE) projects Installed capacity 1-10 MW preferred > 10 MW considered subject to conditions being met Final Selection Criteria Technology-based competitive merit order listing RE Co-Financing Grant Index Value = Total US Dollar Amount of RE Co-Financing Grant MWh of Averaged Net Electricity Generated p.a.
Who can Apply? Project enterprise i.e. the Independent Power Producer (IPP); or OR Promoter of the IPP (Promoter); or OR A group of entities proposing to invest in the IPP (Consortium), each being legally registered in Indonesia or elsewhere. IPP registered in Indonesia Licensed as an Investment Company through BKPM Must not fall under the Non-Eligible Project Partners
TAPP Grants Technical Assistance and Project Preparation (TAPP) Grants o For project preparation or to fill design gaps o Expected to achieve substantial construction completion by 1 st April 2018 o Eligible to receive Co-Financing Grants No separate application required (Envelope 2: Technical) Substantially Prepared projects Merit-worthy projects that have Substantial Gaps
KEY FEATURES
RE Technology Applicants may submit projects with RE technologies that meet GP Project objectives, Indonesian law, IFC performance standards and CfP criteria. An indicative list is shown below: Biogas Biomass PV Solar Sustainably derived palm oil mill effluent (POME) Biogas from animal manure or other organic waste materials Biomass fuel from trees, plants, cellulosic or other vegetative materials Solar PV Thermal or concentrated solar technologies Hydro Run of River Hydro Storage and/or pumped storage hydro Wind Wind power systems Hybrid Combinations of the above Systems that lead to incremental fossil fuel are not eligible
Location
Value and Disbursement Modalities Amounts Subject to project cost and funding availability Currency US Dollars and/or Indonesia Rupiah Taxation Grants are tax exempt When Pay Account First Payment Milestones based disbursement, usually linked to construction progress Grant installments made into a trust and retention or escrow account Indicative conditions include: Agreements signed: PPA, Grant Agreement; Financial Close Agreed % of equity should have been expended Should have fulfilled corresponding performance milestones
Value and Disbursement Modalities Min Equity At least 20% equity in project. Grant may not be diluted until completion Asset Ownership IPP is the ultimate owner, subject to MCA-I asset transfer T s & C s Monitoring Indicative project monitoring: Use of lenders monitoring mechanism, as appropriate; and/or MCA-Indonesia may nominate its own agency to monitor project M&E Activities M&E Plan consistent with MCA-I requirements
Indicative Project Structure FiT PLN (Awards PPA) Payment from PLN Shareholders Lead Investor Strategic Investors Other Investors Shareholders agreement Equity Power purchase agreement Escrow Agent Receivables Waterfall Commercial Banks Financial Institutions Loan agreement Commercial Debt SPV (project owner) O & M Costs MCA-I Grant agreement Grants Maintenance Reserve Fund EPC O&M Debt Service EPC agreement O&M agreement Revenue Share for CSR / ES activities Fuel Supply (as appropriate) Residual Income (Dividends) to SPV
Profit Share for CSR / ES Activities CSR and/or ES activities identified via EIA/ESIA and Lifescape Analyses % Profit Share = 10% of RE Co-financing Grant Amount Equity Capital + 10% of RE Co-financing Grant Amount Illustrative Examples for computing Profit Share for CSR and/or ES Activities (a) Project Cost US$ 100 (b) RE Co-financing Grant Sought US$ 10 (c) Debt US$ 70 (d) Equity US$ 20 (e) 10% of RE Co-financing Grant Sought {e = 10% x b} US$ 1 (f) Percentage Profit Share for CSR and/or ES {f =e/(d+e) = 1/(20+1)} % 4.8%
OVERVIEW OF CFP PROCESS
Grant Process Overview Pre-Submission Meeting 3 Feb 2015 Appraisal of Proposals 10 Apr- 15 Jun 2015 CfP Launch 16 Jan 2015 Proposal Submission 10 Apr 2015 Eligibility Screening Applicants to address gaps and reapply # TAPP grants to rectify gaps Technical Evaluation Reject Pass Reject Pass If No/ minor gaps If major gaps Commercial Evaluation MCA- Indonesia announces IC decisions: 1.Successful Applicants receive Grant Endorsement Letter 2.Merit-worthy projects, substantially complete, receive Grant Endorsement Letter and TAPP Grant 3.Merit-worthy projects, with substantially incomplete studies, may receive TAPP Grant and can resubmit in a second call # # Second call maybe announced ~ Sept 2015, if funds available. Grant Endorsement Letter Technical Evaluation Investment Committee Approval Commercial Evaluation Grant Agreement 2 weeks after Financial Close Financial Close to be achieved in 6 months from Grant Endorsement Letter
Value and Disbursement Modalities Financial Strength Technical Expertise 1. Solvency: No cumulative loss in past 3 years 2. Cash Availability: to fund at least 20% of the Total Project Cost (TPC) 3. Tax Clearance: A satisfactory tax clearance from tax authority 4. Credit Reference: from banks 1. Experience of developing power plants ( any one) o Experience as a Promoter, or o Experience of an individual who has worked as senior management 2. Credentials of the EPC Contractor proposed for the IPP (must) Management Expertise 1. Satisfactory credentials of Key Management, Board of Commissioners 2. Satisfactory assessment of any reputational risk to MCA-Indonesia Legal Authority 1.Registration: IPP to be incorporated in Indonesia 2.Private Ownership: Private enterprise preferred over LGOE/SOE ownership 3.Not a Non-Eligible Applicant: Annex 20 of CfP 4.No Conflict of Interest: Annex 21 of CfP 5.Licenses and Permits: Should have or be in process of obtaining all licenses
Value and Disbursement Modalities Project Type 1. Technology : RE technology as per CfP and capable to connect to PLN 2. Location: GP Provinces 3. Equity Contribution: 20% equity contribution of Total Project Cost 4. Ownership: Project ownership consistent with CfP requirements Pre-requisites Screening 1. Objectives: Expected outcomes consistent with GP objectives 2. Compact Conditions: ERR 10%, reduce fossil fuel use 3. Project Eligibility and Not Non-Eligible as per Annex 19 4. Implementation Time: reasonably expected to achieve substantial completion on or before 1 st April 2018
Value and Disbursement Modalities Technical Operational Feasibility Analysis of site, supporting infrastructure, feedstock sustainability, Preliminary engineering design, outputs and standards, EPC arrangement, O&M arrangements, management arrangements, Risk analysis, project costs, construction schedule Document Review M & E Preparedness & Implementation Plan Environmental, Social & Gender Project structure Contractual framework Due diligence on title, permits and approvals Monitoring and Evaluation plan Impact evaluation and research questions Level of project preparedness Extent and materiality of project preparation and design gaps Remedial actions, if any Fit of implementation plan with GP timeline Environmental, Social & Gender sustainability Land acquisition and involuntary resettlement issues Stakeholder engagement
Value and Disbursement Modalities RE Co-Financing Grant Index Value = Total US Dollar Amount of RE Co-Financing Grant MWh of Averaged Net Electricity Generated p.a. The final selection and merit order list of Projects, as appropriately differentiated by technology, shall be based on the above formula. Financial Model In case of Projects with PPAs before May 2014, it is expected to factor in a reasonable tariff increase that it expects to renegotiate with PLN. To assess completeness and consistency with the business proposal. Typically, it is expected that all Applicants (that have PPAs signed before May 2014 or later) will target the PLN s reference rate (Equity IRR of 18%), while seeking RE Co-financing Grants. RE Co-financing Grants will not be awarded to projects that seek excessive returns (defined as Equity IRR exceeding 23%). Economic Analysis ERR of at least 10%, such assessment will be undertaken by MCA- Indonesia using data provided by the Applicant.
CfP Link on GP Portal Relevant information on the CfP and related documents can accessed on: http://gp.mca-indonesia.go.id/en/re/commercial/
Q&A
THANK YOU Disclaimer All figures, illustrations, data, dates and requirements stated in our disclosures and presentations are subject to change by MCA-Indonesia or MCC and subject to the terms and conditions of Compact, Program Implementation Agreement and Pedoman Tata Kelola Lembaga Wali Amanat MCA-Indonesia, and the applicable laws and regulations of the Republic of Indonesia..