FINANCING ENERGY ACCESS

ASIA CLEAN ENERGY FORUM

MANILA

MILO SJARDIN
4 JUNE 2012

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CLEAN ENERGY FORUM ASIA, JUNE 2012

ASIA PACIFIC, NEW INVESTMENT IN CLEAN ENERGY BY SECTOR, 200411 ($BN)

90 $81bn 80 5 70 $61bn 9 4 6 Small hydro Low carbon services* 20 Geothermal 32 Biofuels 40 30 $21bn 20 $15bn 2 4 4 3 2004 $27bn 5 5 5 4 5 7 2006 2007 2008 2009 2010 2011 6 21 13 $36bn 5 6 8 35 44 36 Energy smart technologies 13 Biomass & Waste $83bn Marine

60
4 50 $46bn 6

10
0

3 4 4 5
2005

Solar
Wind

Note: Includes corporate and government R&D, and small distributed capacity. Adjusted for re-invested equity. Does not include proceeds from acquisition transactions

Source: Bloomberg New Energy Finance

/ / / / CLEAN ENERGY FORUM ASIA, JUNE 2012

TOP 50 MANDATED LEAD ARRANGERS FOR CLEAN ENERGY PROJECT FINANCE, 2011 ($m)
2012
Other 1,533

Europe 16,976

European banks hit by debt crisis Japanese and US banks more active Basel III rules are slowly being implemented

Government/ Agency 21,381

Total 48,429

Commercial banks 24,845

Japan 3,660 US 3,539 Other 670

Loan tenors will shorten to meet funding requirement rules Rates will rise due to increased capital requirements
Source: Bloomberg New Energy Finance

/ / / / CLEAN ENERGY FORUM ASIA, JUNE 2012

SOUTH-EAST ASIA, NEW ASSET FINANCE ONLY,

200411 ($BN)
1.8 1.6 1.4 1.2

$2.8bn? = 75% yoy growth

KEY POINTS
Thailand very attractive due to high tariffs, long term target, local financing and good grid access Malaysia is attractive, but development is capped Indonesia particularly interested in geothermal, but improving for solar and wind
Source: Bloomberg New Energy Finance

1.0
0.8 0.6 0.4 0.2 0.0

Malaysia Philippines Vietnam Indonesia Thailand

2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1

Note: Includes corporate and government R&D, and small distributed capacity. Adjusted for re-invested equity. Does not include proceeds from acquisition transactions

/ / / / CLEAN ENERGY FORUM ASIA, JUNE 2012

WHAT HAS WORKED

POLICY

Combination of attractive short-term incentives with long-term energy goals to provide more policy certainty

POWER MARKET

Electricity market structure that is open to independent power producers and allows for easy access to the grid
Strong involvement of domestic banking sector (Thailand) as they are more comfortable with country risks and multilateral/bilateral financing (eg, Indonesia) Provision of power purchase agreements (PPA) with good default protection (eg, payment security fund)

FINANCE

PPA

/ / / / CLEAN ENERGY FORUM ASIA, JUNE 2012

THE PV MODULE EXPERIENCE CURVE, 19762012 ($/W)

100 1976

10

1985

PRICES DROPPED 75% SINCE 2008, 45% IN 2011 2014: ANOTHER 25%?

2003 2006
2012

2012

0.1 1 10 100 1,000 10,000 100,000 1,000,000 historic prices Thin-film experience curve experience curve First Solar thin-film module cost Chinese c-Si module prices
MW (log)

Notes: Inflation adjustment using US PPI, R2 of c-Si regression = 0.94, R2 of FSLR regression = 0.98

Source: Paul Maycock, Bloomberg New Energy Finance, FSLR filings

/ / / / CLEAN ENERGY FORUM ASIA, JUNE 2012

SOLAR SYSTEM PRICES IN DIFFERENT REGIONS ($/W)

California hostowned residential

9 8 7
6 5 4

$7.95
Japan residential

Germany (100kW or less) $6.62 $5.20

$6.69

$5.97

c-Si module price $2.83 $2.70

Subsidy reductions, competition, deployment

3 2 1
0 Q1 07 Q1 08

$1.01

Q1 09

Q1 10

Q1 11

Q1 12

Source: Bloomberg New Energy Finance

/ / / / CLEAN ENERGY FORUM ASIA, JUNE 2012

OFF-GRID: THE TRUE COST OF DIESEL

770M $0.40/kWh 150GW 5-12% $409billion

People who pay $1/litre+ for diesel fuel Operational cost of fuel alone Off-grid diesel generation market Annual growth of the off-grid diesel market Cost of fossil fuel subsidies to governments
Source: Bloomberg New Energy Finance

/ / / / CLEAN ENERGY FORUM ASIA, JUNE 2012

DIESEL GENERATION VERSUS OFF-GRID HYBRID PVDIESEL SYSTEM

IRR 30%
$/litre South-East Asia $/litre Latin America $/litre Sub-Saharan Africa

Real IRR

25%

20%
Emerging markets loan

15%

10%

5%
$/litre diesel

0%
0.3 0.5 0.7 0.9 1.1 1.3
Assumptions: hybrid diesel generator operates for 12.5 hours per day on 50 cloudy days per year, battery bank sized to night time energy consumption, insolation 1400 kWh/kW/year, all prices are assumed constant in real terms (see associated research note for more details).

Sources: Bloomberg New Energy Finance, market player interviews, Deutsche Gesellschaft fr Internationale Zusammenarbeit (GIZ)

/ / / / CLEAN ENERGY FORUM ASIA, JUNE 2012

REFLECTING THE TRUE COST: INDONESIA

IRR

30%

Real IRR
$/litre Cost to Indonesian Government

25%

20%
Emerging markets loan

15%

10%

PT PLN Bond 10.4%

5%
$/litre diesel

0%
0.3 0.5 0.7 0.9 1.1 1.3
Assumptions: hybrid diesel generator operates for 12.5 hours per day on 50 cloudy days per year, battery bank sized to night time energy consumption, insolation 1400 kWh/kW/year, all prices are assumed constant in real terms (see associated research note for more details).

Sources: Bloomberg New Energy Finance, market player interviews, Deutsche Gesellschaft fr Internationale Zusammenarbeit (GIZ)

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10

THE OPPORTUNITY FOR OFF-GRID SOLAR

150GW
660GW

Size of off-grid diesel generation market PV capacity to replace that diesel market

860GWh
80%

Of batteries to make PV storage systems

% of lead acid battery manufacturing capacity 860GWh represents

Solar capacity alone worth $2 trillion

Source: Bloomberg New Energy Finance

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11

COPYRIGHT AND DISCLAIMER

This publication is the copyright of Bloomberg New Energy Finance. No portion of this document may be photocopied, reproduced, scanned into an electronic system or transmitted, forwarded or distributed in any

way without prior consent of Bloomberg New Energy Finance.

The information contained in this publication is derived from carefully selected public sources we believe are reasonable. We do not guarantee its accuracy or completeness and nothing in this document shall be

construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment of
the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg New Energy Finance. The opinions presented are subject to change without notice. Bloomberg New Energy Finance accepts no responsibility for any liability arising from use of this document or its contents. Bloomberg

New Energy Finance does not consider itself to undertake Regulated Activities as defined in Section 22 of the
Financial Services and Markets Act 2000 and is not registered with the Financial Services Authority of the UK.

/ / / / CLEAN ENERGY FORUM ASIA, JUNE 2012

12

THANKS
MILO SJARDIN, MSJARDIN@BLOOMBERG.NET
MARKETS
Renewable Energy Carbon Markets Energy Smart Technologies Renewable Energy Certificates Carbon Capture & Storage Power Water Nuclear

SERVICES
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sales.bnef@bloomberg.net

////////////////////////////

OFF GRID POPULATION CONCENTRATION IN AFRICA AND ASIA

Off-grid population concentration (persons per sq-km)

20

40

60

80

100

120

Annual spend on fuel-based lighting in Asia: $23bn

SIX HIGHEST OFF-GRID POPULATIONS

COUNTRY India Bangladesh Indonesia Nigeria OFF-GRID POPULATION (m) 405 95 81 81 70 67
Source: National Geophysical Data Center, Bloomberg New Energy Finance.

Annual spend on fuel-based lighting in Africa: $17bn

Pakistan Ethiopia

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14

GLOBAL AVERAGE LCOE FOR RENEWABLES, ($/MWH)

350 300

250
200 150 100 50 0 Q2 Q3 2009 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2012 2010 2011 Wind - offshore Wind - onshore Coal Natural gas Utility-scale Solar PV (cSi) (cSi tracking)

Prices are in nominal dollars

Source: Bloomberg New Energy Finance

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15

SOUTH-EAST ASIA, NEW ASSET FINANCE BY COUNTRY,

200411 ($BN)

3.0

2.7 2.3

0.6% 0.5% 0.4% 0.3%

2.5
2.0 1.5

1.1

1.0
0.5 0.0 Thailand Indonesia Vietnam SEA

1.0

0.2%
0.1% 0.2 0.0% -0.1%

Philippines

Malaysia

% of world

Note: Includes corporate and government R&D, and small distributed capacity. Adjusted for re-invested equity. Does not include proceeds from acquisition transactions

Source: Bloomberg New Energy Finance

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16

SOUTH-EAST ASIA, NEW ASSET FINANCE BY FINANCIER,

200411 ($BN)
Major financiers by type of organisation Major financiers by country

2.3 5.8 14.7

Development banks SEA commercial banks Western banks 54.5 17.9 Japanese commercial banks Multinationals

6.92 Japan SEA Multilateral International

14.7

31.1

22.7

Other
29.4

Note: Includes corporate and government R&D, and small distributed capacity. Adjusted for re-invested equity. Does not include proceeds from acquisition transactions

Source: Bloomberg New Energy Finance

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17

THAILAND LCOE AND RENEWABLE SUBSIDY ($/KWH)

Adder for solar,

0.50 0.45 0.40

wind, biomass, not geothermal

0.35
0.30 0.25 0.20 0.15

Solar and wind

tariff attractive relative to LCOE

No project size
limitation on solar

0.10
0.05 0.00

Costs incorporate
Solar Wind
LCOE Tariff

Biomass
Mid-LCOE

Geothermal

10% IRR and exclude grid connection costs

Notes: Tariff only appears where available. Solar represents PVCsi technology, Wind represents onshore, Biomass covers biomass incineration, gasification and municipal waste-toenergy technologies, Geothermal represents geothermal flash technology.

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18

INDONESIA LCOE AND RENEWABLE SUBSIDY ($/KWH)

FiT for geothermal

0.50 0.45 0.40

capped, but likely to increase

0.35
0.30 0.25 0.20 0.15

FiTs for wind and

solar estimated solar likely to be higher

0.10
0.05 0.00

Small generation
Solar Wind
LCOE Tariff

Biomass
Mid-LCOE

Geothermal

tariff for other RE varies by location, grid connection

Project size limited

to 10MW under small gen tariff
19

/ / / / CLEAN ENERGY FORUM ASIA, JUNE 2012

INDIA: CHASING SOLAR RETURNS

Cost of debt
35%

RISKS
Many large projects on balance sheet due to high cost of debt Debt at 12-14%, but can be 8-9% with multilateral funds incl currency hedge Counterparty risk, partly due to weak RPO enforcement Lack of resource and performance data, and little experience EPC
Source: Bloomberg New Energy Finance

30%

25% Maharashtra 20% Karnataka 15% Gujarat

Rajasthan

10%

Orrisa

5%

0%

11.0%

10.0%

11.5%

8.5%

9.0%

9.5%

12.5%

13.5%

10.5%

12.0%

13.0%

8.5% (15 years tenure)

Equity IRR

Note: Maharashtra and Gujarat have feed-in tariffs of INR 11.16/kWh ($0.21/kWh) and INR 10.37/kWh ($0.19/kW)respectively. Projects in Karnataka, Rajasthan and Orrisa are allocated on the basis of competitive bidding with average rates of INR 8/KWh in Karnataka and Rajasthan and INR 8.5/kWh in Orrisa. We have assumed a 12 year repayment period with no moratorium in all cases expect the first where interest rate of 8.5% is accompanied by15 year tenure and 1 year moratorium.

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14.0%

20