conergy solar infrastructure investment in south east...

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S O L A R I N F R A S T R U C T U R E I N V E S T M E N T I N S O U T H E A S T A S I A

2 Conergy

Over the course of 2016, South East

Asian solar project investment totalled

$892 million, attracting 1.5 times more

than the $588 million invested in wind

power projects.

A substantial $8.3 billion of solar

project financing deals have been

made over the past seven years.

Between 2010 and 2016, project

investment in South East Asia

increased at a compound annual

growth rate of 13.5%.

Solar project financing in 2015

signalled a high water mark for the

technology with investment reaching

a record high of $2.6 billion, Total

financing last year for solar power

remained significantly higher than that

for projects using other clean energy

technologies.

This Solar Infrastructure Investment in South East Asia Report, by Conergy Asia & ME and Clean Energy Pipeline, reviews solar power project financing in South East Asia during 2017.

Given the abundance of sunshine and the high lev-els of solar irradiation levels and lucrative feed in tariffs (FIT) in South East Asia, it should come as no surprise that solar power project financing has far outshone any other clean technology in the region.

South East Asia’s solar project finance market re-mained robust in 2017 with $859 million of commit-ments made between Q1 and Q3.

VIETNAM2%

INDONESIA3%

SINGAPORE1%

MALAYSIA12%

THAILAND43% PHILIPPINES

39%

SOLAR PROJECT FINANCE IN SOUTH EAST ASIA 2010-2017YTD

Solar Infrastructure Investment in South East Asia 3

CLEAN ENERGY PROJECT FINANCE IN SOUTH EAST ASIA

2010-2017YTD BREAKDOWN BY SECTOR

TOTAL SOLAR PROJECT FINANCE IN SOUTH EAST ASIA

2010-2017YTD BREAKDOWN BY COUNTRY

SOLAR WIND BIOMASS

GEOTHERMAL OTHER

NUMBER OF DEALS

INDONESIA MALAYSIA PHILIPPINES

THAILAND VIETNAM SINGAPORE

NUMBER OF DEALS

4 Conergy

As the world’s fourth most populous country, Indonesia

faces major challenges meeting its ever growing demand

for energy.

Indonesia’s drive to build up new alternative energy sources

is underpinned by its National Energy Policy [Government

Regulation No. 79/2014], which calls for renewable energy

to make up 23% of its power mix by 2025, and 31% by

2050.

However, complex government regulations has slowed

Indonesia from reaching its full renewables potential,

especially after changes to its FiT scheme were enacted

earlier this year [MEMR Decree 12/2017].

Previously, all renewable energy technologies benefited

from a single feed-in tariff rate for the clean electricity

purchased by state-owned utility. The new decree from the

Ministry of Energy and Mineral Resources has now capped

clean energy tariffs at 85% of the local generation cost.

Despite the regulatory complexities, the Indonesian

government has recognised the need to move away

from conventional power generation and developers

I N D O N E S I A

T H E P H I L I P P I N E S

have answered the call to boost its domestic generation

capabilities.

Since the National Energy Policy was brought into play in

2014, Indonesia has attracted $6.2 billion of clean energy

project investment to date.

Much of Indonesia’s large-scale renewables financing has

gone towards its geothermal sector, though solar power

financing has increased incrementally over the years.

So far in 2017, Indonesia has already attracted $2.1

billion of renewables commitments, already double the

total amount invested last year and putting it on path

to becoming the most successful year for clean energy

project financing in the country’s history. This is even more

impressive given the fact that Indonesia was also the

second largest renewable energy market in South East Asia

in 2016.

With a very negligible amount of solar investments made in

Indonesia over the past two years (only $6.8 million in total),

financing for the technology has spiked in 2017 to $81.1

million.

The Philippines’ renewable energy project finance reached

its peak sector in 2015, attracting over $2.4 billion of

commitments.

The substantial amount of funding brought in for clean

energy projects was almost wholly spurred on by the

Philippines’ second round feed-in tariff scheme.

However, with President Rodrigo Duterte’s administration

declining to replace the remuneration initiative by way of a

third round, project financing in the country has now fallen

off. The Philippines has only secured just over $161 million

for new clean energy projects so far this year.

Of the amount, $119 million has been spent on Filipino solar

projects in 2017.

Prior to this, the Philippines’ solar sector stood head and

shoulders above its South East Asian counterparts.

In 2016, solar power project investment in the Philippines

came to $ 505 million, while the year before financing came

to a considerable $1.8 billion.


V I E T N A M

T H A I L A N D

Placing second in Clean Energy Pipeline’s SE Asia 2016

project finance rankings, Vietnam’s renewable energy

sector offers perhaps the most promise for new project

developments in the region.

After several years of delay surrounding Vietnam’s support

scheme for renewable energy, the Ministry of Industry and

Trade implemented a strong FiT for solar power earlier this

year. It has also submitted a proposal to increase the FiT for

wind power to re-ignite the technology’s roll-out.

As a result, Vietnam has been host to over $700 million

of project finance deals so far this year, which marks a

turnaround from the $136 million of project investments

made in 2016.

With Vietnam’s solar FiT proving far more lucrative than

the wind FiT, developers have committed to $149 million

of solar project financing in 2017, compared with only

a few wind deals being made last year and zero solar

developments.

Though a few issues still remain over the bankability of

Vietnam’s solar PPA, Vietnam’s solar ambitions is only set

to go from strength to strength.

Thailand’s renewable energy market has remained fairly

stable over the years in a country where solar power

investment has reigned supreme.

Solar project investment has averaged about $500 million

per annum over the past 7 years. Notable years for solar

financing came in 2013 and 2015 where commitments

totalled $1 billion and $686 million, respectively.

The forward momentum of Thailand’s renewable energy

sector has been largely predicated on the government’s

Power Development Plan (PDP), a national energy directive

published every few years.

As such, project investments have largely stalled ahead of

the government’s upcoming publication of PDP later this

year.

Since the most recent PDP 2015-2036 publication,

Thailand’s clean energy project finance market totalled

about $1.37 billion in 2015 and $289 million in 2016. Project

financing in the first time months of this year dramatically

fell to $91 million.

Clean Energy Pipeline’s figures show that market activity

tends to spike after the publication of a PDP.

On the solar side, project financing slowed to $179 million

in 2014 but then shot up to $686 million in 2015 after the

PDP issue and $300 million in 2016. Solar financing has

since contracted to $91 million in 2017.

Reports have suggested that the next PDP could be

published as early as this year.

6 Conergy

M A L AY S I A

Thanks to Malaysia’s overarching Renewable Energy Act

2011, the country has remained an attractive proposition for

solar developers and investors.

The early adoption of a FiT mechanism under the

renewables law resulted in solar project financing going

from just $25 million in 2011 to an average spend of $253

million per year since 2012.

The falling global cost of solar power has meant Malaysia

has had to adapt its level of support, with lower FiT rates

first announced in 2014 and most recently coming into

effect for solar PV in 2016.

However, Malaysia’s opening of competitive auctions in

2016 for large-scale solar plants has proved a successful

venture and has significantly boosted solar financing

commitments in the country.

As such, Malaysia secured what was then a record $386

million of solar project investment in 2016, only to be

usurped by the $418 million of solar commitments made to

date in 2017.

CLEAN ENERGY PROJECT FINANCE IN SOUTH EAST ASIA BY SECTOR

SOLAR

WIND

BIOMASS

GEOTHERMAL

OTHER

SOLAR

WIND

BIOMASS

GEOTHERMAL

OTHER

2016 TOTAL

INVESTMENT ($2,763M)

32%

21%7%

36%

4%

32%

29%

32%

1%

13%

2017YTD TOTAL

INVESTMENT ($3,484M)


Project Country Deal value ($ million)

Sponsors Debt providers

Merchang, Jasin and Gurun solar PV portfolio (200MW) Malaysia 368.00 Scatec Solar N/A

Subic Bay Freeport solar PV plant (100MW) Philippines 216.00 Emerging Power N/A

Barangay Tinampaan, Cadiz City solar PV portfolio (132.5MW) Philippines 211.38 Equis Funds Group / Soleq Solar / Gregorio Araneta

N/A

La Carlota II and Manapla (IslaSol I&II) solar PV plant (80MW) Philippines 172.80 Bronzeoak Philippines / The Philippine Investment Alliance for Infrastructure (PINAI)

N/A

Solar PV plant in Thailand by LDK Solar (67MW) Thailand 144.72 Energy Absolute Public Company Ltd.

N/A

B.Grimm Yanhee solar PV plant (59.7MW) Thailand 139.30 B.Grimm Group Bangkok Bank PCL

Solar PV plant located in San Carlos City by Aboitiz Power Corp and SunEdison (59MW)

Philippines 127.44 SunEdison Inc. / Aboitiz Power Corp. Banco de Oro Unibank Inc.

Toledo City, Cebu province Solar PV plant (60MW) Philippines 120.00 SunAsia Energy Inc. N/A

Solar PV portfolio in Thailand by Superblock (55.5MW) Thailand 118.80 Superblock N/A

Sepalco Solar PV plant (50MW) Philippines 108.00 MRC Allied Inc. N/A

TOP TEN SOLAR PROJECT FINANCE (2015-YTD)

8 Conergy


Q&A with Alexander LenzCEO Conergy Asia & ME

most attractive support schemes for utility-scale solar projects?

With utility-scale solar, a number of incentive systems are in place for utility-scale solar systems. While the incentives are not as attractive as in the years past (lower FIT rates, capacity caps, project restrictions), they continue to attract interest from a number of developers.

These incentives include:

Thailand: Agro-solar Phase 2 - the winners were announced in June 2017 @ a FIT of $0.12/kwh for 25 years. In addition, 300 MWp of solar hybrid PPAs were also announced by the Thai Energy Policy and

Malaysia: Phase 2 of the utility-scale solar auctions with a capacity of 460 MWp were announced in 2017.

Vietnam: Although the solar PPAs in Vietnam (at approximately US$0.0935/kwh) have been deemed not bankable by a number of business groups (due to

and dispute resolution risks), a number of developers still remain keen to pursue this market.

Indonesia: Although a solar FIT is in place in Indonesia, these rates are not the most attractive when compared to other SEA markets which makes the Indonesian solar market slightly less interesting for developers.

Are there any markets in South East Asia that support rooftop solar power?

In the rooftop solar sector, the Philippines has some

of the highest electricity rates in the region….. residential and commercial consumers can pay as much as US$0.18/kwh and US$0.16/kwh respectively.

With these rates, rooftop solar energy is already

Grid parity in the Philippines for rooftop solar has been achieved even as far back as a few years ago.

In Thailand, while there has been a limited uptake of solar rooftops in Thailand, rooftop installations have advanced to a certain extent with consumer owned rooftop systems and some leasing model projects, due to the decline in solar module costs.

How does the future look for solar power in markets such as S.E. Asia? (in light of the falling cost of the technology). Will it ever be cost competitive with conventional power?

in energy demand in these markets as a result of their growing economies and populations. In addition, the conditions in South East Asia are ideal for solar: from good irradiation levels, reasonable availability of land, low cost of labour and to a certain extent attractive

immediate potential. They not only have a solar FIT system in place but their reliance on importing coal to cover 50% of their electricity needs has also brought about a high interest for alternative energy sources.

Although Thailand could be considered slightly

rooftop PV and utility PV with the government’s (albeit

10 Conergy

Indonesia that rely heavily on diesel for primary power

potential for solar hybrid projects.

Myanmar will certainly come into the focus in the long-term as well - due to the size of their population

Myanmar has amazing potential.

In addition, the Philippines would in theory be best positioned for the highest short term potential given its solar track record and the response the industry has shown during the 2 FIT rounds. With the huge volumes of solar deployed in the country, the country can take advantage of economies of scale which makes solar even more competitive. But discontinuing the FIT programme without a transparent and working bilateral PPA market has left the solar progress hanging for most parts.

The Philippines has the highest end-user electricity price in all of SEA (as much as US$ .18/kwh), which implies that solar PV is already at socket parity/grid parity in the Philippines and is competitive with a number of traditional power generation technologies.

Meanwhile, a number of the newly emerging SEA countries have very limited power infrastructure in place. But they are determined to build capacities in the short to medium term and they are seriously considering using RE technologies.

compare with that in Europe? (I.e. the type of banks used, cost of funding, risks).

(government, policy/regulations, counterparties

So the cost of debt is higher in SEA than in Europe. In some markets there are strong local banks so

Philippines). Some markets are also currently considered unbankable by foreign commercial banks (i.e. Vietnam )

What are some of the regulatory hurdles that

Asian markets to boost solar/renewables deployment?

The project approvals/permitting process needs to be streamlined and made transparent. The permitting process is currently unclear and is generally cumbersome/time consuming in SE Asia. Too many government bodies are involved (on both the national/local levels) in approvals. This wastes a lot of time.

There needs to be a more stable regulatory environment in SEA (not changing every 6 months like in the case of Indonesia’s FIT for example). The FIT policy should be more consistent, so that developers can predict revenue streams for their projects and spend time managing all the other risks involved with development in SE Asia.

Obtaining adequate guarantees where necessary can

power is a government owned entity with a very poor

government to give comfort to the banks lending to the project.

would like to hit in the market over the next 12/18 months?

project in Vietnam.

although those markets are moving very slowly. But we expect to secure further contracts for utility scale solar in Thailand from Phase 2 of the Agro-solar program and in the Philippines for projects being built on a bi-lateral PPA basis and in the near future through implementation of the RPS.

In parallel a number of our existing clients are looking into commercial & industrial rooftop projects for which we are – with all our experience in this segment from the past decade – perfectly placed.

In addition to building new solar power plants,


are currently providing operations and maintenance services for most of the plants we’ve built and recently set up our regional remote operations centre in Manila, where we monitor the progress and performance of all solar plants under our

we expect to have closed more O & M contracts even

Alexander Lenz is responsible for Conergy’s business

Conergy Asia & ME is one of the region’s largest downstream solar companies — specializing in the

Clean Energy Pipeline understands the global renewable energy investment landscape and delivers real-time news, transaction data and analytics on this increasingly complex sector. Our in-house team identifies the latest investment, M&A, project finance, fund and regulatory announcements. In addition, we deliver proprietary content including interviews, analysis, insight reports and events.

Find out how we can support delivering on your business objectives.

Sonja van Linden Tol on +44 (0)20 7970 4909 or [email protected]

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