review of existing bankable investment opportunities in ... · report title review of bankable...

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!"#$%&'()*'+%,-)'%.*"/%0*1%

234%56%.37"4%8,9-*4'+)':%

REVIEW OF BANKABLE INVESTMENT OPPORTUNITIES IN FIJI Final Report 29 October 2014

!

!

About IT Power

The IT Power Group, formed in 1981, is a specialist renewable energy, energy efficiency and carbon markets consulting company. The group has offices and projects throughout the world.

IT Power (Australia) was established in 2003 and has undertaken a wide range of projects, including designing grid-connected renewable power systems, providing advice for government policy, feasibility studies for large, off-grid power systems, developing micro-finance models for community-owned power systems in developing countries and modelling large-scale power systems for industrial use.

The staff at IT Power (Australia) have backgrounds in renewable energy and energy efficiency, research, development and implementation, managing and reviewing government incentive programs, high level policy analysis and research, including carbon markets, engineering design and project management.

About ReEx Capital Asia

ReEx Capital Asia is a leading clean energy investment banking and consulting company specializing in the Asia Pacific region with headquarters in Singapore and representation in New Zealand, Indonesia and the Philippines. The company offers the following services and skillsets:

• Capital raising for renewable energy infrastructure, energy efficiency projects, cleantech startups, green product & services companies (US$1-100m)

• Award-winning Advisor: strategy, financial structuring, M&A, due diligence, valuation, business modelling, feasibility study, market analysis, etc.

• Decisive mix of financial & technical skills in energy, waste and water sectors with deep Asia Pacific market expertise and extensive industry network

• 100+ clean energy transactions over past 15 years with aggregate value in excess of US$20 billion

• Track record with international clients, major development financial institutions, commercial banks, corporates and family offices.

About this report

This report is part of work commissioned by the UNDP to help Fiji meet its Fiji Renewable Energy Power Project (FREPP) goals. This work is intended to contribute to the revitalization of the renewable energy market in Fiji, especially where IPPs are concerned. Of particular interest is the policy framework regulating both public and the private investments in renewable energy, and the incentives that could be applied to stimulate growth in the sector.

!

ITP/A0141 – October 2014 ii!

Review of Bankable Investment Opportunities in Fiji

The work is divided into three components, a) the development of standard Power Purchase Agreements, b) the formulation of Investment Information Packages, and c) the assessment and development of Renewable Energy Incentive Schemes.

This report contributes to part b) the formulation of Investment Information Packages.

!

ITP/A0141 – October 2014 """!

Review of Bankable Investment Opportunities in Fiji!

!

Report Control Record Document prepared by:

!

Document Control

Report title Review of Bankable Investment Opportunities in Fiji

Client Contract No. UNDP RFP/FJI10-007-14 ITP Project Number A0141

File path

Client UNDP Client Contact Client Contact

Rev Date Stat

us Author/s Project Manager Approved

1 6th October 2014 Draft Yanis Boudjouher Muriel Watt Muriel Watt

2 29th October 2912 Final Yanis Boudjouher Muriel Watt Muriel Watt

#!$%&'()!(&!(&*+)"'+,"()!-.(('")*!,(!/'%!0(-/1%),'!$&%$+&%0!23!45!6(7%&!8#/',&+9"+:!6,3!;,0!+--%$,'!,.%!<(99(7")*=!

>? @()-9/'"()'! +)0! <"*/&%'! $&%'%),%0! ")! 0&+<,! 0(-/1%),'! +&%! '/2A%-,! ,(! -.+)*%?! 45! 6(7%&! 8#/',&+9"+:! 6,3! ;,0! +--%$,'! )(!&%'$()'"2"9",3!<(&!,.%"&!/'%!(/,'"0%!(<!,.%!(&"*")+9!&%$(&,?!

B? 5.%!0(-/1%),!"'!()93!,(!2%!/'%0!<(&!$/&$('%'!%C$9"-",93!+*&%%0!,(!23!45!6(7%&!8#/',&+9"+:!6,3!;,0?!D? #99!&%'$()'"2"9",3!+)0!&"'E'!+''(-"+,%0!7",.!,.%!/'%!(<!,."'!&%$(&,!9"%!7",.!,.%!$%&'()!(&!(&*+)"'+,"()!7.(!-.(('%'!,(!/'%!",?!

!

ITP/A0141 – October 2014 iv!

Review of Bankable Investment Opportunities in Fiji

LIST OF ABBREVIATIONS

AUD Australian Dollar BPNG Bank of Papua New Guinea BSP Bank South Pacific COD Commercial Operation Date EU European Union FCC Fiji Commerce Commission FDOE Fiji Department of Energy FEA Fiji Electricity Authority FIT Feed in tariff FNPF Fiji National Provident Fund FREPP Fiji Renewable Energy Power Project FS Feasibility Study FSC Fiji Sugar Corporation HIL Hawkins Infrastructure Ltd IPP Independent Power Producer ISFEFF Import Substitution Facility and Export Finance Facility kW Kilowatt, unit of power

kWh Kilowatt-hour, unit of energy (1 kW generated/used for 1 hour)

kWp Kilowatt-peak, unit of power for PV panels tested at STC LD Liquidated Damages PBS Pacific Building Solutions PPA Power Purchase Agreement PV Photovoltaic RBF Reserve Bank of Fiji SE4ALL Sustainable Energy for All SEFF Sustainable Energy Financing Facility SOE State Owned Enterprises T&D Transportation & Distribution TWIL Tropic Wood Industries Limited UAE United Arab Emirates UNDP Untied Nation Development Program WTE Waste to Energy

!

ITP/A0141 – October 2014 F!

Review of Bankable Investment Opportunities in Fiji!

!

CONTENTS

1! INTRODUCTION 2!

1.1! PROJECT BACKGROUND 2!1.2! MEETINGS 2!

2! RENEWABLE ENERGY POTENTIAL OPPORTUNITIES IN FIJI 4!

2.1! POWER SECTOR AND RENEWABLE ENERGY OVERVIEW 4!2.1.1! POWER SECTOR IN FIJI 4!2.1.2! RENEWABLE ENERGY OPPORTUNITIES 4!2.2! RENEWABLE ENERGY PARTICIPANTS IN FIJI 6!2.2.1! GOVERNMENT AGENCIES 7!2.2.2! FINANCIAL INSTITUTIONS 8!2.2.3! PROJECT DEVELOPERS 11!

3! LIST OF EXISTING BANKABLE PROJECTS 17!

4! CONCLUSIONS AND NEXT STEPS 20!

APPENDICES 23!

APPENDIX 1: MEETING MINUTES 23!APPENDIX 2: FEA IPP PROCESS 34!APPENDIX 3: UNSELECTED PROJECT LIST 36!APPENDIX 4: REFERENCE MATERIALS 38!!

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 2!

1 INTRODUCTION

1.1 Project Background

The United Nations Development Program (UNDP) Fiji and Department of Energy (DOE) initiated a consultancy assignment on the formulation of an independent power producer (IPP) and investment framework for renewable energy power generation projects in Fiji. As part of the UNDP scope of works, ReEx Capital Asia has been subcontracted by IT Power and UNDP to conduct one of the components — the formulation of Investment Information Packages, which includes the following activities:

i) Review and Listing of Bankable Investment Opportunities

ii) Preparation of Investment Information Packages

iii) Organization and Conduct of an Investors’ Forum

Suggestions related to invitees and the programme for the forum, as well as feedback from similar events are presented in the conclusion and next steps section of this report.

This report focuses on the first item: to discuss with stakeholder and government agencies and to identify and list potential renewable energy projects.

1.2 Meetings

ReEx Capital Asia CEO, Yanis Boudjouher, attended meetings in Fiji between the 25th and the 29th of September 2014. The schedule of the meetings is provided in the Table 1 below and detailed meeting minutes are provided in Appendix 1.

Table 1: Schedule of Meetings with Stakeholders, Fiji, 25-29 September 2014.

Date Organization People involved

25 Sep 2014 Bank of South Pacific

Kevin McCarthy (Country Manager) and Ashleigh Matheson (Chief Risk Officier), Yanis Boudjouher (ReEx Capital Asia)

25 Sep 2014 Clay Energy Bruce Clay (Clay Energy, MD), Yanis Boudjouher (ReEx Capital Asia)

25 Sep 2014 Fiji Department of Energy (DOE)

Miriama W. Kolinisau (Assistant Project Manager) and Paula R Katirewa (Manager), Yanis Boudjouher (ReEx Capital Asia)

25 Sep 2014 Fiji Commerce Commission

Bobby J Maharaj (CEO) and Sundhia Ben (Research Officer – Accounting, Yanis Boudjouher (ReEx Capital Asia)

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 D!

Date Organization People involved

25 Sep 2014 Hawkins Infrastructure

James Hawkes (GM, International Business Development), Yanis Boudjouher (ReEx Capital Asia)

26 Sep 2014 Fiji Energy Authority Hasmukh Patel (CEO), Eparama Tawake (GM Generation), Karunesh Rao (Executive Projects & Public Relations Manager), Yanis Boudjouher (ReEx Capital Asia)

26 Sep 2014 Naboro Landfill / DOE / Department of Environment

Mark Hirst (Naboro, Plant Manager), Miriama W. Kolinisau (DOE, Assistant Project Manager), Rahul Dutt (DOE, Environment Officer, Naboro Landfill Operations), Yanis Boudjouher (ReEx Capital Asia)

26 Sep 2014 Pernix Michel N. El-Rahi (GM), Abhyash Chand (Pernix Regional Financial Controller), Yanis Boudjouher (ReEx Capital Asia)

26 Sep 2014 Fiji Development Bank

Tevita Madigibuli (GM Relationship & Sales), Candice Hesaie (Research & Business Development Officer), Yanis Boudjouher (ReEx Capital Asia)

29 Sep 2014 Fiji Sugar Corporation

Muthu Nambiyappan (Energy Projects Manager), Jakir Hussain (Electrical Systems Coordinator), Yanis Boudjouher (ReEx Capital Asia)

29 Sep 2014 Tropik Wood Mr Vimlesh Kumar (Company Secretary, GM Finance & Administration), Yanis Boudjouher (ReEx Capital Asia)

29 Sep 2014 Sunergise Ajay Raniga (Partner), Yanis Boudjouher (ReEx Capital Asia)

29 Sep 2014 CBS Power Solutions

Ajay Prasad (GM South Pacific Region), Yanis Boudjouher (ReEx Capital Asia)

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!


2 RENEWABLE ENERGY POTENTIAL OPPORTUNITIES IN FIJI

2.1 Power Sector and Renewable Energy Overview

2.1.1 Power Sector in Fiji

Traditionally, Fiji has relied on high cost, imported diesel for power generation. However, given the crude oil hikes and global volatility in recent decades, high energy cost has become a big obstacle for the development of the country. To tackle the energy issues, the Fiji government has implemented renewable energy incentives to lessen the dependence on fuel imports and support the objective to provide 81% of the country’s electricity generation from renewable energy sources by 20201. The Fiji Electricity Authority (FEA) has completed a Power Development Plan to 2020 which provides the roadmap for achieving that target. FEA plans to invest around FJD$1.2 billion up to 2020, in parallel with around FJD$300 million of private investment from Independent Power Producers and Public Private Partnership arrangements2.

2.1.2 Renewable Energy Opportunities

In contrast to some of its neighbouring countries, Fiji has access to many natural resources that can be converted into electricity, such as hydro, biomass, sun, wind and wave energy. The Government of Fiji aims to develop policies, tariff structures and frameworks to allow a balanced development of these resources, supported by public and private stakeholders.

Reviews of renewable energy potential and barriers have been detailed in numerous reports including:

- Rapid Assessment and Gap Analysis, from the Sustainable Energy for All (SE4ALL), and

- Pacific Lighthouses – Fiji, from IRENA.

The intent of the current report is not to provide another review of these technologies but rather to report on existing bankable projects (see definitions in Section 3) using these technologies and based on discussions with stakeholders.

The following sections provide a selection of the most relevant technologies, mostly derived from the stakeholders’ perspectives (collected during interviews). They intend to provide !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

1 The proposed new national targets for the Government with regard to energy access, renewable energy and energy efficiency are specified in the Sustainable Energy for All (SE4All) report “Rapid Assessment and Gap Analysis” (http://www.fdoe.gov.fj/images/fiji_se4all_report.pdf). While the report has been endorsed by Cabinet, the draft National Energy Policy 2014 that includes these targets is yet to be endorsed as of the date of this report 2 FEA Power Development Plan 2010-2020

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 K!

background information to explain why some sectors have more bankable projects than others.

Hydro

Hydropower is a major electricity resource in Fiji, representing 63.6% (525,261MWh)3 of power generation in 2012. The country has substantial hydroelectric potential which exists around the Nandrau Plateau of Viti Levu (the main island), an area of about 600 km2 at an average altitude of 1,000 m and subject to an average annual rainfall of about 3,300 mm. The potential for untapped hydro-electricity generation is estimated at about 83 MW on the two main islands.

Hydropower projects are favoured by the FEA has they provide baseload power. Nonetheless, they are exposed to droughts, as experienced very recently, where the FEA had to use additional diesel engines4.

Wind

The Fiji islands lie in the tropical trade wind zone of the Pacific Ocean with reliable but relatively low-speed sea breezes. A recent modelling analysis indicated that most of the Fijian island wind speeds range between 2 m/s and 7 m/s with only few locations with wind speeds above 7 m/s5. The country also experiences at least one tropical cyclone per year with severe wind speeds that could exceed 200 km/h6 and could potentially damage wind turbines if not built properly. So far there is only one 10MW wind farm (Butoni plant), which was commissioned in 2007 in Sigatoka for a total investment cost of USD $34m. The generation output has been disappointing, with an average plant load factor of 6.3% between 2007 and 2013, due to numerous issues7.

Solar

Solar PV has been a well-developed technology for many years around the world. Fiji benefits from high solar irradiance rates ranging from 4.5 to 5.7 kWh/m2 (according to NASA’s data) across different islands. However, although solar power is widely used off-grid, the grid-connected market is not well developed in the country. Power Purchase Agreement (PPA) prices for base load generation were at FJD$23c/kWh before being recently increased to FJD$33.08c/kWh. Due to its intermittency, FEA used to apply a discount and agreed to buy solar power at FJD$15c/kWh. These prices were one of the factors that has prevented grid-connected solar PV power from really taking off in Fiji. Other factors include solar PV technology prices (before they decreased significantly and rapidly recently), lack of trained installers and agreed standards (these are now being addressed), etc. Although to date most

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

3 FEA 2012 Annual Report 4 Additional diesel plants had to be hired by FEA during the visit to Fiji for this report in October 2014 5 Wind Speed Modelling of Viti Levu and Vanua Levu, Fiji, GL Garrad Hassan, February 2013 and Regional Energy Officials Meeting, April 2009 6 E.g. Cyclone Evan that hit Fiji in December 2012 7 FEA Annual Report 2013 (http://www.fea.com.fj/wp-content/uploads/2014/08/FEA-Annual-Report-2013.pdf)

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!


customers installing PV have exported very little of the solar power they have generated, the new IPP PPA tariff at FJD$33.08c/kWh will certainly bring new players into the market. The country has already seen a few serious first movers offering solar PV roof-top systems to residential, commercial and industrial customers. We expect more solar players entering the market in the near future.

Biomass / Biogas

Biomass resources in Fiji mainly consist of bagasse and forestry residues, both of which are already used for generating power and producing heat on a large scale, providing 50% of gross energy use in Fiji8. The existing biomass plants are run by State Owned Enterprises Fiji Sugar Corporation (FSC) and Tropik Woods Industries Limited (TWIL), producing steam and electricity for their own use and selling excess power to the grid / FEA. FSC, TWIL and FEA have reported during interviews selling / buying the excess electricity at the new PPA price of F$33.08/kWh.

According to FEA, 2.4% of total power was generated from FSC and TWIL in 2012. With Fiji’s falling sugar production, securing supply of bagasse may become an issue for existing and future biomass power generation using that feedstock. Alternative sources are being explored to provide year-round generation. Land access and location, security of feedstock supply and logistic are the key factors for a successful biomass plant. TWIL estimated that at least 1,000 hectares of land plantation area is required for every 2MW capacity, ideally within 40km radius of the power plant site to avoid high transportation and logistics costs.

The agriculture and the animal husbandry (piggeries, dairy cattle) sectors in Fiji produce feedstock that could support the development of small-scale biogas installations9. The methane generation of the Naboro landfill could also be a source for biogas power generation.

One should note that droughts usually affect both hydro power plants and biomass supply to power plants at the same time. That consideration should focus development on other less correlated renewable energy production technologies (e.g. solar).

2.2 Renewable Energy Participants in Fiji

During the visits, ReEx Capital Asia held information gathering meetings with the main stakeholders from government, financial institutions and project developers (please see meeting minutes in Appendix 1). The following sections give a brief summary of their respective views and involvement in the renewable energy sector.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

8 Pacific Lighthouses, IRENA, 2013 9 Renewable Energy Readiness Assessment Fiji – Draft, IRENA, April 2014 and Review of the Fiji National Energy Policy, Economic Consulting Associates, July 2013. The DOE installed 20 biogas pilot operations using animal husbandry although they were used for cooking and not for power generation

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 L!

2.2.1 Government Agencies

The following list of Government agencies is not exhaustive and does not cover the entire map of institutional entities dealing with the energy sector in Fiji10. The section gives instead a perspective on the renewable energy sector from the entities interviewed (please see minutes in Appendix 1).

FEA

The Fiji Electricity Authority (FEA) is a wholly Government owned statutory authority responsible for generation, transmission and distribution of electricity on three major islands – Viti Levu, Vanua Levu and Levuka (Ovalau), which account for approximately 90% of the country’s population. The installed generation capacity is approximately 240MW, comprising 80MW Monasavu Hydro Scheme and 40MW Nadarivatu Hydro Scheme in Viti Levu and about 112MW of diesel capacity in 14 stations on the three main islands.

Challenges and Incentives Reported in the Interview:

! A robust power network is required to support the use of distributed energy. Most of the FEA power distribution system is old and obsolete and has been in service for more than 30 years11. FEA considers that it needs 24/7 power supply to avoid intermittency issues (Customer satisfaction is one of FEA’s KPIs, which is directly and negatively impacted by power outages);

! FEA has a preference for hydro and biomass generation for their ability to deliver baseload power. FEA mentions that it has not seen any solar developers with strong enough feasibility studies and business development plans to provide them with PPAs;

! FEA notes that there is a project submission process in place (see the submission letter provided to IPP candidates in Appendix 2);

! FEA PPA rate is FJD$33.08c/kWh as instructed by FCC, which is based on their displacement cost model. According to FEA, that PPA price should be valid until all the diesel generation is displaced and for committed power only. According to FEA, there is a small window now for IPPs asking for FJD$33.08c/kWh until diesel generation is displaced by new hydro plants; Although constructing new hydro projects to fill that gap could take a few years, one may expect FEA to renegotiate the actual PPA rate then;

! There are 3 hydro projects that have been identified in July this year and are currently undergoing feasibility study by the European Union (see list of projects in section 3).

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

10 For a more exhaustive map of these entities please refer to the Review of the Fiji National Energy Policy, Economic Consulting Associates, July 2013 (Section 2) 11 FEA 2013 Annual Report (Page 24)

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!


FDOE

The Fiji Department of Energy (FDOE) is in charge of 4 main areas: national energy planning, renewable energy (mainly hydro site surveys and resource assessment), rural electrification, and energy conservation and efficiency (public awareness). During the meeting, existing RE projects were discussed with stakeholders as below:

! Solar project from Astronergy

! Biomass projects (Tropika with Gimko, Fiji Sugar Corporation)

! Wave energy project

! Hydro projects

FCC

The Fiji Commerce Commission (FCC) is a statutory organisation responsible for fair trade, competition and consumer protection regulation in the Fiji Islands. The Commission is an independent statutory body that seeks to protect consumers and businesses from restrictive and unfair trade practices. The FCC conducted an audit at FEA in 2011/12 and decided to reassess the tariffs applicable to IPPs, based on an opportunistic cost approach: average cost of generation using fossil fuel (diesel) is 47c, average T&D rate is 12.67c leading to the proposed IPP price of 33.08c, so that FEA can still make a small profit instead of making a 10c loss due to the subsidized retail tariff12.

The key barriers to RE development were also discussed during the meeting:

! IPP tariff rate: it was FJD$8c/kWh in 2010/11 now adjusted to 33.08c/kWh, which is a

floor price instructed to FEA, but IPP prices could be higher for fully fledged IPP (i.e.

committed firm capacity)

! FEA is a monopoly, which may hinder the process; the FCC has suggested to form

an independent entity, which is already drafted in the proposed 2014 National Energy

Policy

! Lack of an IPP framework, including a clear application / agreement process for IPP

applicants, which needs to be put in place.

2.2.2 Financial Institutions

The following list of financial institutions is not exhaustive and does not cover the entire map of financial entities dealing with the energy sector in Fiji13. The section gives instead a perspective on the renewable energy sector from the entities interviewed (please see minutes in Appendix 1). !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

12 IPP Rates – Second Phase: Full IPP rates, Fiji Commerce Commission, May 2014 13 For a more exhaustive map of these entities please refer to the Review of the Fiji National Energy Policy, Economic Consulting Associates, July 2013 (Section 2)

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 M!

Bank of South Pacific

About the Bank:

Bank South Pacific (BSP) is one of the largest banking organisations in the South Pacific. BSP expended its business from Papua New Guinea to Fiji, Solomon Islands and Niue (50% of BSP shares are owned by Bank of Papua New Guinea (BPNG) and 10% by World Bank / IFC14).

Interest in RE projects:

BSP is interested in financing renewable energy projects but has not found the right opportunity. It already has experience in the RE sector, for example through its previous investment in a US$15m hydro project in PNG. BSP is looking at RE projects with moderate risk and could provide non-recourse debt, depending on the project credit quality and sponsor credibility.

The bank still sees barriers for RE financing, such as the lack of collateral options for projects with lower credit worthiness (e.g. some roof-top solar projects) or loans in US$ where the bank might not be competitive.

ANZ Bank

About the Bank

ANZ is the leading bank for retail and institutional customers in Fiji with approximately 43% (as of December 2012) market share across all segments (60% in institutional)15.

ANZ offers full banking services to customers, including retail and business accounts, and is also the provider of Rural Banking services.

The bank is one of the most active in the renewable energy sector, with several joint initiatives with the World Bank, FDB and UNDP.

Interest in RE Projects

FEA recently obtained a US$30 Million commercial loan from ANZ Bank to fund part of the Nadarivatu renewable hydro power project (alongside the China Development Bank).

ANZ Bank is also one of the few participating financial institutions in the Sustainable Energy Financing Project (SEFP) loan scheme 16 providing customers with low rate loans to purchase selected renewable energy / energy efficiency equipment.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

14 IFC investment of US$140m for the 10% stake 15 http://www.investmentfiji.org.fj/pages.cfm/for-investors/key-infrastructure-services/banking.html

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 10!

ANZ Bank is in discussions with project developers for financing RE projects in Fiji (see list of projects below).

The Reserve Bank of Fiji (RBF)

About the Bank

The functions, powers, and responsibilities of the Bank specified in the Reserve Bank of Fiji Act, 1983, are as follows:

- To regulate the issue of currency, and the supply, availability and international exchange of money;

- To promote monetary stability;

- To promote a sound financial structure; and

- To foster credit and exchange conditions conducive to the orderly and balanced economic development of the country.


In November 2010, the Reserve Bank of Fiji extended the eligibility list on its Import Substitution and Export Finance Facility to include renewable energy for import substitution funding. The Facility is set up to assist exporters, large scale commercial agricultural farming, and renewable energy businesses to obtain credit at concessional rates of interest. The Facility is provided through the commercial banks, Fiji Development Bank and licensed credit institutions, and provides back-to-back finance with a limit of FJ$40 million. The amount of advance under the Facility is based on respective credit assessments and is limited to a maximum of FJ$1million per business (amounts greater than FJ$1million may also be granted in special circumstance).

In February 2012 the Reserve Bank of Fiji announced that, under the provision of Section 44 of the Reserve Bank Act, with effect from 29 February 2012, commercial banks in Fiji are required to hold 2 per cent of their deposits and similar liabilities in loans to the renewable energy sector17.

Fiji Development Bank

About the Bank:

The Fiji Development Bank (FDB) was established under the Fiji Development Bank Act (Cap 214) in 1967. FDB provides finance for projects that contribute to the development of the Fiji economy and improve the quality of life for the people of Fiji. Loan funds are provided for agricultural, small and medium enterprises, corporate and micro projects. The

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

16 DOE is the executive agency for the World Bank in implementing the scheme. ANZ and FDB are the participating financial institutions 17 http://www.investmentfiji.org.fj/pages.cfm/for-exporters/finance-assistance-schemes/export-finance-facility-eff.html

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 >>!

government also uses the FDB as a financial instrument in its development projects/plans and special assistance programs that may be necessary.

Interest in RE projects:

To encourage sustainable energy and reduce reliance of fuel importation, a series of facilities have been provided by FDB:

! Sustainable Energy Financing Facility (SEFF): 5 year loan available for RE projects such as hydro, solar etc., up to $1m at 5% annual rate.18

! Import Substitution Facility and Export Finance Facility (ISEFF): a facility partially guaranteed by the World Bank to assist exporters, large scale commercial agriculture farming and renewable energy businesses to obtain credit at a concessional rate of interest. Businesses can borrow up to $1m at 5%19 annual rate for up to 5 years.

! Project Lending: an amount of up to FJD$40m with partial guarantee from the World Bank, of which FJD$18m is allocated for RE sector including:

- FJD$5m through the Export Credit Facility

- FJD$4m already deployed, mainly loans to commercial roof-top solar PV projects (50% guaranteed by the World Bank) and bio-diesel (coconut oil) projects

- FJD$3m of project pipe (FJD$2m solar, FJD$1m for geothermal project exploration)

Westpac

About the Bank

Westpac has a longstanding presence in Fiji (since 1901). It provides personal and business banking, corporate banking, foreign trading and international services.


Westpac is in discussion with project developers for financing RE projects in Fiji (e.g. biomass project – see list of projects below).

2.2.3 Project Developers

The following list of project developers is not exhaustive and does not cover the entire map of developers dealing with the energy sector in Fiji. The developers below have been selected based on their existing and active involvement in the renewable sectors (or active

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

18 Subject to change. 19 Subject to change.

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 12!

intention to move into this sector) with the ability to develop medium to large projects. The section is mainly based on interviews (please see minutes in Appendix 1).

The list is split between private developers and state owned enterprises.

Private Developers

Clay Energy

About the Company:

Based in Suva, Fiji, Clay Energy specialises in renewable energy power systems and design of remote infrastructure services. They supply a range of renewable energy equipment and offer design, installation and maintenance services in the Pacific region. Clay Energy has been operating from its base in Fiji for the last 15 years, and has carried out over 300 installations (wind, solar, hybrid technologies) in Fiji, Tonga, Vanuatu, Samoa, Cook Islands, Solomon Islands and Kiribati. Clay Energy partners with Sunergise and provides them with Engineering Procurement and Construction (EPC) services.

RE Experience:

In general, solar systems in Fiji are relatively small: residential system sizes are around 2 kW, and industrial and commercial systems average 70 kW. Clay Energy has also experience in off-grid hybrid systems for remote villages and resorts. It recently won a tender led by the United Arab Emirates (UAE) for building a hybrid 550kW diesel-solar mini-grid project in Fiji, which is part of the US$5m UAE grant for RE allocated to Fiji.

RE Opportunities and Challenges:

! There is a great potential for converting diesel mini-grids into solar hybrid solutions in

the islands; also grid connected solar systems are becoming a viable option.

! The approval for connection of solar PV systems by FEA is relatively quick and well

established; the final inspection before commercial operations could be a bottle neck

due to lack of inspectors (c. 1 month)

! Ongoing trained O&M personnel is essential for ensuring quality project installations.

Some business associations have set up training programmes for installers but they

remain quite expensive (c.AUS$800 for the technical part), which could be a limiting

factor to the expansion of RE, especially solar roof-top.

Sunergize International

About the Company:

Sunergize International was founded in 2012 by a team of investors and entrepreneurs as the first pan-Pacific solar power utility serving the Pacific islands and New Zealand markets.

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 >D!

They provide design, financing, installation, monitoring and maintenance services for solar systems. They partner with a few solar installers including Clay Energy mentioned above.

RE Experience:

Sunergize’s business model offers commercial customers guaranteed power savings with no upfront cost. The company has a strong presence in the roof-top solar market in Fiji. It has a team of 28 people. The company installed a 122 kW roof mounted system at Port Denarau Marina, the first off-grid system at Tokiriki Island, roof-mounted arrays at Golf Terraces, RB Patel Jetpoint, and Roosters Future Farms factory in Ba.

Potential RE Opportunities:

! So far all the projects are designed for self-consumption due to the low purchase tariff applied by FEA for excess power injected to the grid from solar systems (F$15c/kWh)20.

! IFC invested US$1m for 20% equity of Sunergize International and an additional US$1m for preferred shares to finance solar power installations in Solomon Islands, Papua New Guinea and Fiji. Sunergize is also considering raising additional capital to expand its capital-intensive business. The company is discussing with other potential investors such as ADB on that matter.!

Hawkins Infrastructure

About the Company:

Hawkins Infrastructure Ltd (HIL) is an established civil engineering contractor within the Asia Pacific infrastructure market offering asset planning, design, construction and maintenance. In June 2014, Hawkins and a joint venture partner Pacific Building Solutions (PBS) have been selected to complete the Nadi International Airport Modernisation project, a $50m, 16-month project.

RE Experience:

HIL has been involved in the development studies for several hydro projects in New Zealand and has recently completed the raising and strengthening of St Pat’s dam on the West Coast of the South Island. In Fiji, It has been contracted by FEA to develop the Qaliwana and Upper Wailoa Diversion Hydro projects, which is 18.6MW and 30MW respectively.

Potential RE Opportunities and Challenges:

! Hawkins Infrastructure is still negotiating with FEA on the structure of the PPA that will depend on FEA’s preferred structure for the projects (BOO, BOT, etc.); once agreed, Hawkins Infrastructure will be able to move forward with potential investors / co-developers!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

20 This may change to the FJD33.08c now stipulated by the FCC, if FEA accepts that this applies to intermittent renewables.

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 14!

! It is crucial to have government support, a IPP framework, and bankable PPAs to be able to close transactions with investors. !

Pernix

About the Company:

Pernix is a construction and power infrastructure company with integrated design and engineering capability. Pernix Group has a long and successful track record in the Fijian power industry, including having managed the expansion, upgrade and ongoing operations of the two largest power plants in Fiji over the past decade. Pernix currently operates and maintains those power plants under long-term contracts with FEA running through 2023, with over 72 MW of base load generation capacity.


! Pernix is planning to diversify away from the diesel business and actively expand into the RE sector. Discussions are ongoing to explore the new market. The company is also interested in becoming a co-developer or investor in RE projects.

CBS Power Solutions

About the Company:

CBS began operations in Australia in 1998, providing mainly standby power (battery solutions) to blue chip organisations. CBS opened offices in Fiji in 2006 where it provides renewable energy and contracting services.


CBS showed great interest in RE projects such as hydro, solar, biomass, where it is willing to look for opportunities as an EPC contractor.

State Owned Enterprises (SOE) Developers

Naboro Landfill

About the company:

The Naboro landfill is located approximately 24km from central Suva and is Fiji’s first and only landfill. Solid wastes transported to the site are compacted and covered with soil. The Department of Environment owns the landfill and HG Leach (Fiji) Ltd is mandated to operate the landfill. The landfill operator carries out standard day to day operations which involves reception of the waste, compacting and capping with clay soil.

Major Challenges:

! Increasing supply of municipal waste: the initial site was designed to receive 5,000 tonnes per month, but now the site receives 6,500 tonnes per month. The Department of Environment is managing a tender process for the site extension (estimated $10m project cost, to be confirmed by bidders and validated by the Ministry of Finance)

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 >K!

! Chinese developers came and looked at the possibility to install a $40m gasification plant but the project was eventually not considered as viable due to the amount of waste that the project would have required.

! A Feasibility Study (FS) has been done for a 10MW Waste to Energy (WTE) generation facility using pyrolysis technology. The FS is being reviewed by FEA.

Fiji Sugar Corporation

About the Company:

Fiji Sugar Corporation (FSC) is the government-owned sugar milling company having monopoly on production of raw sugar. It also produces electricity from bagasse, a bi-product of sugar cane. FSC supplies FEA with electricity in Lautoka and Labasa area during the crushing season for about six months.

RE Experience and Opportunities:

! In Labasa, FSC operates a 10 MW cogeneration plant and a 4WM steam turbine selling electricity at FJD$ 33.08c/kWh to FEA during harvesting seasons21

! In Lautoka, FSC operates a 20MW plant and the company is planning to add one more turbine of 12MW (8.5 MW to the gird) during harvesting season

! In Rarawai, a 40MW power plant is under development: a feasibility study and detailed project report are completed. FSC is preparing for tendering major items (boiler, turbine etc.). In terms of financing, a FJD$70m loan has been approved by the Government of India for the use of Indian technologies

! Ethanol Production: FSC produces about 100,000 tonnes of molasses per year, which provides a potential for the production of 20m litres of ethanol annually

! FSC is planning to build a master plan for renewable energy including the 20m litres of ethanol production, 60MW of new biomass capacity and solar PV on the FSC building; the total cost is estimated at FJD$200m

! Proper feedstock analysis will have to be carried out to ensure adequate supply for the envisaged capacity.

Tropik Wood Industries

About the Company:

The company is a state owned enterprise created in 1982 and based in Lautoka, Fiji. Tropik Wood Industries owns and operates sawmill and chip plants and produces woodchips that are exported to China and Japan. They also produce poles for FEA, fencing poles, shiplap and flooring. The domestic demand has picked up in the last few years and most of Tropik !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

21 The price has been confirmed both by FSC and FEA

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 16!

Wood production is for the domestic market. The company owns Fiji Forest Industries in Malau, Labasa, Tropik Wood Products Limited in Wairiki, Bua and the Tropik Energy Limited in Nadi, which is involved in power production from sawmill and chip mill residues.

RE Experience:

! Similarly to FSC, Tropic Wood is one of the two companies in Fiji providing electricity to FEA with a PPA from its 9.3MW wood-fired co-generation plant. The plant has suffered until recently from issues with boiler and other components reliability, preventing the plant from supplying the contracted quantity (it has been generating on average 3MW of load supply)

! The company recently formed a joint venture with Korea-based Gimco for construction of a US$35 million 10MW biomass-fired power plant in Nadroga, Fiji. The project will be financed by 30% equity and 70% debt with both local and overseas investors. Negotiations are on-going with existing partners to provide equity and debt.

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 >L!

3

3 LIST OF EXISTING BANKABLE PROJECTS

In general, a project is considered bankable if it is ready for investment (equity and debt). This means that, at a minimum, the project developers are able to provide a financial model and a project information memorandum that are detailed enough and to a standard acceptable to most of international investors (including international banks).

None of the projects identified during the visit to Fiji are at that stage due to either the absence of that information or the non-communication of that information to us (which would require a Non Disclosure Agreement and a proper mandate to do so). All of the project developers met during the visit were also very protective of their project information.

As a consequence, a broader definition of bankability has been used for the purpose of this report: projects that could be bankable based on the following criteria:

(i) projects well advanced in the development phase, already raising capital or near financial closure but may need additional funding;

(ii) projects under due diligence processes with identified financial institution(s) / investor(s);

(iii) projects less advanced in the development phase but worth starting to raise interest due to their profile (size, state owned companies, etc.).

Based on the above, the Investment Information Packages will be a portfolio of teasers rather than detailed project information memorandums. The teasers will have to be attractive enough to investors while not revealing confidential information. Project developers will also have to agree that they are comfortable for their project(s) to be mentioned in the Investment Information Packages.

Discussions with numerous stakeholders in preparation and during our visit to Fiji have allowed us to identify 18 RE projects, of which 11 are possible candidates for short to medium term bankability based on the above criteria. We suggest that they should be selected for further review for the Investment Information Packages and the Investors’ Forum in November.

The 11 projects are listed in Table 3 below. They can be split into 3 categories:

a) Projects near financial closure but that might require a last round of financing depending on the discussions with current partners (PRE / VUDA, Tropika Gimco);

b) Projects that have started to be marketed to potential investors, are starting or have started a due diligence process with an investor but may need more capital and/or co-investors (FSC, HIL, Sunergize and, possibly, GS Energy);

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 18!

c) Projects that are still at a development phase (e.g. Feasibility Studies, EPC discussions, etc.) but for which it is worth starting to raise interest (Naboro WTE, Astronergy and 3 EU hydro projects).

Table 2: Project Shortlist

Ref Name Technology Capacity Partners Status Categorie

Short-list for Investment Information Packages

1 Naboro Lanfill Municipal Solid Waste Waste to Energy

Approx. 10MW

DOE / FEA FS with FEA

C Yes, subject to FS

2 Pacific Renewable Energy Ltd (PRE) former VUDA Renewable Power Development

Biomass wood-chip

17.8MW FDB (up to FJD$10m), ANZ Westpac

DD with lenders (ANZ, FDB, Westpac)

B Yes, subject to confirmation of interest for additional capital

3 Fiji Sugar Corporation (FSC)

Biomass (captive bagasse)

40MW Government of India

FS done, DPR done, tendering major EPC items

A Yes, subject to confirmation of interest for additional capital

4 Tropika Gimco Bioenergy Ltd

Biomass (wood chip and dedicated energy crop)

10MW GIMCO (Korea)

Clearing land (6ha for plant)

B Yes, subject to confirmation of interest for additional capital

5 Qaliwana Hydro Project, and Wailoa Downstream Hydro Project by Hawkins Infrastructure

Hydro 17MW + 28.6MW

Formalising partnership with IFC

Discussions with IFC and FEA for conditions

A Yes

6 Sunergize Solar PV c.1MW rooftop

IFC (20% stake +

Capital raising

A Yes, subject to confirmation of

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 >M!

installed, pipeline of c.7MW including 1MW ground mounted

loan) FDB FJD$3m

interest for additional capital

7 Astronergy (TBC) Solar PV 10MW ground mounted (as a start)

TBC Early stage. Initial discussion with FEA

C Yes, subject to further information on the project

8 Downstream of Nadarivatu Hydro Project

Hydro c.8-10MW TBC FS by EU (expected Oct 2014)

C Yes but early stage feasibility that might limit the information available for investors

9 Wailevu Hydro Project, DAwara, Vanua Levu



10 Waivaka Hydro Project, Namosi



11 GS Energy MSW WTE 16MW TBC [A] Possible subject to further information on the project

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 20!

4

4 CONCLUSIONS AND NEXT STEPS

So far, there has been limited private sector investment in the power sector in Fiji, mainly due regulatory uncertainty, the absence of an effective IPP framework in place and low IPP tariffs.

After the September 2014 elections, it is expected that a number of foreign investors will reconsider their investment position in Fiji’s economy, although key challenges still remain such as policy uncertainty, business environment both for domestic and foreign investors, contract enforcement, access to finance, etc.22

This report has identified possible bankable projects that could be promoted to attract investors during an investors’ forum planned in November 2014. The list will have to be confirmed by further contacts with the project developers to validate their willingness to provide information on their projects, as well as their requirement to raise (private) capital.

The RE sector in Fiji is small. Players are often reluctant to provide information that could be circulated without their control with the risk of negatively impacting their projects. As a consequence, additional projects beyond the list provided may also be available. The Investors’ Forum should be a good opportunity to identify them and/or allow the project developers to meet with financiers.

The following next steps are suggested to UNDP / DOE in order to prepare for the Investors’ Forum:

! Validate the list of short-listed projects with UNDP / DOE;

! Approach the developers to confirm interest and gather more information on the projects;

! Develop Investment Information Packages for the Forum with the information available.

In the meantime, we suggest gathering information on the following items:

! The Prime Minister’s Green Growth Summit organised in Fiji in June 2014 by the Ministry of Strategic Planning Office (email sent to Ovini Ralulu requesting information on the outcome of the Summit);

! The SPC and BizClim Renewable Energy and Energy Efficiency Trade & Investment Forum held at the Westin Denarau Hotel, Nadi, Fiji from 8–9 August 2012;

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

22 Re-invigorating Private Sector Investment – Fiji, Asian Development Bank, 2013

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 B>!

! As FDB is involved in several projects identified, we suggest to have a discussion re. their exit strategy as that might bring additional opportunities for the private sector while providing more investment capacity for FDB,

! Other financial institutions such as the Fiji National Provident Fund (FNPF), the Reserve Bank of Fiji (RBF) and Investment Fiji are also to be consulted on their participation in the Forum and in the RE sector in Fiji.

Based on the feedback from stakeholders and ReEx Capital Asia’s own experience, we suggest the following structure for the Investors’ Forum:

- Investment Information Packages should be prepared and a Forum advertisement published on various media,

- The Forum will provide a good opportunity for networking between IPPs and investors; it will also help in building confidence to Fiji’s RE market post-elections,

- Government incentives for the RE sector should be highlighted in the Forum, such as free tax zones (Northern part of the main island), duty free imports for RE equipment, tax holiday, recoverable VAT, etc.

- Allow for networking sessions between IPPs, developers, FEA and investors outside the main presentations.

Based on ReEx Capital Asia’s experience at the ADB Pacific Energy Investors Forum held in Tahiti on 10 July 2014, we recommend to start advertising the Forum as soon as possible and to consider places that would be of easy access to investors (e.g. even outside Fiji, such as Australia).

A Forum format is also suggested below:

Registration

Welcome Address (e.g. DOE)

Presentations from FEA/DOE/UNDP/Larger Sponsors/Other Investors

- Power sector overview (Supply/Demand analysis, power plan)

- RE sector overview (new incentives, IPP rates, IPP process)

Networking Sessions

Morning

- Presentation from Development Financial Institutions (support as co-

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 22!

investors, financing schemes, etc.) – e.g. FDB, World Bank, ADB

Presentation of potential projects

- RE projects (presentation could be in broad terms w/o revealing confidential information, ReEx to confirm with developers beforehand)

Networking Sessions

Afternoon

Closing Speech (DOE - TBC)

Suggested financial institutions and sponsors that could be invited to present in the morning sessions include:

- World Bank / International Finance Corporation (IFC) - Asian Development Bank (ADB) - Fiji Development Bank (FDB) - Investment Fiji - Reserve Bank of Fiji (RBF) - Fiji National Providence Fund (FNPF)

Depending on time available, it might also be useful to invite the Fiji Revenue & Customs Authority (FIRCA) to provide an overview of tax incentives available to investors.

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 BD!

!

APPENDICES

Appendix 1: Meeting Minutes

Bank South Pacific (BSP)

Date Thursday 25 Sep 2014

Attendance Kevin McCarthy (BSP, Country Manager) and Ashleigh Matheson (BSP, Chief Risk Officer)

Meeting Minutes

! 50% market share in PNG. Started as a PNG bank then expended to Fiji and Solomon, typical market for BSP: 60% commercial and 40% retail customers

! The banking economy in relatively basic in Fiji

! Initial discussions with a solar player in Fiji but did not close a deal because no collateral was provided

! Looking at a biomass project $32 required [probably Tropik Energy]

! Expressed an interest but concerned about volatility of local interest, BSP is offering debt in FJD$ but sponsors might be looking for US$; Most probably will be financed off-shore (cheaper); Competition with ANZ and Westpac for financing RE projects

! Few private individuals looking at developing biomass projects but BSP is restricted due to (i) local forestry issues (IFC owns 10% of the bank) and (ii) sponsors credibility for developing such projects

! Big draught at the moment so FEA is now relying on diesel

! Would be interested in looking at RE deals; Would look at fair returns considering the risk of each project; Could do non-recourse debt for some projects (depending on credit quality, sponsors, etc.)

! Financed a US$15m hydro project on BSP book (in PNG)

! Not much of an energy saving culture here (price driven)

! Reserve Bank of Fiji (RBF) requires banks to allocate 4% and 2% of their books in RE and agriculture; IFC mandate to BSP is to penetrate the SME business (loan, etc.)

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 24!

Clay Energy


Attendance Bruce Clay (MD)

Meeting Minutes

! Main issue of the PPA at FJD$23c/kWh is that it is for committed generation (base load); for solar it is at FJD$15c for selling to the grid, making it nonviable, therefore the focus is then on roof-top for self-consumption (no reason to oversell)

! Main activity at the moment: roof-top PV for home and resorts; Residential systems are rather small here: around 2kW; Have not done a grid-connected ground mounted project yet

! The New Energy Policy is still pending (it will have to go through the new parliament so will probably take longer

! FGOV / Ministry of Environment’s initiative with support from AUS and NZ Governments; A forum was held in June 2014 (gathering projects developers and investors)

! FEA is putting a temporary diesel modular plant because of the drought (they did it in the past and dismantled it)

! Clay Energy won a tender led by UAE for building an hybrid diesel – solar 550kW mini-grid (part of the US$5m UEA financing for RE in Fiji)

! Some industrial & commercial (I&C): e.g. 70kW in Suva for self -consumption by commercial customer (financed option)

! Some training would be required. Some business associations have setup training programme for installers but they remain quite expensive (c.AUS$800 for the technical part)

! Huge potential for converting diesel mini-grids into solar hybrid in the islands

! Process of getting approval is quick and well established. The final inspection before Commercial Operation Date (COD) could be a bottle neck due to lack of inspectors (c. 1 month

! FGOV has signed for the SE4ALL UN programme, which could be an opportunity to get some funding from SE4ALL programme to support a mini-grid project

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 BK!

Fiji Department of Energy (FDOE)


Attendance Miriama W. Kolinisau (DOE, Assistant Project Manager) and Paula R Katirewa (Manager)

Meeting Minutes

! Notes sharing and discussion on project status including

! Biomass projects

! Solar (Astronergy, etc.)

! Wave

! 3 hydro projects

(outcomes were gathered in Table 3 of the main report)

Fiji Commerce Commission (FCC)


Attendance Bobby J Maharaj (CEO) and Sundhia Ben (Research Officer – Accounting)

Meeting Minutes

! Key barriers to RE development:

o Tariff rate (was FJD$8/kWh in 2010/11) now 33.08/kWh; that’s a floor given to FEA but IPP prices could / should be higher for fully fledged IPP (i.e. committed capacity)

o FEA is a monopoly, which impacts the process; FCC are thinking that it should be an independent entity (it is in the draft New Energy Policy)

o Development of an IPP framework: a clear application / agreement process for IPPs applicants needs to be put in place

! The FCC conducted a FEA audit in 2011/12 and decided on an opportunistic cost approach: average cost of generation using fossil fuel is F$47c (diesel), average T&D rate is F$12.67c leading to the proposed IPP price of F$33.08c so that they make a small profit instead of making a F$10c loss (due to the subsidized retail tariff)

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 26!

! Existing projects: 10MW biomass Gimko (largest IPP in Korea) is partnering with Tropik (not fully fledged). Gimko to plant energy crop (from Korea bamboo) and will also try to address current issues with Tropik Wood existing plants; FSC 40MW Latauko biomass but starting with 10MW; Solar project from Astronergy; These projects want to sign a PPA with FEA

Hawkins Infrastructure


Attendance James Hawkes (GM, International Business Development)

Meeting Minutes

! Capital raising and structuring for 2 hydro projects: Qaliwana 18MW; Wailoa 29MW

! IFC to come on board as development partner (part of equity and debt, to be finalized)

! Looking for a co-developer (ideally with O&M expertise)

! Need to agree the framework with FEA (BOT, BOO, etc. Also, need government guarantee); No PPA yet; it will depend on the FEA final structure

Fiji Electricity Authority (FEA)

Date Friday 26 Sep 2014

Attendance Hasmukh Patel (CEO), Eparama Tawake (GM Generation), Karunesh Rao (Executive Projects & Public Relations Manager)

Meeting Minutes

! FEA's mission is to get 90% of renewable energy by 2015; 60% of RE as at last year; Average retail price is FJD$37.4/kWh; Industrial customers are paying FJD$42c; FEA need 24/7 power to supply electricity to customers

! IPPs allow FEA to differ capex; Preference for hydro, biomass before solar and wind; FEA would be happy to buy at FJD$33/kWh for committed 24/7 generation; The new 3-year power development

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 BL!

plan is due end of the week

! Main solar players approached FEA asking for higher prices than IPP PPA and commitment over 25 years; FEA are still to see serious solar players with all the studies in place (irradiance, etc.); Need practical proposal (e.g. 5- year contracts) for solar

! FEA have issues with performance clauses in current PPAs (e.g. LDs for non-performance); FEA are happy to pay FJD$33 which is based on displacement cost model until all the diesel is displaced; Hence there is a small window now for IPP asking for FJD$33 as diesel is being displaced by new hydro

! They see players happy to offer less than FJD$33/kWh but FEA are forced to pay FJD$33; FEA pay Tropik Wood FJD$33 but Tropik Wood have performed poorly since in operation (100+ outages in the last 12 months); FSC is in a similar situation (31 outages in the last 3-4 months)

! Need spinning reserve to back up intermittent generation, which is not reflected in the FJD$33; Part of CEO KPIs is customer satisfaction. Customers are calling every time there is a power cut and it is reflected in customer survey

! FEA is working with the EU that is carrying out FS on 3 hydro projects in 3 locations identified

! There are only 2 IPPs operating at the moment: Tropik Wood and FSC; Both are performing badly

! Fiji electricity prices are amongst the cheapest in the Pacific region; The network is not strong enough to support distributed generation; A FEA IPP application process is in place

!

Naboro Landfill


Attendance Mark Hirst (Naboro, Plant Manager), Miriama W. Kolinisau (DOE, Assistant Project Manager), Rahul Dutt (DOE, Environment Officer, Naboro Landfill Operations)

Meeting Minutes

! The main issue of the landfill plant manager is dealing with increasing supply of municipal waste; The initial site was designed

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 28!

to receive 5,000 tonnes per month; Now the site receives 6,500 tonnes per month

! The priority of the plant manager is to find more space; Several studies have been carried out in the past without success; Tentative registration of CDM but the project was deemed too small to be profitable

! Chinese developers looked at a $40m gasification project that would have required all the waste from the country added with Cassava supplies; the project was not profitable vs. risk

! DOE is managing the contract outsourced to H.G. Leach (Fiji) Ltd; DOE is arranging a tender for the site extension ($10m project - to be confirmed by bidders and Finance Ministry); Gate fee of FJD$26/t; The Department of Environment owns the landfill; FEA are carrying out a FS for a WTE project using pyrolysis

!

Pernix (Fiji) Limited


Attendance Michel N. El-Rahi (GM), Abhyash Chand (Regional Financial Controller)

Meeting Minutes

! Track-record: works for the US Government (built the US embassy in Suva); O&M agreement with FEA to operates 2 major diesel plants in Fiji; EPC signed for 36 MW of HFO with FEA; Guam: infrastructure BOT project; 8600 ft international runway project, etc. Listed company on NASDAQ

! Housing development, school; Looking at diversifying away from diesel and expending to RE: in discussions with few companies; 95% local staff; Could be co-developer / investor e.g. if O&M

! Butoni 10MW wind farm does not perform well mainly due to lack of wind

! FEA cost for HFO is F$36c/kWh, diesel at F$46c/kWh

! Investment incentives

o Tax free zones if investment in North of the Island

o Duty free on import is possible

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 BM!

o Tax holiday for RE (maybe in some areas only)

o VAT 15% recoverable (that works)

! Withholding tax of 15% on know-how, services

!

!

Fiji Development Bank (FDB)


Attendance Tevita Madigibuli (GM Relationship & Sales), Candice Hesaie (Research & Business Development Officer)

Meeting Minutes

! FDB are lending at 1% through its SEFF scheme; the total amounts to FJD$40m (50% is guaranteed by the WB), of which FJD$18m for RE, including: FJD$5m through Export Credit Facility, FJD$4m already deployed (mainly loans to commercial roof-top solar PV projects - 50% guaranteed by the WB - and bio-diesel projects - coconut oil), FJD$3m project pipe (FJD$2m solar, FJD$1m for geothermal project exploration)

! Looking at off-grid projects

! Review of the project list during the meeting (comments are included in the Table 3 of the main report)

!

Fiji Sugar Corporation (FSC)

Date Monday 29 Sep 2014

Attendance Muthu Nambiyappan (Energy Projects Manager), Jakir Hussain (Electrical Systems Coordinator)

Meeting Minutes

! FSC is 100% owned by the Fiji Government; existing sugar mills over 4 sites:

o Labasa (Vanua Levu); There is a 10MW (high pressure turbine) exhaust used for sugar + 4MW steam turbine but operating only during harvesting season: billing FJD$33c

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 30!

to FEA

o Viti Levu (3 mills): Rarawai, Lautoka and Penang

! RE projects

o Labasa (Vanua Levu): Project of 10MW of additional capacity (condensing turbine) to export power to grid around the year using bagasse during harvesting season + wood ship (off-season) from timber industry in Labasa (hogging machines) + buy chip from timber mills / hogging contractors; Plant is being buit; COD in Nov 2014 will depend on work on the boiler (old boiler being upgraded at the moment); PPA agreed with FEA at FJD$23c, which now needs to be revised at FJD$33c (power already being sold at FJD$33c to FEA using low pressure boiler turbine); Financing from FDB (soft loan)

o Rarawai (Viti Levu); 40MW power plant; $70m loan approved by Government of India through export promotion using Indian technologies; FSC already benefited from the $50m loan from the Government of India to Fiji; FS done, DPR done, tender document prepared for major items (boiler, turbine, etc.); EPCM will be carried out by FSC Project Division; FSC will commit on a minimum output. The PPA (with the new rate) is not signed yet but no issue is envisaged at that stage as the initial PPA (with old IPP rate at F$23c) was signed between FEA and FSC; The loan will covers up to 85% of cost. And the rest will come from FSC; the plant will operate around the year; Fiji Government can borrow up to $250m from the Government of India (used to be $120m so FSC could ask for supplementary loan if required)

o Latauka; 20MW existing plant, exporting power; FSC are thinking of adding 1 more condensing turbine of 12MW (8.5MW export to grid) just for harvesting season. Decision on financing not taken; FNPF (Fiji National Providence Fund) and FDB might be interested in putting equity but FSC are looking at divesting some assets to re-invest as equity or equipment financing

! FSC is envisaging implementing its RE master plan: 20m litres of ethanol production + 60MW biomass + solar PV on the FSC building to become green building (total $200m estimated investment); Co-

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 D>!

generation objective as it is part of sugar business

! Looking at bio-diesel with 40MW new generation: 20m litres annually, expecting that blending will be allowed. Will be selling to the Government of Fiji, which will then sell to oil companies. It depends on DOE to take a decision on the policy but no progress has been made. FCS would be happy to follow up with the DOE on the ethanol sector (energy security approach)

!

Tropik Wood


Attendance Mr Vimlesh Kumar (Company Secretary, GM Finance & Administration)

Meeting Minutes

! Tropik Wood manufactures products for a variety of usage: FEA poles (for power network), fencing poles, Wood chip for export to China and Japan, Chip lap, flooring (at the moment 100% for local demand as there has been a surge in demand)

! Tropik Wood operates 2 power plants

o 3.3MW plant currently used as back up for own consumption;

o 9.3MW plant (turbine rating) that suffered from 2 major fires; In 2013, international experts suggested improvements that were implemented by Gimko (Korean). Since May 2014 the plant has been running according to plan although the output remains below 9.3MW due to boiler restrictions (5MW total and 2MW for internal use, so only 3MW are exported to grid) and with ups and downs. The load restriction is also due to feedstock quality during rainy season (c.4 months of the year because of wet wood, which was the origin of the fire)

! Key aspect is fuel supply: FSC has been buying wood chip from Tropik Wood to run its biomass plants; Tropik is the largest land lessee: 82,000 ha leased of which 42,000 covered with pine trees

! The business model was built originally based on free feedstock because there was a huge pile of feedstock in 1997 now

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 32!

reducing due to loss of its calorific value and the deficit between boiler consumption and wood waste generation

! Might need to buy from forest at FJD$95/tonne; Considering adding 10MW; Nabou area (Navutu), West Viti Levu; JV Tropik Wood and Gimko; Site identified 6ha land area, lease issued; PPA almost finalized with FEA at F$33.08c

! Financing: 30% equity 70% debt; Equity: 4 shareholders: 3 Koreans + 1 Tropic Wood (% to be discussed); Debt still being explored

! Technology designed by Korea company; Gimko are running many co-gen plants in Korea; Would provide technical support

! Feedstock would come from waste wood from the forest + short rotation 5,000 ha of land identified (part of land leased, only 9 years of lease left but energy crop produces 3 harvests a year)

! Completed FS; NTP before end of year 2014: nursery, planting trees, selecting the plant technology, etc.; COD in 2016 starting with forest residue, then dedicated plantation

Sunergize


Attendance Ajay Raniga (Sunergize, Partner)

Meeting Minutes

! 1MW installed roof top systems; 7-8 MW in pipe including 1MW ground mounted; Mix of upfront payments by customers and leasing model; Have main operations in Fiji (28 people team), PNG (4 people), Solomon, Vanuatu; In discussion with FEA for ground mounted PPA and authorization

! All grid connected projects but not selling to grid as not attractive enough; IFC invested 20% in the company + debt

! Talking to other potential investors such as ADB (doing due diligence); Potentially interested in more capital injection as the business is capital intensive

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 DD!

CBS Power Solutions


Attendance Ajay Prasad (GM South Pacific Region)

Meeting Minutes

! Auspac Energy (business in Sydney) and CBS Solutions (business in the Pacific Islands) are both managed by Ajay

! Interested in hydro projects as EPC contractor (also solar or biomass projects); have not done biomass projects yet due to lack of resources but are interested in looking at these projects

! Looking at other countries than Fiji

! At the Forum, would be interestde in EPC business, consortium to build large projects

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 34!

Appendix 2: FEA IPP Process

The process described below is from the submission process letter provided by FEA to IPP candidates.

An extract of the submission process letter that FEA provides to IPP candidates is provided below:

[Beginning of the letter]

!We thank you for your interest in Fiji towards the development of renewable energy projects. We are excited with the prospect of having another potential Independent Power Producer (IPP).

Our first step would be to enter into a Non-Disclosure Agreement (NDA). In order for us to prepare the NDA we request from the potential IPP the following information:

- Formal proposal of planned renewable energy scheme, source of funding, output (plant size in MW and output in MWh) and location;

- Name of registered company with the registered address (Copy of Business Registration Certificate); and

- Details of Company Directors & Secretary.

Once the NDA has been signed, FEA will provide the potential IPP with an Information Package / Booklet which details the information that the IPP needs to provide to FEA. This booklet and its attachment are meant to provide the potential IPP with the initial background information to aid in deciding whether or not to enter into negotiations with FEA towards a possible Power Purchase Agreement (PPA).

It also highlights to the potential IPP what they need to provide and comply with in order to enter into such negotiations and the required information for the FEA to understand the IPP’s project proposal. Once satisfied that the project is in line with FEA’s energy development,

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 DK!

and when there is a window of opportunity to recommend to the FEA Board, FEA will enter into a legally binding contract known as a Power Purchase Agreement for the purchase of electricity.

We are attaching for you:

- FEA Grid Code

- Generic PPA

- Information Package Schedule

With thanks,”

[end of the letter]

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 36!

Appendix 3: Unselected Project List Table 3: Unselected projects for the Investment Information Packages

Ref Name Technology Capacity Partners Status Reaason for not shortlisted

1 OceanQuest (TBC)

Wave energy

Less than 1MW

TBC TBC No due to very early stage

2 Tavioni Project (?)

Solar PV (ground mounted)

TBC TBC TBC No due to lack of information

3 Solar Project Solar PV (ground mounted)

TBC Energy Pro Early stage No due to lack of information

4 Cal Valley (US based)

Solar PV (ground mounted or roof-top)

TBC TBC TBC No due to lack of information

5 Fiji Sugar Corporation (FSC)

Biomass (captive bagasse + purchased wood chip off-season)

10MW Indian EPC company, FDB loan financing

Construction No (plant is being built)

6 Somosomo Hydro 700kW operating Possible ext. 2.1MW (2 more PP on same river + possible solar and

Chinese Govt Near completion

No (too small and near completion already)

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 DL!

Ref Name Technology Capacity Partners Status Reaason for not shortlisted

biomass)

7 Green Generation

Biomass 3MW TBC Project developers pulled out officially

No (project cancelled)

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 38!

Appendix 4: Reference Materials

- Pacific Lighthouses - Renewable Energy Opportunities and Challenges in the Pacific Islands Region, IRENA, 2013

- Renewable Energy Readiness Assessment Fiji, IRENA, April 2014

- Design and Facilitation of Implementation of Renewable Energy Power Generation Demonstration, Inception Report, Grue + Hornstrup A/S, February 2013

- Review of the Fiji National Energy Policy, Final Report, Economic Consulting Associates Limited, July 2013

- Rapid Assessment and Gap Analysis, Sustainable Energy for All (SE4ALL), 2014

- National Energy Security Situation Report, SMEC, March 2010

- Energy Aspects of Fiji Sugar Industry, Surendra Prasad, Fiji Institute of Applied Studies

- The Fijian Sugar Industry – Investing in Sustainable Technology, Oxfam Briefing Paper, September 2005

- Emission Reduction Profile, Fiji, UNEP Risø, June 2013

- Independent Power Producing Rates – Second Phase: Full IPP Rates, FCC, May 2014

- Constructing a Reference Emission Level for Fiji, Scope14+, December 2012

- Fiji Renewable Energy Report, UN-ESCAP, 2009

- Reserve Bank of Fiji Annual Report 2013

- Wind Speed Modelling of Viti Levu and Vanaua Levu. Fiji, GL Garrad Hassan, February 2013

- Future Renewable Energy Projects, FREPP Inception Workshop, FEA, 2013

- Annual Report 2013, FEA

- Fiji Electricity Authority (FEA) Regulatory Review, Final Report, Maunsell Limited, 2008

- REM 2009, Regional Energy Officials Meeting, April 2009

- Re-invigorating Private Sector Investment in Fiji, ADB, 2013

- 2014 Fiji Tax and Customs Incentive Brochure, Fiji Revenue & Customs Authority (FIRCA)

- ISEFF brochure, from Fiji Development Bank

- SEFF brochure, from Fiji Development Bank

- Vision brochure, from Fiji Development Bank

!

G%F"%7!(<!H+)E+29%!4)F%',1%),!I$$(&,/)","%'!")!J"A"!

ITP/A0141 – October 2014 DM!

- IPP application process letter dated 16 April 2014, from Fiji Electricity Authority

- FCC company brochures, provided by the Fiji Commerce Commission

%

review of existing bankable investment opportunities in ... · report title review of bankable...

Documents