Feasibility and Bankability of
Bioenergy Projects
Dr.-Ing. Matthias Eichelbrönner
General Manager E.Quadrat, Mannheim, Germany
Visiting Professor, University of Applied Sciences, Mannheim
Member Advisory Board, German BioEnergy Association
www.exportinitiative.bmwi.de
Feasibility and Bankability of Bioenergy Projects
Content
1. Observations made in Indonesia
o Operation of a 6 MWel Biomass power plant
o Project development: Biomass waste to goods and energy
o 1.2 MWel Biogas power plant Belitung
2. Takings from meetings with Indonesian Banks
o Capital and financial conditions
o Quality offensive to improve project finance
3. Bioenergy bankability
o Feasibility study
o Calculation model
o Input parameters and results
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Observation : 6 MWel Biomass Power Plant
Location: Indonesia
Designed for: 6 MWel; EFB and shells
Boiler: designed for coal, built in 2007
Manufacturer: Chinese company, did not finish commissioning
Fuel: blend of shells and mainly pressed EFB fibers
Experience: - boiler is not suitable for biomass fuel available
- achievable thermal power too low, inlet too small
- efficiency very low under daily operating conditions
(~18% efficiency under ideal conditions only)
- nut shells (higher heating value) can be sold to the
market at higher price compared to FIT
- power factor very low, grid condition questionable
Economy: not economical feasible
was built to achieve CDM revenues, owner considers
dismantling and new construction under new FIT
(expected)
Fotos: E.Quadrat
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Observation : Project development biomass waste to
fibers and POME to energy plant
Location: Palm oil mill, Indonesia
Target: Usage of biomass residues and waste from palm oil mill
Status: Development status first concept, application for project finance
Intention: Feasibility study to achieve project finance
Assignment: Red-Flag-Report to collect detailed project information to prepare feasibility study
Findings: business concept existing, POM ok, POME lagoon digester existing biogas output unclear, grid
access technically feasible, no permission, no contracts, no …. etc.
> conclusion no feasibility study executable, project delay 1 year minimum
> quality of project development must be improved
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Observation : 1.2 MWel Biogas Project Belitung (1)
Source: ANJ Group / PT. Austindo Aufwind New Energy
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1.2 MWel Biogas Project Belitung (2)
Reliable technology for covered lagoons
Source: ANJ Group / PT. Austindo Aufwind New Energy
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1.2 MWel Biogas Project Belitung (3)
Project data
Design: 1,2 MWel; 13851 Nm3 Biogas per day
Input material: POME effluent 495 m3 per day
Manufacturer: combustion engine MWM, Germany
Start operation: 2013
Investment: 3,9 Mio. USD including grid connection
Finance: 100 % equity by owner palm oil mill
Purpose: all electricity delivered into PLN grid
Tariff: 975 IDR/kWh (~6,5 €Ct/kWh)
IPP agreement with PLN, duration 15 years (no compensation
of inflation)
The time being PLN pays without delays.
Owner: ANJ Group / PT. Austindo Aufwind New Energy, Jakarta,
Indonesia
Project development and detailed quality control
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Feasibility and Bankability of Bioenergy Projects
Content
1. Observations made in Indonesia
o Operation of a 6 MWel Biomass power plant
o Project development: Biomass waste to goods and energy
o 1.2 MWel Biogas power plant Belitung
2. Takings from meetings with Indonesian Banks
o Capital and financial conditions
o Quality offensive to improve project finance
3. Bioenergy bankability
o Feasibility study
o Calculation model
o Input parameters and results
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Takings from Indonesian Banks: Bioenergy (04/14)
Experiences: no experience with bioenergy
(the time being hydropower),
remarks made: quality of project
applications generally very low
Investments: should be larger than 4 Mio. USD (minimum
1 Mio. USD); due diligence efforts significant
Equity: 15 to 35% CAPEX, depending on refinance
funds of banks
Debt: IDR or US-Dollar, conditions differ
Redemption: 5 to 10 years (20 years)
Interest: differ, yearly adjustments, up to 5
years fixed
Securities: collaterals on fixed assets, cash flow, PPA
PIP Indonesia Investment Agency EPC guaranties and warranties,
often corporate guarantees
All banks with State of Indonesia Precondition for project assessment:
backing PPA and detailed project description
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Selected Financial Conditions
EXIM BRI SMI PIP
Portfolios Palm Oil Industry; renewable energy hydropower, bioenergy; 50 MioUSD funds
hydropower; feasible own consulting unit available for renewable
no bioenergy so far installed to support energy projects;
project developers
Finance product Investments > 4 Mio. USD Investments > 4 Mio. USD Investments > 5 Mio. USD Investments > 1 Mio. USD
Loans: duration 6-7 years, Loans: duration 5-20 Loans: portion <=70% Loans: duration 5 (<=10)
interest < 5,75 %/a USD; years, interest < 10 %/a interest: bank is open for years, interest < 9.5 %/a
9.5%/a IDR; USD; discussion on quality USD
portion <=85% 11-12%/a IDR; improvement to adjust portion <=65%
portion <=65% interest rate
Loan securities collaterals: revenues, collaterals: project assets; Collaterals and assets collaterals: limited
property, machinery, cash flow recourse, project assets
fixed assets, corporate and cash-flow
guarantee;
PPA not sufficient
Requirements PPA, feasibility study PPA, qualified references, PPA, detailed project technical issues of a
through bankable EPC, strong off-taker preparation and bioenergy project
consultants description reported
Information taken from interviews executed in April 2014 by E.Quadrat/GIZ; no guarantee provided if information is correct
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Quality offensive to target lower interest costs
Project Project Plant
Development Implementation Operation
Outcome:
Higher project quality und transparency based on detailed monitoring,
milestone and performance controlling would improve bankability significantly!
Monitoring and Quality Control
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Higher quality may lead to lower interest costs!
10 years
Graphs show Net Present Value (NPV) effect of reduction of interest rate p.a. over 10 years
amortization period. The inflation rate does not affect the results significantly, rather the amortization
period.
Example: 10 years period, a reduction of 2% points of interest rate at an inflation rate of 8% p.a.
would create a NPV effect of 8, assumed the initial debt amounts to 100.
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Feasibility and Bankability of Bioenergy Projects
Content
1. Observations made in Indonesia
o Operation of a 6 MWel Biomass power plant
o Project development: Biomass waste to goods and energy
o 1.2 MWel Biogas power plant Belitung
2. Takings from meetings with Indonesian Banks
o Capital and financial conditions
o Quality offensive to improve project finance
3. Bioenergy bankability
o Feasibility study
o Calculation model
o Input parameters and results
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Detailed Feasibility Study to improve bankability
Target: Detailed and comprehensive study anticipating entire project life cycle
Content:
Project Development Project Plant Operation
Implementation
- Feedstock supply - Technology details plant - O&M agreement/concept
- Approvals, clearances - Technology fuel conditioning - personal concept
- Development steps - EPC agreement, deliverables - Feedstock market
- Implementation phase and liabilities - Performance control
- Operation phase - Final acceptance test - Benchmarking of key figures
- Financial model, detailed - Grid connection - ……….
- Risk analysis and mitigation - Grid quality
- Ownership and sponsors - Warranties and guaranties
- Legal structure - ……….
- Tax structure
- …….
Pre-Feasibility: First analysis and description along the key components, milestones including
technical and financial ones; CAPEX and OPEX estimation to check economic
viability; detailed list of content to execute Feasibility Study
Feasibility Study: Detailed and comprehensive description of all administrative, technical and financial
details of the project including internal interfaces and dependencies; assessment of
the drafts of all key agreements concerning feedstock supply, EPC, O&M, PPA, land
lease; risk analysis and mitigation concept
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Project Assessment: Pre-Feasibility Study
Target: Detailed and comprehensive study to prepare Feasibility Study and start bankability
Content: Description of project
- Biomass / feedstock availability and potential competition
- Components and interfaces
- Financial model, revenues, CAPEX, OPEX, financial figures, equity and debt sourcing
- Implementation and testing
- Operation and maintenance
- …..
First Step: Red-Flag Report on project
information exsiting
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Biomass to Energy Calculation Tool (Pre-feasibility)
Input table for key parameters: tariff per Indonesian
region, technology and voltage level, CAPEX, OPEX, finance,
feedstock, technical data
Output tables for 15 years plant operation, including graphs,
cash-flow, return on invest, return on equity and more
Specific control figures like Debt Service Cover Ratio DSCR
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Example: 1,2 MWel POME Biogas to Energy I
Parameters and scenarios
Rated power 1200 kWel
Full load hours 7000 h/a
Capacity factor 80 %
Parasitic loads, aux. 4%
Energy delivery 8.064 MWh/a
CAPEX 47.700 Mio IDR
3.900.000 USD
OPEX 5,00% von CAPEX
No feedstock costs
No land lease
Feed-in Tariff A 1575 IDR/kWh
Feed-in Tariff B 1200 IDR/kWh
Financial parameters
Debt 70%
Redemption period 10 years
Interest rate 11% p.a.
Inflation rate 7% p.a.
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Successful biomass project feasibility and bankability
Use of reliable biomass conversion technology from experienced suppliers
Proper and detailed feedstock/biomass analysis, amount and quality and
subsequently appropriate technology for plant dimension
Alternative use of biomass feedstock - e.g. wood industry - to be assessed
Detailed project engineering to prepare project finance
Grid impact study for maximum feed-in power
High quality of project development, implementation and operation to be
assured
Project operation, training of O&M personal essential to achieve high
capacity factor
ASEAN Guidelines for bioenergy project realization in preparation
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E.Quadrat GmbH
E.Quadrat GmbH & Co. Projekt- und
Beratungs- KG
Kolpingstraße 39
68753 Waghäusel
Mannheim Office
Weinheimer Straße 64a
68309 Mannheim
Germany
Amtsgericht Mannheim
HRB 700843
Tel +49/(0)621/18 15 37-0
Fax: +49/(0)621/18 15 37-99
E.Quadrat GmbH www.equadrat-gmbh.eu
