Energy Efficiency Investments in Southeast Asia: Opportunities in the Short Term and in the Long Term

Catriona McLeod, CFA

Associate, ReEx Capital Asia ASIA CLEAN ENERGY FORUM MANILA, JUNE 20-24 2011 1

Outline
Energy Efficiency Investment Strategies

Short Term Opportunities

There are many attractive Energy Efficiency investments available
High returns
Which sector is best? Which country is best? Ways to Invest

Potential Long-Term Opportunities

Some Energy Efficiency markets are not attractive now, but may be in the future
Barrier #1: Artificially low electricity prices

Barrier #2: Investment risks

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Energy Efficiency High Returns (1/2)

**Source: McKinsey

Energy Efficiency High Returns (2/2)

Return on Investment
40% 35% 30% 25% 20% 15% 10% 5% 0%
Commodities Real Estate Intl. Equity Intl. Fixed Income Energy Efficiency
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Which Sector? (1/2)

INDUSTRIAL SECTOR: EE Potential in Production Processes, Heating and Cooling systems in production facilities of industry sectors like Semi-con, Pharmaceuticals, Automotive, F&B etc.

COMMERCIAL SECTOR: EE Potential in Heating, Cooling, Lighting systems in Private and Government Offices, Hotels, Malls, Hospitals, Data Centers and Educational institutions

High Operational Risk

Low Operational Risk

Which Sector? (2/2)

Yearly Savings/Investment
70% 60%

50%
40% 30% 20% 10% 0%

Industrial

Commercial

Which Country? (1/2)

Electricity Tariff (US cent/kWh) 20 18 16 14 12 10 8 45 40 35 30 25 20 15 10

Investment Returns (%)

6
4 2 0

5
0

Which Country? (2/2)

PHILIPPINES THAILAND Tax Incentives? SINGAPORE MALAYSIA INDONESIA VIETNAM

Grants / Subsidies?*

Mature ESCO Sector?

100% Foreign Ownership OK?

Grants available through: Thailand: Energy Efficiency Revolving Fund (EERF), ESCO Fund Singapore: GREET scheme
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Short Term: How Do I Invest?

Building Owners / Energy Users Invest directly in Energy Efficiency measures

Non- Owners / Private Investors

Buy shares in an Energy Services Company (ESCO) OR Invest in an Energy Efficiency Fund

Long Term: Even Larger Market

Energy Efficiency Market Size - Investment Potential (US$ millions)
1600 1400 1200

1000 800
600 400 200 0 Malaysia Indonesia Thailand Singapore Vietnam Philippines
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Barrier #1: Subsidies (1/2)

Malaysia

Indonesia

Electricity Subsidies

Vietnam

Thailand

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Barrier #1: Subsidies (2/2)

Electricity Tariff (US cents / kWh)

Investment Returns (%)

45 40 35 30

20 18 16 14 12 10

25
20 15 10 5

8
6 4 2 0

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Barrier #2: Investment Risks

Performance Risk
Performance Guarantees Supplied by ESCOs Measurement and Verification

Credit Risk
Insurance Products Aggregation of Projects

Electricity Price Uncertainty

Hedging Instruments

Energy Usage Uncertainty

Insurance Products Aggregation of Projects

Time Horizon Uncertainty

Securitization of Savings Cash Flows Secondary Market
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Contact us

Catriona McLeod ReEx Capital Asia

16 Collyer Quay Hitachi Tower #20 Singapore 049318 www.reexasia.com Mobile: +65 9860 7806 Tel: +65 6818 9710 catriona.mcleod@reexasia.com

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