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

18.11.2014 2
E.Quadrat GmbH
 -
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

18.11.2014 3
E.Quadrat GmbH
 -
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

18.11.2014 4
E.Quadrat GmbH
 +
Observation : 1.2 MWel Biogas Project Belitung (1)

Source: ANJ Group / PT. Austindo Aufwind New Energy

18.11.2014 5
E.Quadrat GmbH
 1.2 MWel Biogas Project Belitung (2)
Reliable technology for covered lagoons

Source: ANJ Group / PT. Austindo Aufwind New Energy

18.11.2014 6
E.Quadrat GmbH
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

18.11.2014 7
E.Quadrat GmbH
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

18.11.2014 8
E.Quadrat GmbH
Takings from Indonesian Banks: Bioenergy (04/14)
PIP Indonesia Investment Agency
All banks with State of Indonesia
backing
18.11.2014
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
EPC guaranties and warranties,
often corporate guarantees
Precondition for project assessment:
PPA and detailed project description
9
E.Quadrat GmbH
 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

18.11.2014 10
E.Quadrat GmbH
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

18.11.2014 11
E.Quadrat GmbH
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.

18.11.2014 12
E.Quadrat GmbH
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

18.11.2014 13
E.Quadrat GmbH
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
18.11.2014 14
E.Quadrat GmbH
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

18.11.2014 15
E.Quadrat GmbH
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
18.11.2014 16
E.Quadrat GmbH
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.

18.11.2014 17
E.Quadrat GmbH
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

18.11.2014 18
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