Benefits of Low Cost Financing on CSP Projects ADBs Analysis

Mr. Woo Yul Lee Mr Asian Development Bank Beijing, 9 June2010

Disclaimer

The views expressed in this presentation are the views of the Asian Development Bank (ADB) staff and DO NOT necessarily reflect the views or policies of the ADB, its Board of Director or the Governments they represent.

Why CSP in PRC?

Good resources mainly in y western provinces - Gansu, Qinghai, Xinjiang, IMAR, Tibet Cost of CO2 abatement about 1/3rd of the solar PV Diversification of energy mix Di ifi i f i Reliable power supply and inherent storage i.e. when needed - any time of the day and night. High share of local content in the CSP value chain.& job creation potential

12th FYP targets 5 GW solar power development with demonstration of CSP projects. (renewable energy share in the energy mix [11.4%])

Combination of Storage and Hybridization in a Solar Plant

Source: IEA

Why CSP in PRC?

Good resources mainly in y western provinces - Gansu, Qinghai, Xinjiang, IMAR, Tibet Cost of CO2 abatement about 1/3rd of the solar PV Diversification of energy mix Di ifi i f i Reliable power supply and inherent storage i.e. when needed - any time of the day and night. High share of local content in the CSP value chain.& job creation potential

12th FYP targets 5 GW solar power development with demonstration of CSP projects. (renewable energy share in the energy mix [11.4%])

CSP Value Chain

CSP Value Chain

Status of CSP

PRC

Global

Need to demonstrate immature

Source: A.T. Kearney

renewable technologies through demonstration projects

Expected Tariff Reduction from 2012 - 2025

Considerable Tariff reduction can be materialized after 2012 Cost of financing would play a catalytic role in reducing

generation cost
Source: A.T. Kearney

Impact of Financing Condition to Solar Project

Fossil fuel plants: the risk of significant fuel price variation during the concession period (25 30yrs) Solar power plants: No fuel costs during the lifespan (less uncertainty) Fuel cost through capital investment at the beginning of the project The cost of power from solar power projects is particularly sensitive to financing conditions (interest rate) and schedules (repayment/grace periods) periods).

Source: A.T. Kearney

Why ADB Financing ?: Impact of Financial Crisis

Debt Liquidity is reduced within all banks On-hold approach On hold Cost of lending rose substantially Reduced volumes of financing Reduced tenors: from 15yrs to 7-10yrs New players & technologies found accessing debt very difficult

Equity Reluctant to invest Difficult to access competitive financing, with lower Leverage & higher rates.

Public source of financing has had a very important renewed role i renewable energy fi d l in bl financing i
Source: A.T. Kearney

Why Wh ADB Financing ?

ADB
IDC Interest rate Repayment Period Grace Period Deb/ Equity 2.06% 3.26% 20 3

Domestic
6.10% 6.60% 15 0 80 / 20

Project s Projects financial viability highly sensitive to cost of financing. It can lower the required tariff by 22% for the same return (ROE: 10%)

Benefits of ADB Financing

High leverage" and low risks with lower rate Play a critical role not only in improving the financial performance but also providing valuable insight into challenges, and risks thereby assisting provincial and national governments in formulating practical policies and programs. ADB even provides up-front financing of CDM transaction costs

ADB s ADBs Activities for CSP in PRC

Asian Solar Energy Initiative: targeting to assist the identification, development and implementation of 3,000 3 000 MW of solar power i th A i P ifi region f l in the Asia Pacific i over the next 3 years ADB has gained insight into challenges and risks through an ongoing TA ($1 M) and 1 MW pilot project Financing to 50MW Jinta CSP project: up to $120 M

Conclusion

CSP will become new alternative drivers for sustainable development along with other renewable energy resources. CSP project is highly sensitive to low-cost and favorable financing conditions Early demonstration through low-cost ADB loan can accelerate wider deployment of CSP in PRC

Thank you for your kind attention !! o o r

Further Information: Mr. Mr Woo Yul Lee Young Professional (Energy) Asian Development Bank Tel (632) 683 1803 Fax (632) 636 2302 wylee@adb.org