Bantayan Island 5MW Solar Energy Project

Bantayan Island Solar Energy Project Cebu, Philippines A Proposal

Project Presentation Term of Reference (TOR)

1

Table of Contents Particulars

Page Nos.

Cover Page

1

Table of Contents

2

What is Solar Energy?

3

How much Solar Energy?

4

Radiant Energy

7

Project Description

8

Bantayan Electricity Cooperative (BANELCO)

9

BANELCO Electricity Rates

10

BANELCO Electricity Bill (For illustration purposes only)

11

The Provincial Government of Cebu

Page Nos.

Solar Energy Potential Sites in the Philippines

15

Cebu Province Sun Path Diagram

16

Cebu, Philippines

17

Sunrise, sunset, dawn and dusts times table

5-6

Advantages and Disadvantages

Why in Bantayan Island?

Particulars

Philippines and Cebu Province

18 - 19

Challenges and Opportunities Solar Energy Project

The Feed-In Tariff Rules National Electrification Agency

20, 21, 22 23

BANELCO in the NEA List that can issue PPA

Project Finance Strategy

12 - 13 14

2

24 - 25

Sequence of Events

26

References and Appreciation

27

Contact Us

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What is Solar Energy?

Originates with the thermonuclear fusion reactions occurring in the sun.

Represents the entire Electromagnetic radiation (visible light, infrared, ultraviolet, x-rays, and radio waves).

3

How much Solar Energy?

The surface receives about 47% of the total solar energy that reaches the Earth. Only this amount is usable.

The Sun is 93 million miles away.

The tiny fraction of the Sun’s energy hits the Earth (~a hundredth of a millionth of a percent) is enough to meet all our power needs and more.

The sun provides more energy in an hour than the U.S. uses in a year.

We call the energy from the sun, Solar Energy.

4

Radiant Energy (1)

Under extreme pressure, and at extremely high temperatures, nuclei of atoms and their electrons can separate, forming plasma. In this extremely high energy state, nuclei can get close enough to each other to fuse. When they fuse, they release tremendous amounts of energy. This is what happens in the sun’s core.

The energy produced by fusion can be reabsorbed by other nuclei and rereleased in future fusion reactions.

Energy released in the core of the sun can take thousands of years to find its way to the surface of the sun.

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Radiant Energy (2)

Once the energy has left the sun, it is radiated as electromagnetic radiation toward space at a speed of 300 million meters per second, or 186,000 miles per second. At that speed, the energy needs only 8 minutes to reach the outer atmosphere of the earth 93 million miles away.

Once it reaches the earth, the incoming solar radiation, or insulation, is absorbed and reflected.

The greenhouse effect, a naturally occurring phenomenon, allows the energy from the sun to remain trapped near the earth’s surface, keeping the temperature of the earth in a comfortable range at night.

Without the greenhouse effect, life on earth would be impossible.

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Advantages and Disadvantages Advantages All chemical and radioactive polluting byproducts of the thermonuclear reactions remain behind on the sun, while only pure radiant energy reaches the Earth.

Energy reaching the earth is incredible. By one calculation, 30 days of sunshine striking the Earth have the energy equivalent of the total of all the planet’s fossil fuels, both used and unused!

Disadvantages Sun does not shine consistently. Solar energy is a diffuse source. To harness it, we must concentrate it into an amount and form that we can use, such as heat and electricity. Addressed by approaching the problem through: 1) collection, 2) conversion, 3) storage.

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5 MW Solar Energy Project Bantayan Island, Cebu Province, Philippines

Project Description Particulars

Description

Project Location

Bantayan Island, Cebu Province, Philippines

Installed Capacity

5 MW

Technology

Photovoltaic/Mono-Crystalline Silicon Panels/Single Axis Trackers/Lithium Ion Storage

Daily Storage Capacity

+/- 2.5 MW

Annual Production

9,500,000 KWH

Off Taker

Bantayan Island Electric Cooperative (BANELCO)

PPA Duration

25 Years

Purchase Price

To be determined

Annual Escalation

Philippine and US Inflation Rate (A Price Escalation Formula will be preestablished)

Project Footprint

+/- 12 Hectares

Distance from Interconnect

350 Meters

Engineering

GRUPO COBRA, a wholly owned company of ACS of Spain

Utility Inter-Connect

ABB (NASDAQ)/MITSUBISHI ELECTRIC

Accountant/Legal/Construction

Divina Law Firm/Grupo Cobra

Cost Per Watt

$1.91

Total Project Costs

$9,550,000.00 (including cost of land)

Feed-In Tariff Approved for Solar

PhP9.68/kWh effective in the January 2015 ($0.217)

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Bantayan Electric Cooperative (BANELCO)

Overview: Bantayan Island Electric Cooperative, Inc.(BANELCO) has been serving the Bantayan Island community since 1983.

Just like the other 118 rural electric cooperatives nationwide, the Bantayan Island Electric Cooperative, Inc. (BANELCO) located at Balintawak, Bantigue, Bantayan, Province of Cebu.

BANELCO derived its birth from the provisions of Republic Act 6038, Presidential Decree No. 269, and by Republic Act 1645. As provided also in the aforementioned laws, BANELCO exists primarily to effect total electrification in its coverage area, on an area coverage basis.

BANELCO was registered with the National Electrification Administration (NEA) on September 29, 1978, and granted franchise to operate an electric light and power for a period of fifty (50) years, with Certificate No. III, from August 15, 1984, in the areas comprising the three (3) municipalities.

With the release of its construction loan from the NEA in the amount of P10,080,000, the ceremonial first pole erection was made in January of 1983. This signaled the start of the construction of the distribution lines.

Operation of BANELCO started with the energization of its backbone lines on December 08, 1983, which also energized simultaneously the three municipalities under its coverage area (Bantayan, Madridejos and Santa Fe) and fourteen other barangays

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BANELCO Electricity Rates (As of November, 2014)

10

Item No.

Charges

Rate/KHW in Pesos

Rate/KWH in US$

1.

Generation System Charge

7.5602

0.17

2.

System Loss Charge

0.7246

.02

3.

Distribution Demand Charge

20.0000

0.45

4.

Distribution System Charge

1.3651

0.03

5.

Supply Retail End-User Charge

27.5600

0.62

6.

Metering Retail Customer Charge

32.8500

0.74

7.

Subsidy on Lifeline

0.0952

0.01

8.

VAT on Generation Charge

0.9150

0.02

9.

VAT on System Loss Charge

0.0877

0.01

10.

VAT on Distribution Charge

0.1200

0.01

11.

VAT on Other Charges

0.1200

0.01

12.

UC-Missionary Electrification

0.1163

0.01

13

UC-Environmental Charge

0.0025

0.000056

14.

Prev. Yrs. Adj-P. Cost/UC SCC

0.1938

0.00435

15.

SC Recovery

0.0023

0.000051

16.

Transformer Rental/ Other Fee

17.

Vatable/VAT

18.

TOTAL

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Bantayan Electricity Bill (For illustration purposes only)

Why in Bantayan Island?

Basic Information (1) Overview: Country: Philippines Continent: Asia Name of the Municipality: Bantayan Region: Central Visayas (Region VII) Province: Cebu Total Land Area – 110.71 km2 (42.75 sq mi) excluding other islands Population: 114,314 (as of 2010) excluding other islands Economy: Fishing, agriculture and tourism Length: 16 Km (19 Miles) Width: 11 Km (6.8 Miles) Highest Elevation: 30 m (100 ft) Energy Production – Energy Consumption – Feed-In-Tariff by Solar PV – Independent Power Producer (IPP) in the Island: Electric Cooperative: Bantayan Electric Cooperative (BANELCO)

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Why in Bantayan Island?

Basic Information (2) Small power projects are making a big difference in people’s lives, especially in the remote islands of he Philippines.

The Philippine government is attracting private investment in off grid power generation, which will provide reliable and cheaper electricity to hundreds of thousands of people.

Renewable energy systems (RESs) have been promoted for rural electrification as an answer to the growing energy needs of communities while simultaneously satisfying environmental and resource scarcity problems. These off grid systems however have several challenges in the perspective of sustainability due to the technically and financially weak recipients and users of the projects. There is still, however, less detailed understanding how the technical and economic aspects of the projects can properly match the social aspects to promote sustainability.

The proliferation of micro grids in Asia Pacific has been encouraged by the rural electrification programs in developing countries as well as the establishment of commercial micro grids in developed nations. "Rural electrification projects such as the 1000 islands project in Indonesia, solar photovoltaic program in the Philippines, and off-grid projects in Malaysia are promoting the market.

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The Provincial Government of Cebu

Overview: Country: Philippines Continent: Asia Name of the Province: Cebu Region: Central Visayas (Region VII) Total Land Area – 110.71 km2 (42.75 sq mi) excluding other islands Population: 2,619,362 (as of 2010) Economy: Fishing, agriculture and tourism Land Area: 4,943.72 km2(1,908.78 sq mi) Number of Municipalities: 44 Independent Cities: 3 Component Cities: 6 Economy: Fishing, agriculture, mining, tourism, and Center of Trade in the Visayas Region. recognized as the Queen City of the South and the largest City next to Manila

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Solar Energy Potential Sites in the Philippines The Philippines position just above the equator does not provide her with vast potential for solar energy applications. However, the country's average solar radiation, based on sunshine duration, is 161.7 watts per square meter, with a range of 128 to 203 watts per square meter. Further work on solar mapping is being undertaken to determine the country's solar energy potential.

Accurate solar resource data is important for the proper sizing and life cycle cost analysis of solar photovoltaic technologies. Knowledge of the spatial distribution of the solar resource for various tilt angles will allow for more cost effective design and operation of photovoltaic systems for meeting small, distributed loads.

In 2000, National Renewable Energy Laboratory (NREL) completed a national assessment of solar resources of the Philippines. This assessment combines existing ground measurement data collected in the Philippines and the output of NREL’s Climatologically Solar Radiation (CSR) Model. This model converts information on satelliteand surface derived cloud cover data collected at a 40-km spatial resolution to estimates of the monthly average daily total global horizontal solar resource. This spatial resolution is generally much higher than the spacing of ground stations, and therefore allows for a more detailed analysis of the effects of microclimate variability on the solar resource, and provides a more accurate interpolation of the solar resource between ground stations.

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Cebu Province Sun Path Diagram

16

Cebu, Philippines Sunrise, sunset, dawn and dusts times table

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Philippines and Cebu Province Challenges and Opportunities Solar Energy Project CRITICAL FACTORS IN PROJECT DESIGN

Legal Framework (1):

Designers of off-grid electrification projects are responsible for a range of critical decisions that affect sustainability. These decisions include technology choice, ensuring affordability, social safeguards and environmental considerations, as well as taking advantage of Opportunities to initiate and enhance productive activities and institutional applications. Project designers must also consider ways to use appropriate business models, determine necessary regulatory actions, and explore opportunities for international co-financing.

The RE Regulatory Framework Governmental bodies involved in oversight of the regulatory sector – with impact on the renewable energy framework – include: 

 

Unlike fossil and wind energy resources, solar energy resources are fairly evenly distributed in most densely populated areas. The main metric for solar energy resources is the average annual “insolation” on a horizontal surface, usually expressed in units of kilowatt-hours of solar radiation per square meter per year. (Alternately, this value is divided by 365 to express it in daily units.) At the lower end of the range, low elevation, cloudy, northern (or southern) locations might see only 2.5 kWh/m2 per average day (about 900 per year) while at the other extreme higher altitude, clear desert locations near the equator might see as much as 7.5 kWh/m2 per average day (about 2,700 kWh/m2 per year). Energy production from a PV facility is proportional to insolation, so for any fixed-cost PV system, the price of the electricity is inversely proportional to the insolation.





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The Department of Energy (DOE) – created in 1992 under Republic Act No. 7638, responsible for preparing, coordinating and supervising all activities of the Government relating to energy exploration, development, use and conservation; The ERC, created in 2001, to regulate sector participants; The National Electrification Agency, primarily responsible for rural electrifications; The National Renewable Energy Board (NREB), created by the 2008 Renewables Law consisting of a 15-person advisory board of government and private sector representatives; The Board of Investments, under the Department of Trade and Industry, with the power to offer tax breaks and incentives to encourage investment in the sector

Philippines and Cebu Province Challenges and Opportunities Solar Energy Project Legal Framework (2): Another lesson learned during the permitting process is that regulatory requirements intended for conventional power plants are difficult and burdensome for solar power plants. For example, regulations pertaining to air emissions, fuel transfer and storage, and cooling water required discussions of all these issues along with public notices and hearings for full adherence to the letter of the law, even though the simple answer would seem to be “not applicable” to a PV facility.

Definitions: 'Feed-In Tariff' An economic policy created to promote active investment in and production of renewable energy sources. Feedin tariffs typically make use of long-term agreements and pricing tied to costs of production for renewable energy producers.

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In 2008, the Philippines enacted a comprehensive and ambitious renewable law, Republic Act No. 9513, also known as the Renewable Energy Act of 2008 (hereafter, the RE Act). The RE Act includes mandatory purchasing of power from renewables, a renewable energy certificate market as a subset of WESM, preferential feed-in tariffs, a “green energy option” that allows consumers to choose renewable sources and various other incentives. With respect to the different market actors responsible for renewable energy development, the RE Act provides :  The DOE promulgates rules regarding the mandatory purchase of renewable energy, awards RE service contracts, formulates the National RE Plan, and registers RE participants;  The ERC sets rates, including feed-in tariffs for wind, solar, ocean, run-of-the river hydropower and biomass resources, as well as the pricing methodology for net metering;  The NREB sets the minimum percentage of renewable power for the renewable portfolio standards; assists the ERC in crafting and setting the FIT system regulations as well as in the setting the tariffs; and consults with the DOE on how to establish the green energy option and on the use of a Renewable Energy Trust Fund. The NGCP is responsible for the settlement and payment of the FITs for the Eligible RE Plants, and for this purpose, consolidates the information on physical sales of all Eligible RE Plants and the RE generation for the whole country, including off‐grids, and shares this information with relevant stakeholders.

The Feed-In Tariff Rules (1) The FIT Rules came into effect after a lengthy public consultation and comment process. The regulator posted its draft Rules for comment on its website in March 2010 and offered an open comment process. The ERC approved the Rules in July. The FIT Rules provide for: 









Guidelines as to how to establish FITs through a renewable energy charge to be collected from all consumers through the Feed-In Tariffs Allowance, or “FIT-All,” a uniform charge to be imposed on all electricity consumers based on their kWh consumption. The proceeds of the FIT-All go to a fund which National Grid Corporation of the Philippines (NGCP) will manage. This fund will provide payments to the renewable energy developers based on the FITs applicable to them and their actual energy deliveries into the system. The ERC is responsible for setting the FIT-All upon petition by NGCP; A 15-year duration. Renewable energy developers are entitled to receive the FITs corresponding to the year it starts commercial operation for a period of 15 years. The ERC is reviewing requests from potential investors to extend this duration to 20 years.; Annual Adjustments for cost of local inflation and foreign exchange rates. The ERC reviews and adjusts the FITs annually for the entire period of its applicability to allow pass-through of local inflation and foreign exchange rate variations, employing “a simple benchmarking indexation formula to apply to all technologies based on the applicable percentage sharing between local and foreign capital . . .” The ERC will publish these adjusted FITs annually and use them in the calculation of the FIT-All for the current year; Technology-specific tariffs. Further differentiation based on peak or off-peak generation, or on plant size may be instituted by the ERC, subject to additional analysis by the ERC. Such differentiation would be linked to installation targets, which the NREB shall set for each technology.; Degression rates. The ERC may subject FITs to a degression rate to account for the maturing of renewable energy technology over time. With respect to degression, the FIT rules provide: “To encourage the RE producers to invest at the initial stage and hasten deployment of RE, the FITs to be established by ERC shall be subject to a degression rate which it shall determine based on NREB's recommendation. The Eligible RE Plants shall be entitled to such degrease FITs corresponding to the year when they started commercial operation. The ERC may approve a different degression rate for different technologies.”

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The Feed-In Tariff Rules (2)  

FITs for self-generation. FITs shall be established for each generation plant exporting net excess electricity to the distribution or transmission network; Reasonable Flexibility. While fixed, the ERC may review and re-adjust the FITs if/when: (1) the installation target per technology as defined by NREB is achieved; (2) the installation target per technology is not achieved within the period targeted; (3) there are significant changes to the costs or more accurate cost data become available that will allow NREB to calculate the FITs based on the methodology included in the annex; or (4) “other analogous circumstances that justify review and re-adjustment of the FITs.” However, the new FITs approved by the ERC may apply only to new RE projects. Eligible RE plants in commercial operation at the time of approval of the new FITs remain entitled to their existing FITs (although section 9.1 of the FIT Rules contains a general good cause exemption permitting changes to existing FITs when to do so “is found to be in the public interest and is not contrary to law or any other related rules and regulations”).

Furthermore, the Rules state that the cost of the FIT will be passed on to transmission and distribution customers as a uniform kWH rate to be listed separately on customer bills. NGCP is responsible for collecting FIT-All proceeds to ensure payment to RE producers. A portion of the proceeds will be dedicated to a Working Capital Allowance for this purpose. In cases of delay of payment or non-payment, ERC has the authority to impose penalties, including a surcharge of up to 20% as well as monthly accumulated interest. NGCP may disconnect any customer defaulting on payment for a period of over two billing periods.

The FIT may be reviewed on an annual basis based on petition from NGCP but the Rules allow for revision of the tariff should funds in the Working Capital Allowance fall under 50% of the projected FIT-All proceeds. According to the Rules, the FIT will be set based on “forecasted annual required revenue of the Eligible RE Plants; the previous year’s over or under recoveries; NGCP’s administration costs; the forecasted annual electricity sales; and such other relevant factors to ensure that no stakeholder is allocated with additional risks in the implementation of the FITs.”

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The Feed-In Tariff Rules (3)

-In The FITs that NREB calculates and submits to the ERC for approval must conform to the Rules, except that the initial tariff may be based on “a reference cost study for each technology based on a real candidate project or a hypothetical one depending on the available information. The project to be chosen shall be representative of the average conditions of the renewable energy plant operating in compliance or at par with applicable international technical standards and practices for such technologies, and the pricing study shall consider also all non-price incentives in R.A. No. 9513.” The FIT Rules provide that “the NREB shall propose the FITs taking into Tariff Rules account the expected MW capacity for each technology that it shall set as installation targets and the number of years when this target shall be achieved. The FITs shall cover the costs of the plant, including the costs of other services that the plant may provide, as well as the costs of connecting the plant to the transmission or distribution network, calculated over the expected lives of the plant, and provide for market‐based ‐ weighted average cost of capital (WAC e) in determining return on invested capital.”

In summary, ERC has established a strong foundation for the FIT-All by creating a clear regulatory framework supporting the mechanism and providing a detailed blueprint of the analysis to maximize benefits and minimize cost.

These guidelines allow flexibility in the implementation of the FIT while at the same time setting up a predictable Regulatory environment that encourages investment in renewables.

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National Electrification Agency (BANELCO is in the target lists that can issue PPA)

National Electrification Agency (NEA) list for the target Philippine electric cooperatives (EC's) for possible direct PPA (Power Purchase Agreement) plays. The list is classified into two: ď ą Main Priority List - those with solid credit rating and institutional health, 2015 expected supply contract deficiency (as per NEA national data; this has to be verified on the ground), and no solar RESC (Renewable Energy Service Contract) application in the DOE indicating that another solar developer is interested to develop a project in the area; And ď ą Expanded Priority List - those with solid credit rating and institutional health, expected 2015 supply contract deficiency (as per NEA national data; this has to be verified on the ground), but includes those with solar RESC (Renewable Energy Service Contract) application in the DOE by other developers. To determine if these developers have a Power Purchase Agreement (PPA) contract with the EC, the EC must be contacted. These solar RESC's might be for the FIT play and not with a PPA concerning the EC. 23

Project Finance Strategy (1)

The development of the 5MW Solar Energy Project in Bantayan Island, Cebu Province, Philippines requires three types of financing as follows: 1.

Pre-Development Financing: Funds needed to finance so called “soft cost” is called pre-development financing. It is estimated that of the total project cost of $9,550,000.00 the total pre-development financing needed will be about $500,000. Of this amount the initial fund requirement is approximately $250,000.00. The balance of $250,000.00 will be needed after the completion of the comprehensive feasibility studies.

Pre-development period – 12 months Total amount required - $500,000.00 Day One ----------90th day-------------180th day--------------270th day------------360th day $100,000.00 $100,000.00 $100,000.00 $100,000.00 $100,000.00 The project has acquired site control from __________________ providing the land with a total requirement of about 15 hectares.

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Project Finance Strategy (2)

2.

Construction Finance:

Item No.

Particulars

Budgetary Costs Estimates

A.

Direct Costs

$7,387,500.00

A1.

Pre-Development Costs (including government Permits and Licenses)

$500,000.00

A2.

Local Component Costs: Materials/Labor Costs

$850,000.00

A3.

Foreign Component Costs: Materials/ Equipments/Labor Costs

$6,037,500.00

B.

Indirect Costs

$2,162,500.00

B1.

Overhead and Supervision

$450,000.00

B2.

Insurance Premiums and Bank Charges and Incidentals

$850,000.00

B3.

Land Costs, VAT and Other Taxes

$862,500.00

C.

TOTAL PROJECT COSTS

$9,550,000.00

Construction finance means funding needed to construct the project. The project cost in the amount of $9,550,000.00 is divided into two (2) components as follows:

A.

DIRECT COSTS

$7,387,500.00

Pre-development costs - $ 500,000.00 Local Costs - $ 850,000.00 Foreign Costs - $6,037,500.00

B. INDIRECT COSTS

$2,162,500.00

C. TOTAL PROJECT COSTS

$9,550,000.00

Construction Period

- One and a Half (1 1/2) Years

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Sequence of Events Item No.

Activities

Remarks

1.

Submission of Proposal to BANELCO and other appropriate government agencies to undertake a 5MW Solar Energy Project in Bantayan Island under the Build-Operate-and-Own (BOO)

2.

Preparation of Pre-Development works including creation of a Special Purpose Entity (SPE) that will own the Project

3.

Selection and Appointments of Project Development Consultants, engineers and Architectural Firms

4.

Negotiations with Investors/Creditors/Export Credit Agency and other Financing Institutions/Land Owner

5.

Drafting and Executions of Contracts and PPAs with BANELCO and other Government Agencies.

6.

Bidding and Awarding of Contracts to various Companies

7.

Project Execution

8.

Operation and Maintenance

9.

Debt Servicing

10.

“Ownership� of the Project to be sold to the Government or to private interest group

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References and Appreciations This “Project Presentation” is intended for presentation to potential investors and strategic partners. The objective is to develop a 5MW Solar Energy Project in a designated site at Bantayan Island, Cebu Province, Philippines.

A “comprehensive project feasibility studies” will be done as soon as potential participants in this Project have been identified and all the Parties have executed a Memorandum of Understanding (MOU).

Moreover, this document was made possible through the support of Global First Financial Partners, Inc. and other partners of Mr. Fernando M. Sopot.

Likewise, the author has recognized the importance of reference materials used in this document such as but not limited to NASA Public Information documents, the U.S. Department of Energy’s Solar Development, Department of Energy in the Philippines, Energy Regulatory Board, National Electrification Agency (NEA), BANELCO, World Bank, IFC and other sources of information that are relevant to this presentation.

This “document” is subject to change without prior notice.

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Contact Us: Contact Us: Global First Financial Partners, Inc. 108 Orchard Terrace, Union New Jersey 07083 U.S.A.

Attention: JOSE HERNANDEZ Chairman P: 1.201.349.8336 E: joehernandez555@msn.com FERNANDO M. SOPOT President & CEO P: 1.908.463.9417 E: fms@globalfirstfinancial.net MARK LEO CHANG Project Advisor P: +63 9177049422 E: markleochang@yahoo.com VALUE CREATION ALTERNATIVE Christophe Schwoertzig CEO – Director General FINANCIAL ADVISOR

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