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ASIA BIOMASS WORKSHOP 2007

BANK PEMBANGUNAN MALAYSIA BERHAD

FINANCING FOR BIOMASS AND RENEWABLE ENERGY ROJECTS

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Agenda

1)Brief Current Scenario

• RE in Malaysia• Sources of Financing• Issues in project financing

2)BPMB - New Role3)Financing Schemes

For RE4)Concluding

Remarks

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Why RE?

Pressure to shift to alternative sources of energy

Reasons:

Depleting and finite nature of fossil fuels

1. Dramatic rise in global energy demand brought about

by:• population growth• increase in standards of living• big energy appetite of emerging economies

2. Concern on environment – Kyoto Protocol

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RE in Malaysia

• Renewable Energy as Fifth Fuel incorporated in the

8th Malaysia Plan (2000-2005) – SREP Program• Only 2 projects came on stream and connected

to the grid. – why?• Uncertainty of availability and price of

biomass waste• Excess power generation capacity• Tariff considered low• Purely commercial venture• Technology risks• Accessibility of financing

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RE in Malaysia

• Strategies for alternative energy sources

continued in the 9th Malaysia Plan (2006-2010)• Electricity price reviewed• Rise in oil price – reduce dependency• Other sources such as Solar and MSW to be

developed• CDM support• Financing issues

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Sources of Financing

Debt Financing • Commercial banks• Developmental Financial Institutions (DFI)• Export Credit Agencies (ECA)

Equity Financing• Developer’s own resources• Capital market (IPO)• Investors• Technology supplier

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Issues in RE Project Financing

Feedstock Generation Offtake

•Availability•Pricing •Transport costs•Fixed price

•Long Term Supply Agreement•Capacity of supply

•Reputable contractor and Technology provider providing guarantees

•Fixed O & M Contract

Strong utility

•EPC Contract Proven and Suitable•Technology•Delivery schedule•Realistic costing•Competent technical team

•Creditworthiness•Price•Quantity•Price escalation•Duration•Transmission costs

What to consider for successful financing:

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BPMB – New Role

To provide medium to long term financing focusing on the:- infrastructuremaritime high technology (including renewable energy from biomass, biodiesel and environmental related projects)

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RENEWABLE ENERGY

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Financing Schemes

Fund Allocation ;

RM1.0 billion RE/EE Fund

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RM1.0 billion Biodiesel Scheme

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General Eligibility Criteria

•Incorporated in Malaysia

•Malaysian owned and controlled (at least 51% Malaysian shareholding)

All existing and new enterprises carrying out or planning to carry out RE&EE projects are eligible

•Projects located in Malaysia

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Non-Eligibility

• Refinancing

• Financing of Shares

• Taking over existing productive capacity

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Mode of Islamic Financing

Mode of Islamic Financing

Mode of Islamic Financing

Financing Purpose

Bai Bithaman Ajil

Purchase of land, building,plant, machinery, equipment

Istisna Construction of plant, building

Ijarah Lease of machinery,equipment

Murabahah Purchase of raw materials/working capital

Al Dayn Finance purchase of invoice

Bai Inah Operational exp. Capex

Kafalah G’tee Bank Guarantee

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RE/EE FUND

Amount : RM1.0 billion allocation

Target Market : Biomass (included oil palm biomass), forest

residues, solar thermal, mini hydro, solar PV, municipal waste, rice husk and landfill gas

Tenure : max 10 yrs (include max 2 of grace period)

• Profit Charged: Based on Cost of fund +

• Max financing amount : RM100m or 85% of project cost whichever is lower

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SECURITY

• Security is inclusive but not limited to the following:-

• Charge on project assets

• Assignment of Offtake Agreements or REPPA/FSA, Insurance Policies, Guarantees and all other project agreements

• Personal/Corporate Guarantees

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BIODIESEL SCHEME• RM1.0 billion (capital market)

• Tarket market ; Manufacturing, processing, transportation and infrastructure development of the biofuel industry, which included biofuel plant, manufacturing equipment, transportation, storage and export distribution

• Max financing amount : RM100m or 85% of project cost whichever is lower

• Profit Charge: Cost of fund +

• Tenor : Max. 10 years inclusive 2 years grace period

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Concluding Remarks

Renewable Energy shall remain as an important

alternative source of energy for the future. But…•Biomass for other applications?•Other sources – mini-hydro, biogas, MSW,

solar but need economic

feasibility studies•Tariff increased – is it attractive to developers?•Other issues and barriers being addressed in 9MP

- Implementation?•Utility’s role•Financiers appetite

…..are we really up to it??

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Contact Us :

Bank Pembangunan Malaysia Berhad

Aras 26, Menara Bank Pembangunan

Bandar Wawasan

No.1016, Jalan Sultan Ismail

50724 Kuala Lumpur

Telephone : +603-2611 3133

Fax : +603-2692 8250

Website : www.bpmb.com.my