2011 International Conference on Alternative Energy in Developing Countries and Emerging Economies
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10,000 – 20,000 million, accounting for at least 30%
of total market share.
A popular financing model adopted by most green
projects is the combination of equity and bank loans
with a ratio of 30% and 70% of total project cost,
respectively.
VC, PE and funds’ activities related to renewable
energy industry
Based on our research results, the level of
participation in the development of renewable energy
industry by VC, PE and funds in Thailand is still
minimal. Leave alone for renewable energy, these
financial institutions are not key players in Thai
financial sector. Most active funds are co-sponsored
by governments. Below please find the firms that
focusing on energy:
ESCO Venture Fund.
This is a government-
backed venture capital established in 2008 with the
startup fund of $15 million. In the long-term, the fund
plans to raise $100 million - $200 million and
prioritize to include private investors.
MFC Energy Fund.
Thailand’s first private equity
fund focuses on investment in renewable energy. It
was established in 2007 with startup fund of $70
million, contributed by institutional investors from
energy and financial services sectors, with the 10
years maturity (See Table 8: MFC Energy Fund)
Private Energy Market Fund
[15]
.
A Finland-
based private equity focusing on renewable energy. It
has invested in biomass power plants in Thailand.
Interviews with financial professionals in Thailand
Based on our interviews with policy makers at
BOI and ERC, with developers, as well as with
finance professionals at Kasikorn Bank, MFC Energy
Fund, and AWR-Lloyd, key points were noted as the
following:
Growing business opportunity in the renewable
energy industry in Thailand.
This has resulted from
increased support from the government. For the past
few years, government has been more proactive to
develop this industry. The investment opportunity
under the 15-Year Renewable Energy Development
Plan proves to be promising and attractive.
However, the return from investing in the
renewable energy projects is still moderate.
Based on
the interviews, acceptable average equity internal rate
of return (Equity IRR) from the renewable energy
projects for Thai investors range from 8 percent to 20
percent. The lower range is acceptable for large and
low risk investment taken by commercial banks’
large project finance. The higher range is acceptable
for equity investors such as VC, PE and funds. This
IRR range proves to be unattractive compared to
returns in other markets such as in United States.
Why does the return on investment seem
unattractive?
While investors perceive business
opportunities, they are concerned that the
government-sponsored programs are not aggressive
enough. For example, Dr.Pallapa commented on the
effectiveness of feed –in tariffs programs as the
following:
SPPs/VSPPs, power generation using wind or
solar energy is still not cost-effective. To address
this problem and to enhance fuel diversification,
on 16 November 2007, the NEPC approved the
adjustment of adder rates to encourage
investment in power generation using wind or
solar energy as fuel. That is, for wind-energy
power generation, the adder is increased from
2.50 to 3.50 Baht/kWh for solar-energy power
generation, the adder is 8.00 Baht/kWh still;
however, the duration of adder provision for both
wind and solar energy projects is extended from 7
years to 10 years as from the COD
[16]
.
However, in July 2010, the adder for solar VSPPs
was reduced from 8.00 baht to 6.50 Baht/kWh by the
government. As a result, developers who submitted
investment and license proposals and had not been
approved will receive only 6.50Baht of adder. The
government believes that the solar technology
becomes cheaper and easier to access. This change
undeniably raised concerns of predictability and
stability of government’s policies for the renewable
energy industry in Thailand. Moreover, developers
and financial professionals commented that the new
adder for solar, and even existing rates especially for
biomass and biogas, do not make the investments
commercially viable – to give them desirable rate of
returns.
At present, investors and lenders are looking
forward to the new, full feed-in-tariff program that
will be announced later in 2011. The new program is
hoped to elevate investment environment and
commercialization of Thailand’s renewable energy
projects.
V . C
O N C L U S I O N
The results from our methodologies conducted in
the previous chapter suggest that financial institutions
in Thailand, although taking part in government-led
programs, do not play a crucial role in developing
renewable energy industry. Nonetheless, going
forward, financial institutions may invest more both
in debt and equity. This is a result of the forecast
private investment under the 15-Year Renewable
