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Rice Husk to Electricity, July 2013


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The gap between electricity supply and demand in Cambodia is significant. The country relies heavily on expensive imported electricity, diesel and other fossil fuels. To fulfill the rapidly growing demand for electricity, many are looking at alternative renewable energy solutions, including biomass power generation. This plan provides an overview of the opportunities in converting waste rice husk to biogas electricity production, produced on GIFT's Global Leadership Programme in partnership with ORIX Corporation, July 2013.

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Rice Husk to Electricity, July 2013

  1. 1. Click to edit Master title style Rice to edit Master title style Husk to Electricity Click Power Generation from 100% Biomass in Cambodia A proposal for SOMA Group prepared through the ORIX Global Leaders Programme, July 2013
  2. 2. ORIX Global Leaders Programme 2013 Hong Kong based leading provider of experiential executive learning programmes Japanese financial services group with a presence in 34 countries Cambodia’s leading industrial conglomerate with a focus on the country’s development New entity set up under SOMA Group focusing on renewable energy development in Cambodia 2
  3. 3. Background: Rice Industry in Cambodia • Government aims to export 1 million tons of rice by 2015 (400% increase in 3 years) 1200000 1000000 800000 600000 400000 200000 0 2011 2012 2013 2014 2015 Massive increase in rice milling out put is expected in the coming years 3
  4. 4. Biomass Energy in Cambodia • Cambodia has significant biomass energy resources including rice husks. • Exports of milled rice is expected to increase from 0.2 million tons in 2012 to 1 million tons by 2015 (A 400% increase in 3 years). • At the same time, electricity tariffs are high and only 50% of Cambodians have access to power. • Rural electrification is even lower, at less than 30%. Rice husk biomass energy will exploit Cambodia’s skyrocketing rice production to electrify rural areas. 4
  5. 5. Biomass Energy 5
  6. 6. Biomass Power Generation Technology • Existing solutions – Gasifier + Hybrid Diesel Engine • SOMA Energy’s solution: 100% loose rice husk gasifier & genset • Advantages of the new solution – loose rice husk: eliminates the need for extra energy inputs through pelletising and gasification – 100% diesel free: further reducing power generation costs required by users – Byproduct: ash and bio-char, can be used as soil enhancer, potential to generate additional income for users and provide value to Cambodian agriculture – Lower carbon emission: generally more environmentally friendly and provides potential opportunities in carbon offsets and credits 6
  7. 7. Biomass Power Generation Technology Ankur Scientific Energy Technologies Pvt. Ltd. GE-Waukesha VHP 5904 The retooled GE Waukesha gas engine is compatible with 100% synthetic gas produced from biomass gasification for power generation The gasification process converts the feedstock, such as rice husks, into Producer Gas, ready to feed into the power generator If fully developed, the biomass gasification technology in Cambodia using rice husks has great potential to address the country’s energy security. 7
  8. 8. Vision of SOMA Energy • SOMA Energy strives to be a leader in renewable energy development in Cambodia and to be the catalyst for promoting biomass energy solutions • SOMA Energy aims to be the pioneer in biomass power generation, therefore contributing to rural economic development and prosperity throughout Cambodia SOMA Energy is a renewable energy company 8
  9. 9. SOMA Energy Value Proposition • • • • • SOMA Energy is committed to providing the rural Cambodian population with clean and low-cost electricity (compare to HFO) generated from renewable biomass gasification, to fulfill the growing demand for electricity SOMA power generation uses 100% loose rice husk – an agri-byproduct, turning agri-waste into electricity and reducing the overall consumption of diesel and HFO in power generation By providing access to affordable electricity, SOMA Energy is also playing a key role in promoting rural economic development SOMA energy projects supports the rice industry in Cambodia by providing affordable and stable source of electricity, stablising paddy supply for mills, reducing post-harvest wastage and leveling the seasonal rice price fluctuations By providing better drying and storage facilities (both energy dependent) and management services, SOMA intends to reduce wastage, prevent paddy from flowing to neighbouring countries through unregulated channels and increase the income of the rice farmers in Cambodia 9
  10. 10. Key Stakeholder Analysis The key stakeholders that SOMA Energy needs to consider engaging include: • Technical partners: Provider of gasifier (Ankur, SME Renewables), provider of power generator (GE) • Financial Partners: corporate investors, PE firms, development agencies, banks, mutual funds • Clients: rice mills, local grid operators and power distributors, local factories, local households, national grid • Suppliers: rice mills (husk), rice traders (paddy) Supplier management with the mills to secure the supply of rice husks is key to SOMA’s stakeholder management 10
  11. 11. Biomass Energy in Cambodia Biomass Energy Generation Challenges : • Supply chain management • Secure supply and transportation of rice husks • Price volatility of feedstock • Lack of renewable energy policy and incentives for producers • Limited access to financing • Expanding national electricity grid • High transportation cost relative to the value of commodity Policy environment and feedstock management are the main challenges facing Cambodia’s biomass energy industry 11
  12. 12. Option #1: Rice Mill Installation (Schematic) Local Electricity Distributor Farmers Grid Paddy Rice Mills Husk + Reduced electricity Tariff 12 Industrial Electricity Users
  13. 13. Option #2: Remote Electrification (Schematic) Local Electricity Distributor Farmers Grid Paddy Rice Mill Husk Power Generation 13 Industrial Electricity Users
  14. 14. Option #3: Rice Storage & Electricity (Schematic) Local Electricity Distributor Farmers Grid Paddy Paddy <SILO> Rice Mill <Power Generation> Husk + Reduced electricity Tariff Industrial Electricity Users 14
  15. 15. Comparison of 3 Options Option #3 of building and operating silos presents the best rate of return among the three business models, but also requires the largest initial capital investment. Options #2 can be considered in areas rich in paddy but lacking in power, as well as alongside Option #3. Option #1 is suitable for regions with relatively higher concentration of existing mills. IRR (10 years) Net investment US$ mil. Cumulative net income US$ mil. 1. Generation Unit at Rice Mill Cluster 13.9% 3.16 2.90 2. New Mill + Generation Unit 15.2% 6.34 6.39 3. Silo + Generation Unit 20.0% 7.90 10.9 Options All three options provide a favorable IRR 15
  16. 16. Comparison of 3 Options Fincial Performance Least Capital Request Feedstock Stability Three options have been compared against criteria including financial and social benefits, as well as investment and key operational considerations Option 1 Option 2 Ease of Operation Social Benefit Option 3 Option 3 is recommended as it provides greatest overall benefit, in spite of requiring higher investment and technical expertise 16
  17. 17. Option #3: Financial Projection • • • • • Capital Investment Requirement: US$ 7.90 million IRR: 20.0% in 10 years Payback Period: 5 years Expected annual revenue: US$ 13.88 million Expected annual net profit: US$ 1.27-1.30 million Million USD Accumulated Profit 12.00 10.00 8.00 6.00 4.00 2.00 Year 1 Year 2 Year 3 Year 4 Year 5 17 Year 6 Year 7 Year 8 Year 9 Year 10
  18. 18. Risk Analysis and Mitigation: External Risks Risk Type Description Likelihood Impact Risk Mitigation • Expansion of National Grid High Medium • • Market Risk Be aware of the future expansion plan of the national grid carefully select project sites to prevent clashing with grid in the next 5-10 years • Establishment of Secondary Market for Biomass Competition High High Signing of long term captive contract with rice mills to secure supply of feed stock Targeting major rice producing provinces Locating the power plant close to source of feedstock (within 20-30 km radius) Investing in drying and storage facilities • Diversification of business scope • • Medium Low 18
  19. 19. Risk Analysis and Mitigation: External Risks Risk Type Description Current lack of regulation on renewable energy Policy Risk Unfavorable policy change on biomass energy solutions Likelihood Impact Risk Mitigation • High Low • • Low Low 19 • Influence the government to make renewable-related policies Better cost-management to compete with traditional sources of power generation Expand business into other renewable solutions and services Move from direct energy provider to energy services
  20. 20. Risk Analysis and Mitigation: Internal Risks Risk Type Description SOMA lacking experiences in power business Management Risk Lack of financial independence and transparency Likelihood Impact Risk Mitigation • Medium Low • • Medium Medium 20 • Employ experienced staff to run and operate the energy business Acquire technical know-how from the technical partners i.e. GE, Ankur, SME to equip SOMA staff SOMA energy should be an independent entity from SOMA Group SOMA Energy should be responsible in keeping its own financial statements
  21. 21. Risk Analysis and Mitigation: Internal Risks Risk Type Description Likelihood Delay in recovery of investment Impact Risk Mitigation • Medium High • • Funding and Capital Risk Lack of sufficient funding Medium Working capital locked up in inventory High Medium • • High 21 • • Strengthening cash flow to be in better position to deal with unexpected situations Secure some of the financial liabilities and obligation through insurance, etc. Increasing the financial transparency of SOMA Energy Establishment of robust financial and risk management policies Collaborate with international partners to explore various funding methods Establishment of rainy day fund Sourcing of extra credit lines
  22. 22. Cambodian Biomass & SOMA Energy • Cambodia can be a catalyst for new biomass energy solutions • SOMA Energy can be a pioneer in rural economic development • Renewable energy can develop before conventional energy infrastructure becomes entrenched • Contact SOMA to get more details on investment or partnership opportunities The time for biomass energy is NOW 22
  23. 23. THANK YOU! សូមអរគុណ! Our team wishes the best for SOMA Group and Cambodia!