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Power Generation from 100% Biomass in Cambodia
A proposal for SOMA Group prepared through the
ORIX Global Leaders Programme, July 2013
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
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
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
Biomass Energy

5
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
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
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
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
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
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
Option #1: Rice Mill Installation (Schematic)

Local Electricity
Distributor

Farmers

Grid

Paddy

Rice Mills

Husk + Reduced electricity Tariff

12

Industrial
Electricity Users
Option #2: Remote Electrification (Schematic)

Local Electricity
Distributor

Farmers

Grid

Paddy

Rice Mill

Husk

Power Generation

13

Industrial
Electricity Users
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
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
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
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
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
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
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
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
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
THANK YOU! សូមអរគុណ!
Our team wishes the best for SOMA Group and Cambodia!

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Rice Husk to Electricity, July 2013

  • 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. 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. 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. 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
  • 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. 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. 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. 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. 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. 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. Option #1: Rice Mill Installation (Schematic) Local Electricity Distributor Farmers Grid Paddy Rice Mills Husk + Reduced electricity Tariff 12 Industrial Electricity Users
  • 13. Option #2: Remote Electrification (Schematic) Local Electricity Distributor Farmers Grid Paddy Rice Mill Husk Power Generation 13 Industrial Electricity Users
  • 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. 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. 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. 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. 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. 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. 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. 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. 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. THANK YOU! សូមអរគុណ! Our team wishes the best for SOMA Group and Cambodia!