Cambodia: Renewables start to gain traction

Cambodia: Renewables start to gain traction

Solar power is slowly gaining momentum in Cambodia as a viable source of
electricity for the country's growing energy needs, though stakeholders are
anxious to see a real government commitment to establish a beneficial
regulatory framework.

Speaking at a forum organised by EuroCham yesterday, private sector players
called on the government to incorporate green business strategies and back
solar proposals such as a net metering tariff.

Tin Ponlok, secretary-general of the Cambodia National Council for
Sustainable Development, said that the government vowed to pay more
attention to the solar industry, but urged the international community to
"level the playing field" by increasing access to technology, especially for
developing countries.

Nevertheless, Arnaud Ayral, regional business development director for
Cleantech, said that Cambodia's solar capacity continues to grow despite
numerous challenges.

"Right now it is just happening but Cambodia has a huge momentum and a huge
amount of interest [in solar]," he said. "Estimates differ between 10 or 20
megawatts of solar that are already operational in the country."

Ayral added that the primary challenges for wide-scale solar adoption hinged
on financial backing, government support and long-term planning.

"It remains a long-term commitment, whether you invest yourself or whether
you get someone else to do it for you, you are looking at 10 years or more
in terms of length," he said. "So if you are not sure if you are going to
continue to operate your plant in five years, it is going to be difficult."

One successful sign for solar adoption was an announcement early this week
that the Asian Development Bank (ADB) was providing funding for Cambodia's
only planned solar farm, lending $9.2 million to Singapore-based Sunseap
Group for its 10-megawatt facility in Bavet.

Shuji Hashizume, the lead project officer at the ADB for the loan, told The
Post that renewable energy projects of that scale require high upfront
capital costs before they can become viable - something that traditional
financial institutions are unwilling to take on.

"To ensure a competitive tariff for the benefit of the consumers and the
country, and for the project developers to enjoy reasonable return from
their investments at the same time, it is important that they have access to
competitive, long-term financing," he said.

"This remains scarce in an emerging country like Cambodia since
international commercial banks are reluctant due to perceived high political
risks [while] the local banking sector is underdeveloped and their funding
costs are high."

The Bavet solar farm, which has already secured a power purchasing agreement
with the state-run Electricite du Cambodge (EdC), faced numerous
uncertainties after Sunseap won the initial bid last year. According to
Hashizume, additional funding was needed to create new framework agreements.

"There was no established template for a power purchase agreement, so the
project sponsor had to negotiate with the EdC to ensure the PPA is
bankable," he said. "These all come with additional associated fees and
resources which they would not have needed in a more established market with
precedent projects."

The $9.2 million concessional loan is supported by the Canadian Climate Fund
for the Private Sector in Asia and co-financed by France's BRED Bank.

Jean-Christophe Levens, head of corporate structured finance Asia at BRED
Bank, said that the public-private partnership represented a diversification
of financial lending in the Kingdom.

"In Cambodia, we are slowly starting to see the development of more complex
and sophisticated products, of which project and structured finance is one
of them," he said. "This financing is also good for us because it allows us
to reach out to a more diversified number of industries."

Levens said solar offered good potential for investment in Cambodia, adding
other similar energy projects are in the pipeline. He noted that the
involvement of the ADB and the EdC alongside other international
shareholders helped to mitigate the risks of financing the nascent renewable
energy market.

"For us, the decision to finance solar projects in Cambodia makes sense, due
to the requirements of the country in energy, even more in clean energy," he
said.

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com