SETA 2016 : Bangkok Breaking Barriers to showcase the advantages of Energy Efficiency: Cracking the code

Key Points 1 Overview : Potential Energy Savings in South East Asia 2 CAPEX – Payback - Saving 3 What are the Energy Efficiency barriers ? 4 Criterias to select the right partner 2

3 1- Potential Energy Savings in South East Asia by 2020 Southeast Asia could achieve efficiency gains of 12% to 30%, = power SAVINGS between 119 TWh to 297 TWh, = USD 15 billion and USD 43 billion To achieve that need to invest by USD 11 billion GROWTH IN ANNUAL ELECTRIC ENERGY SAVINGS POTENTIAL IN THE FIVE COUNTRIES FROM 2010 TO 2016 MARKET POTENTIAL IN ENERGY EFFICIENCY IN SOUTHEAST ASIA, Eurocham Sustainability Committee, Nov 2010,

4 2- CAPEX – Payback – Saving CAPEX ≤ 2 yrs 3 to 6 yrs 6 to 8 yrs Payback 2 to 8 % 5 to 25 % Gains [kWh and/or $]

3- What are the EE barriers? Drivers for Energy Efficiency 5 Government Regulation Increase of Energy prices Increasing Energy security Government / utility incentives Enhanced brand or public image (CSR) Existing policies Greenhouse gas reduction Growth in Green Building Certification Technologies available

3- What are the EE barriers? Key challenges 6 Not aware of opportunities No trust and confidence in ESCO Landlord/Tenant split incentives AWARENESS Lack of funding to pay for improvements Payback / ROI perceived as TOO LONG EE projects risks FINANCIAL Complexity: Numerous technologies available Uncertainty vs savings / performances Lack of technical expertise to evaluate/execute projects Reluctance for long-term solutions/contracts TECHNICAL

Not aware of opportunities No trust and confidence in ESCO Landlord/Tenant split incentives AWARENESS Lack of funding to pay for improvements Payback / ROI perceived as TOO LONG EE projects risks FINANCIAL Complexity: Numerous technologies available Uncertainty vs savings / performances Lack of technical expertise to evaluate/execute projects Reluctance for long-term solutions/contracts TECHNICAL 3- Overcoming the barriers Awareness 7  Communication, EE promotion  Experience: Track record, Feedback, Benchmark, Historic  Performance bonds  Education, Explanations ( highlight mutual interests of both Tenant and Landlords )

Lack of funding to pay for improvements Payback / ROI perceived as TOO LONG EE projects risks FINANCIAL Lack of awareness opportunities No trust and confidence in ESCO Landlord/Tenant split incentives AWARENESS Complexity: Numerous technologies available Uncertainty vs savings / performances Lack of technical expertise to evaluate/execute projects Reluctance for long-term solutions/contracts TECHNICAL 8  Baseline for Energy Savings must be accurately measured (Energy Audit)  Shared Savings scheme to provide incentives to all parties  Various ways of Financing (see later)  If the Project Financing is outsourced Owner gets savings from day 1 3- Overcoming the barriers Financing

LOAN 9 3- Overcoming the barriers Financing : typical financing Typical financing not link the EEPC with the Loan ESCO Project EEPC BANK

10 3- Overcoming the barriers Financing : typical financing Project LOAN BANK Based on Guarantee ESCO EEPC Link the ESCO and the performance guarantee into the loop It’s a 3 parties commitment

Complexity: Numerus technologies available Uncertainty vs savings / performances Lack of technical expertise to evaluate/execute projects Reluctance for long-term solutions/contracts TECHNICAL Lack of awareness opportunities No trust and confidence in ESCO Landlord/Tenant split incentives AWARENESS Lack of funding to pay for improvements Payback / ROI perceived as TOO LONG EE projects risks FINANCIAL 4- Overcoming the barriers Technical 11  The baseline for Energy Savings must be accurately measured and analyzed (Energy Audit)  ESCO must guarantee the future performances (Performance Bond)  Full transfer of Technical risks to ESCO  OPEX guaranteed (O&M, Spare-parts, Consumables, Repairs)  Reporting and online supervision by Client,  Transparency and Flexibility in contracts with Exit Clauses

4- Criterias to select the right partner 12 R ISKS T RANSFER Equipment Staff Insurance Client’s expansion R ISKS T RANSFER Equipment Staff Insurance Client’s expansion T RANSPARENCY Pre-agreed IRR Sharing Scheme KPIs Energy Meters T RANSPARENCY Pre-agreed IRR Sharing Scheme KPIs Energy Meters F LEXIBILITY Exit Clause Y3 Assets returned Invoicing matching client’s activity F LEXIBILITY Exit Clause Y3 Assets returned Invoicing matching client’s activity G UARANTEES Savings (energy/O&M) Cash Flow from day 1 Efficiency Availability Reliability G UARANTEES Savings (energy/O&M) Cash Flow from day 1 Efficiency Availability Reliability Prerequisites Knowledge & experience ref. the numerous technologies available Overall view ( LIFECYCLE PLANNING ) Capacity to determine / to measure the baseline Transparent and Flexible contract terms Shared savings to incentive all parties Prerequisites Knowledge & experience ref. the numerous technologies available Overall view ( LIFECYCLE PLANNING ) Capacity to determine / to measure the baseline Transparent and Flexible contract terms Shared savings to incentive all parties

Low Cost Low Risk Lighting Replacement Thinking global costs: CAPEX & OPEX 4- Criterias to select the right partner Lifecycle planning 13 Risk 1=Low 10=High Potential Cost High Cost High Risk 2015 Based upon Cofely Optimise™ data and COFELY CTS internal analytics Thinking only CAPEX : Chillers PV Building Optimisation Water Save Boilers VSD’s 2035

4- Ask 3 Questions 14 The 3 questions you need to ask yourself: Do I know EXACTLY the cost of my utilities (AC, Compressed air, Steam, …) ? Do I regularly ANALYZE my energy consumption ? Do I have the COMPETENCES in-house to handle such a difficult project ? NO ?  High level of savings available  Need to implement an EE project and to entrust the right partner

4- Criterias to select the right partner Why outsourcing EE project ? 15 Audit / Design (measure before) Finance / Implement Commission / Performance tests O&M / guarantees (measure after) “ Bundled Services” Get Energy Efficiency Services Company to be your L ONG T ERM P ARTNER

16 4- Criterias to select the right partner Critical Issues?  A UDIT No Audit >> Wrong Baseline >> Over-estimated Capex >> Lower IRR  S OLUTION D ESIGN : Request large experience to define the right solution among the numerous technologies in the market  I MPLEMENTATION Implement so as to ease the future O&M  L ONG - TERM O&M with strong Performances Guarantee = No surprise

“ Data is KING ” : No proper measurement => no solution => no improvement 4- Criterias to select the right partner Baseline 17 Demand Side Management Converting meter readings into reportable information Financial analysis of specific consumption Site usage efficiency Monthly, annual and ad hoc energy reports Providing consumption profiles to Finance Departments Validation and challenges to utility billing Collate and submit all data for Carbon Trading & CRC

Summary Can’t control market forces on energy price Energy Efficiency can be used to lower operating costs Benchmarking & Continuous Improvement are both important Review the various funding options available Shared Savings can generate long term revenue for you Risk Transfer & Guarantee Savings give security Better results in carried out as integral part of a technical facilities contract

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