41082 May 2007 World Bank Supports Renew- able Energy Development in However, Siam Commercial's initial reaction was not quite upbeat. And, to managers Thailand of other commercial banks, this was not a surprise. Despite the Thai Government's efforts to promote more use Five years ago, Siam of renewable energy, the Commercial Bank PCL. was country's banking sector approached by Mitr Phol remainsunfamiliarwiththe Sugar Corp. -- a longtime industry and its economic client of the bank -- for potential. a loan worth 1.5 billion baht. The money would Substantial enableMitrPhol,Thailand's Investment Required largest sugar producer, to build a 53 MW biomass With huge investment costs power plant next to its Dan required, renewable energy ChangSugarMillinSuphan isnaturallylesscompetitive Buri province, located some than oil and gas.As a result, 180 kilometers north of Bagasse ­ waste fiber left after juices have been extracted from sugar cane,which can be used as a fuel source for bio-government subsidies or Bangkok. energy production financial incentives are considered necessary to Onpaper,thebusinessplansoundedreasonable. make renewable energy projects attractive to As a sugar mill operator, Mitr Phol produces commercial banks. "bagasse" ­ or waste fiber left after juices have been extracted from sugar cane ­ every day. The company would use bagasse as fuel "In the long term, most renewable energy, source to produce electricity, which would then maybe with the exception of solar, is a be supplied to the sugar mill next door. Any cheaper source of fuel than oil and gas,but it surplus would be sold to power grid owned by EGAT PCL., formerly known as the Electricity requires a high up front investments" Generating Authority of Thailand (EGAT). "It took us quite a while to approve the loan for this project," said Chuleeporn Witchatikom of Siam Commercial Bank. In doing so, Siam Commercial also heavily hedged itself against all possible risks: it required as collateral the land, the building and all of the equipments belongingtoDanChangeBio-EnergyLtd, the company Mitr Phol set up to oversee the project. The bank also required Mitr Phol to guarantee the loan against default. In addition, all benefits from risk insurance of equipment and assets would be given to Siam Commercial, not the borrower. Dan Chang Bio-Energy in Suphanburi Province, which produces electricity for continued on page 2 Mitr Phol Sugar Mill and for sale to EGAT Page continued from page Even though Thailand is endowed with abundantrenewableenergyresources,including biomass (agriculture and animal waste), high "We also looked very carefully at the plan for investment costs may have deterred Thai raw material supplies," Chuleeporn said. "Our financial institutions from fully participating relationship with the loan applicant is also a in the renewable energy sector, said Antonie very important factor. In the case of Mitr Phol, de Wilde, the Coordinator of Asia Alternative we have established a very good relationship Energy Program, a World Bank unit which with them because they have been our client for manages multi-donor trust fund that promotes a very long time. We had renewable energy. a certain amount of trust in each other, which also "Renewable energy has low operating and "In the long term, most improved our confidence maintenancecostcomparedwithfossilfuels, renewable energy, maybe in the project." which have a lower investment costs but a with the exception of solar, much higher operating cost" is a cheaper source of fuel S i a m C o m m e rc i a l ' s than oil and gas, but it position is not uncommon requires a high up front inThailand.OtherThaifinancialinstitutionsalso investments," he said. "Renewable energy has acknowledgedthatthey,too,havebeencautious low operating and maintenance cost compared with financing renewable energy projects. with fossil fuels, which have a lower investment costs but a much higher operating cost." But the rush to invest in "clean" energy in the West is also stirring interests among bankers Recognizing the need to support the Thai in Thailand. Many of them, however, have Government's efforts to promote alternative limited technical knowledge in this field, said sources of energy, the World Bank, collaborating Watson Chansajcha, Vice President of BankThai with the Office of National Economic and PCL's corporate division overseeing the energy Social Development Board (NESDB), has sector. been organizing a series of workshops and consultations on renewable energy and energy "We know there is some economic potential efficiency in Thailand. in renewable energy. We just need more information in order to gain more confidence In August last year, the Bank and the NESDB in this sector," he said. jointly organized a workshop on "Future Scenarios toward Sustainable Energy Policies Need to Reduce Reliance on Energy and Practice in Thailand," bringing together 70 Imports and Greenhouse Gas energy specialists from government agencies, Emissions the private sector, and research institutes from Asia, Europe and North America. For decades, many developed countries have been trying to produce energy at home and World Bank Supports Experience- relying less on oil imports, given volatile oil Sharing in Energy Sector prices and concerns over energy security. In addition, global warming trends also create This type of effort is part of a broader dialogue demands for "clean" energy that will ultimately theBankhasbuiltintoitsCountryDevelopment reduce gas emissions into the ozone ­ the cause Partnership on Infrastructure (CDP-Infra), of greenhouse effects. a knowledge-sharing program aimed at supporting the development of Thailand's As a result, national energy policies of many infrastructure sector, said Ian Porter, Country countries are stipulating a percentage of Director of the World Bank in Thailand. "Not renewable energy use versus total energy only will the CDP-Infra enable Thailand to consumption, which governments hope will access international experience and expertise, it motivate further development of renewable also enables the World Bank to share Thailand's energy. As Thailand imports half of the 70 policies in infrastructure in general, and in the milliontonsofoil-equivalentenergyitconsumes energy sector in particular, with other countries annually, the Thai Government has set 2010 as a in the region and beyond," Porter said. year by which 8 percent of all energy used must be renewable. continued on page 3 Page 2 continued from page 2 In March, the Bank invited representatives of the Thai banking sector to a workshop on "Financing Sustainable Energy: Seizing Business Opportunities for Financial Institutions." This workshop was a joint effort by the World Bank, the Office of National EconomicandSocialDevelopment Board (NESDB), the Thai Bankers' Association (TBA), the Federation of Thai Industries (FTI), and the European Commission. "The idea is to share experience and collectively identify key issues and specific actions in Thailand's Dan Chang Bio-Energy technician explaining biomass power generation to visitors from renewable energy development," Bangkok said Zhi Liu, Infrastructure Sector Coordinator at the World Bank office in Bangkok. "The idea is to share experience and collectively identify key issues and specific actions in Thailand's renewable energy "Theworkshopisimportantforusto development," understand the barriers preventing moreparticipationintherenewable energy industry by commercial banks. Together, For more information aboutWorld Bank support to we hopetocomeupwith anactionplanthatwill renewable energy development in Thailand,please help reduce the barriers," he said. contactZhiLiu,InfrastructureSectorCoordinator,at zliu@worldbank.org AfieldtriptotheDanChangeBio-Energyplant in Suphan Buri followed the one-day workshop. FormoreinformationaboutAsiaAlternativeEnergy There, bankers were briefed by Dan Chang Bio- Program(ASTAE),pleasevisit http://www.worldbank. Energy staff on the history and the operations org/astae of the plant. Donning a hard hat and protective safety glasses, they were taken on a tour of the For more information about the World Bank's power plant, where they learned all elements of RenewableEnergyforDevelopmentprogram, please the biomass energy generation first-hand. visit http://www.worldbank.org/re "The trip was really useful because helped put what we discussed during the seminar into perspective," said BankThai's Watson. "Ithinktherearesomefinancialinstitutionsthat, even though they may be strongly interested in financing renewable energy projects, they lack the understanding that will help them weigh between risks and profitability," he added. "So by taking part in the seminar and then the field trip, they were able to learn both the theory and the practice at the same time. This can help them to improve their own assessments of the renewable energy sector." Page 3 April Events Supporting Youth Voices: Inter-Regional Knowledge-Sharing Series on the World Development Report 2007 Many young people EastAsia and the Pacific have become interested and actively engaged in the world development process, and some are continuously making efforts to have their voices heard when poli- cies are considered that affect them. To support those efforts, the World Bank initiated an inter-regional knowledge-sharing seminar, aimed at bringing together youth leaders and policy-makers from the re- gion to discuss development programs by youth. Chalongkwan Tavarayuth, 2, youth representative from Youth leader from Mongolia during the seminar by Thailand videoconference The first of the two-part seminar, held on April 19, was attended by more than 100 youth and civil so- ciety representatives, as well as World Bank staff in the region and in Washington, DC. Youth represen- tative from Thailand, Chalongkwan Tavarayuth (above), presented the Thai experience on "exercising citizenship" -- one of the five crucial youth transitions identified by the "World Development Report 2007: Development and the Next Generation." The second seminar is scheduled to take place in late June. During this seminar, policy makers from the region will be addressing youth representatives and answering questions on government policy and institutions in support of youth development. For more information on this event,please visit theWorld Bank website at http://www.worldbank.or.th You may also contact KhunTinnakorn Sareenun at tsareenun@worldbank.org to register for this event. Sixty members of the World Bank Youth Club returned to Samut Prakarn Province on April 22 to join villagers of Baan Khun Samut Jeen to plant 300 young trees along the village's shoreline. This activity was designed to help the villagers ad- dress the coastal erosion issue that has been threatening their livelihoods. It is part of the Offshore Protection Program, sup- ported by the Thailand Re- search Fund and the provin- cial administration of Samut Prakarn, and another effort by the Youth Club to help protect the environment, following a similar activity at the village last October. For comments or questions about this newsletter, Tel.: 0-2686-8300 please contact Mr.Tinnakorn Sareenun Fax: 0-2686-830 The World Bank Office,Bangkok Email: tsareenun@worldbank.org Siam Tower,30th Floor,989 Rama I Road,Pathumwan,Bangkok 0330 Website: http://www.worldbank.or.th Page