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Enhancing Renewable Energy Bank ability in Southeast Asia


Progress in renewable energy technology has been at the forefront of attempts to address and as well tackle global climate change.
 
However, this does not imply that the spread of wind as well as solar farms around the world has been completely uniform. Europe and the US have long gained from the technical information and understanding, state tariffs and supports and – maybe most important– the important level of investment.
 
Nevertheless, for people looking to invest in renewable energy projects, some economic drivers have taken the risk-to-return ratio on offer in these markets that are more mature less charming than it was before.
 
In turn, this has led a lot of people to check out the emerging renewable energy markets, and particularly Southeast Asia, as fertile ground to carry out their investments.
 
Across some countries in the region, which include Singapore, Thailand, Vietnam, a mixture of growing energy demand, strong wind as well as solar resources, and political support for growth have made investing in renewable energy an enticing prospect.
 
Making sure that those projects secure the needed financing to help that development, nevertheless, remains a problem, with a huge proportion of Southeast Asian projects looked at as unbankable. Nevertheless, there are two different danger factors to know when evaluating whether a project is likely to draw financing: project bankability risks and sovereign risks.
 
Frequently, investors understand that lenders will only work with one major source of risk. If a certain market carries with it important political or economic risk, the project fundamentals themselves must be error-free if it must be supported by a bank as well as another lender.
 
Just to secure capital, investors as well as developers must mitigate project risk as far as it can go. Choices on how to mitigate risks taken at the beginning-stage can, hence, have a strong bearing on a project’s bankability as well as profitability further down the line.
 
However, what tactical measures should investors put into consideration to make sure that their investments are bankable at a project level?
 
Making use of the example of Vietnam—one of the greatest favorable targets of clean energy investment, owing to powerful economic growth as well as a Government commitment to developing a reduced carbon economy—the most notable problem is to manage dangers that include the high price of capital.
 
This implies that investors need to be able to correctly know the dangers of a project, adopt systems to manage it, and as well prove to lenders that they have the understanding and experience to do so.
 
It might sound apparent, but developing a complete construction plan is another important factor when it comes to guaranteeing project bankability.
 
This activity, the norm in rising markets like Vietnam, while having the benefit of letting investors work with EPC contractors which are familiar to them, hardly mitigates project risks. Rather, it can make it more difficult for investors to know clearly the risks they go through, mainly when local EPC contractors do not possess the experience of wind and solar farm construction – an important feature in emerging markets.
 
To lessen a lack of renewable energy construction experience among the teams of construction, investors can look to engage an owner’s representative to look after construction via direct contracting with suppliers and contractors as well.
 
In addition, by bundling risk in the construction project, a sound project manager will properly allocate risks to the contractors best able to take care of them. For example, making the balance of plant contractor which are responsible for logistics diminishes the risk of delays because of availability of plant. In greater risk markets, displaying to lenders that all project risks have been understood and well accounted for will ultimately help ensure their backing.
 
Possessing an experienced risk management team, one that is familiar with the local language, regulations, as well as business cultures – and the particular obstacles to project development which may occur – is the soundest approach for investors to make sure their financial targets are achieved, and further the extent of renewable energy over Southeast Asia.