Infrastructure funds

Why Indonesian bagasse ?

Bagasse is a excellent renewable fuel, used around the world for power generation. The most striking example is Brazil, with 7GW of installed capacity and bagasse covering ~5% of total electricity demand. Thailand, India, Mauritius, and many others follow suite.

In Indonesia, the national power utility, PLN, is not purchasing electricity generated from bagasse at a reasonable price. The government is also subsidizing coal use by forcing exporters to direct a portion of their output onto the domestic market at a low, controlled price. Bagasse has therefore no real monetization option inside Indonesia.

It is the recent emergence of a global market for biomass pellets that makes it possible for Indonesian mills to profit from bagasse. We estimate that industry wide refurbishment could produce 1.5 million tons per year of torrefied bagasse pellets.

1.5 million tons per year is a sizable amount, but wood pellets originating from new wood plantations will remain the marginal supply which sets the price equilibrium.

Indonesian bagasse will be enjoying a long term producer surplus in the pellet market.

Regulation

Unlike utility scale solar and wind, MOBIONU’s projects do not require approval from ESDM or PLN, making it much likely to succeed and faster to execute.

The permits required are limited to:

• Trade Business License (SIUP - Surat Izin Usaha Perdagangan): Issued by the Ministry of Trade
• Export Approval (SPE - Surat Persetujuan Ekspor), also issued by the Ministry of Trade
• Industrial License (IUI - Izin Usaha Industri), managed by the Ministry of Industry, obtained through the Online Single Submission (OSS) System.
• Environmental Permits: SPPL (Surat Pernyataan Kesanggupan Pengelolaan dan Pemantauan Lingkungan Hidup - Statement of Capability for Environmental Management and Monitoring), obtained through the Online Single Submission (OSS) System.

Profitability

At current market prices for biomass pellets, project yields are around 15% unlevered. These return can be further enhanced through carbon credits.

Revenues will be denominated in JPY or USD, lessening currency and macro risks.