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ESCO Capacity Building Seminar by NEDO

Dusit Thani Hotel Bangkok

Outline of ESCO & How to found ESCO


December 17, 200

Note: This Presentation is made based on public data during the author has been president of FESCO for 10 years. Therefore, please note that it does not show existing business condition in the company.

Kenzo Tsutsumi, Founder

Social Change among Energy Conservation


Ultimate Object of ESCO Business is to Improve Social Inefficiency

Political Current in Japan


Global Warming Issue Strengthen to Reduce 2 Emissions Regulation Concerning the Promotion of Measures to Cope with Global Warming Deregulation Energy Deregulation Environmental Ratings Public Works To Promote Out-sourcing to Pivatesector Enterprise Management Green Management Carbon Management Job Creation Environmental Business Development
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What is the ESCO Business?


Feature of ESCO Business: Energy Service Company

Total Service Integrated Facility Doctor


Preliminary audit Detailed Energy Audit Management of retrofitting work M&V

Performance Service Guaranteed Energy Conservation


Guaranteed by performance contract

Financial ServiceNo Initial Investment


Propose business plan with three birds with one stone

Financial Service of ESCO


Mechanism of three birds with one stone
To achieve energy conservationIncrease of customer profitBusiness formation

Guarantee

Reduced Cost Energy Cost Before ESCO Energy Conservation


FESCO Service

From Reduced Cost Energy Cost After ESCO

Increase of Customer Profit

FESCO Service Fee


Audit Equipment
Engineering Management After Care

Contract Scheme of ESCO Business (1)


Shared Savings Contract
Financial flow of shared savings contract

Reimbursement Performance contract


Payment of service fee Lease/ Loan Contract

Client

Financial Institution

Contract Scheme of ESCO Business (2)


Guaranteed Savings Contract
Financial flow of guaranteed savings contract

Performance contract
Payment of service fee Lease/ Loan Contract

Client Reimbursement

Financial Institution

Points of ESCO Business and competitiveness

Enhance Engineering Ability


What is real engineering?
Deference between Technology and Engineering Realistic solution finding capability to solve the problem

Engineering ability for ESCO


Quick audit ability to solve the problem Solution finding ability with cost performance Ability to realize with reasonable cost

How to enhance engineering ability


Remove the concept of Service is Free of charge Train the engineers who understand ESCO business

Change of existing paradigm is needed


Business custom should be changed by ESCO business

Change the Service Concept


Is the service free Knowledge and know how should be charged

Change relationship with ESCO and clients


Is the customer always right Consider the solution with clients

Change from process to result-oriented


Is matter of understanding equal to matter to perform Guaranteed energy conservation amount by ESCO

How to Found FESCO

Company philosophyVisionBasic strategy


Company Philosophy
Contribution to establish the society with good compatibility between the Company environment and economic activity Vision

Basic philosophyWill are basically not changed DNA which is inherited Ideal corporate image To achieve vision & philosophy Matters which are decided by the leader Tool & method to achieve the vision Matters which are decided by the exectives Change of Newly Business strategies environment
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Challenge the integrated environment and energy service company

Basic strategybusiness plan Basic policy to establish mid-term business plan In the newly/differential theme, business field should be expanded

FESCO Company Vision (when listed to equity market Corporate philosophy:


For good compatibility between the environment and economic activity
Key Word

Client oriented ESCO


Energy conservation support business
Energy Conservation Kyoto Protocol target achievement Energy conservation in global level

Client oriented

ESCO
Environmental Rehabilitation

ESCO
Generation by renewable energy Generation by waste Material recycle

Utility conservation Act for privately-owned generation Energy management

Environmental Rehabilitation ESCO


Green Energy Business
NEW energy RPS

Integrated Energy Service

Market Trading

ESCO
PPS Electric & Gas retail sales RPSCDM

Market Trading ESCO


Electric Business
Electricity deregulation COEmission right

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FESCO Success History


Market trading ESCO
Retail sale of electric power Electric power Trading Emissions trade

Strengthen of customer foundation

Biomass Generation environmental rehabilitation Business OILGASFuel Cell Biogas

Environmental Rehabilitation ESCO

Year 2006 Client oriented ESCO


On-site ESCO Cutomer type ESCO Energy Audit Retrofiting Work
FESCO

Competitive New Energy Generation

Jan. Iwakuni Wood power started in operation service of electric retail sales started in Kansai Feb. FESCO Power Station Shiga Moriyama Power station started in operation

Deregulation
Emphasize environment

Outsourcing

Get listed to Tosho mothers Expand of retail sale market Revision of Energy Retail sale of electric power Conservation Law Entry into Force of the Kyoto Protocol Revision of Energy Conservation Law Renewables Portfolio Aichi Expo (Movement to decrease CO2 Emissions) Growing needs Kyoto protocol was ratified Standard in effect Founded
97 98 99 2000 01 02 03 04 05 06 10

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FESCO Success History


May, 1997 Established in 16 Ichiban-cho, Chiyodaku, Tokyo Capital fund 50 million yen President Mr. Kenzo Tsutsumi assumed June, 1998 Move to 5 Saniban-cho, Chiyodaku, Tokyo 1st capital expansion: Capital fund 126 million yen Feb, 1999 April, 2000 New Business Award Environmental Award Admitted by Prime Minister of METI based on new business creation law May, 2000 July, 2000 2nd capital expansion: Capital fund 260 million yen Move to 22-7, Saniban-cho, Chiyodaku, Tokyo

March, 2001 3rd capital expansion: Capital fund 411.6million yen June, 2003 August, 2003 March, 2005 May, 2007 4thcapital expansion: Capital fund 681.6million yen Move to Nurihiko Bldg. 2-9-2, kyoubashi, Chiyodaku, Tokyo Listed on the Mothers of the Tokyo Stock Exchange (stock code9514) President Mr. Tsutsumi left his office 12

FESCO Success HistoryAnnual Income)


8,000

Annual Income
7,000 Number

(million Yen)

108 7,000

of Employee

6,000

5,000

4,927

4,000

54

3,000 29 2,000 15 1,000 5 77 0


983 1998 993 2000 003 2001 013 1999 2002 023 2003 033 2004 046 2005 056 2006 066

2,522

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7 266

9 808 420

1,053 783

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Client Oriented ESCO Outline of Energy Conservation Support Service

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Outline of Energy Conservation Support Service


Shared Savings ESCO Contract
Client
Energy Supply OM Energy Service Contract Pay Service Fee Maintenance Contract Order Placement to factory Commission the maintenance Fuel Supply Contract Order the Fuel Financial contract nonrecourse loan Delivery of equipment Maintenance Service Fuel Supply Subsidization

Facility Owner

Applied Subsidy applied with client

NEDO Petroleum Association of Japan

Financial Institution

Manufacturer of energy conservation equipment Sub-contractor Fuel Supply Company

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Outline of Energy Conservation Support Service


On-site BusinessESCO for industrial sector
In the client facility, energy audit will be done. Based on the result of the audit, planning of retrofitting and retrofitting work will be done. Introducing high efficient large scale cogeneration system establish energy conservation and CO2 emissions reduction by supplying both electricity and heat to the system. FESCO pay the investment of equipment instead, and operate management after that consistently.
Case example
Rengo Co., Ltd.

Yashio Factory

IHI Shibaura Machinery Corporation

Matsumoto Factory
Daily electric demand and seasonal steam demand are analyzed. With 3 type of boilers and high efficient diesel engine cogeneration, integrated control system established large amount of energy conservation and cost.
Outline ofContract Demand9,200kW Facility Small Scale Diesel EngineTractor Factory Electricity Consumption: 32,950MWh/y MeasuresCo generation Electricitycaptive power(6,200kW+) + Purchased power3,000kW Steam/Oil fired tubulous boiler + fire tube boiler exhaust heat recovery boiler once-through boiler(2/6) Integrated electricity-steam supply control system Finance finance and subsidy Contract typeShared savings

Through energy audit in existing all generating power system, high efficient solutions are found
Outline ofContract demand:5,000kWdaytime facility Paper board factory Electricity Consumption:105,000MWh/y Measure High efficient gas cogeneration Electricity/New Construction Gas engine generation(11,500kW) +Existing Steam Turbine(33,900kW) +Purchased power5,000kW Steam/Boilersteam turbine + gas engine cogeneration Seiko Epson Finance finance and subsidy Ina Plant Contract typeShared savings

Fuel Cell

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Outline of Energy Conservation Support Service


Super Marugoto(ESCO for commercial Sector)

Without requiring any initial investment, both energy conservation(CO2 emissions reductionand reduction of energy cost were established Comprehensive service from audit, design, retrofit work and M&V After contract period, all profit by energy conservation attributes to the client.
ESCO Service
Efficient Chiller
Efficient AC
Introduction example
1F area Food2,800 Contract Demand Before & After 566470kW
1200

including back yard


Total 5,200 Operation Hour Operatio n year 364

2F area Textile2,400 Demand Reduction 96kW

9:0024:00

Management
1000

Lighting

Efficient show case

Demand Management System

25%
800

220

Chiller

AC

(kWh/Day) (kwh/)
600

14%
400

450

20%

450

18%

350

200

240 100

240 100
Between period 4.5.10.11 790kwh/ 96,400kwh/

240 100
Winter 12.1.2.3 690kwh/ 82,800kwh/

Efficient Lighting

water atomization

Summer 6.7.8.9 1,000kwh/ 122,000kwh/

12.1Decrease 12.6 Decrease

10.9% Decrease

Annual energy Conservation 301,200kWh/year(12.0%

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Environmental Rehabilitation ESCO

Outline of Green Energy Business

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Outline of Green Energy Business


Woody Biomass Power Generation Business
Waste from local
Lumber producer

Biomass Generation Subsidiary


Intermediate Treatment Company Fuel Supply Company Electricity
Sell Electricity

Power Company

Fuel Supply

Gardening Company

PPS etc Biomass generation facility


Purchase Fuel Contract

Scrapper

Sell RPS value

Civil engineering

Fuel Processing Pay fuel fee Facility Select Material Chipping Operation

New Energy RPS Value Financial Procurement

Forestry Farmer

Business investment

Finance

Finance
Capital subscription

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Outline of Green Energy Business


Biomass Generation Subsidiary
Iwakuni Wood Power Co., Ltd.
Iwakuni wood power mascot

Hokkaidou area

Steam turbine

1805-7 10,000KWCapacity January, 2006Commercial operation) 3,724millin yen(Total investment

Touhoku area

Center control room

Hokuriku area

Hida Wood Power Co., Ltd. Hida-shi, Ooita 12,000KW November, 06 4,447million\

Chyugoku area

Chubu area

Kantou area
Shirakawa Wood Power Co., Ltd. Shirakawa-shi,

Shikoku area

Fukushima 11,500KW Octobet, 06 4,159million\

Kyushyu area

Okinawa area

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Market trading ESCO

Outline of Retail Sale of Electric Power

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Outline of Retail Sale of Electric Power Business


Electric retail sale flow after the dereguration
Power Supply System by
Low voltage power customer Power Company
Use grid of Power company

Normal Time

FESCO Power Producer and Supplier


Power Company supplementa ry power FESCO use grid of power company. So when our plant stopped to operate, electricity from power company is supplied to our client with no electric outage.

High voltage & specific high voltage power customer Low voltage power customer

Emergency Situation

Power Company

FESCO Stop supply

FESCO Power Producer and Supplier

High voltage & specific high voltage power customer

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Outline of Retail Sale of Electric Power Business


Feature of Electric Retail Sales by FESCO
. Supply electricity cheaper than power company . Without requiring any initial investment for the customer . Supply integrated solution service with energy conservation and environmental measures. FESCO Power Formation
Base power
Iwakuni Wood Power Janu., 2006 Shirakawa Wood Power Oct., 2006 Hida Wood Power Nov., 2006 Hokkaidou area

Middle power

Peak power (adjustment)

FESCO Power Station Shiga Nakssode Green Power Feb.,2006 Oct., 2007 FESCO Power Station Gunma Procure power from Feb., 2006 conterpart Japan Electric Power Exchange (EPX)

Shirakawa Wood Power

Touhoku area

FESCO Power Station Shiga


Hokuriku area Tyugoku aera

Kantou area
Nakasode Green Power FESCO Power Station Gunma

Varuious Power Source FESCO line up various power source from biomass to gas turbine, Kansai area started operation from Jan.,2006 Kantoui area started operation from Oct., 2006

Kansai area
Iwakuni Wood Power
Shikoku area

Tyubu area

Hida Wood Power

Kyusyu area Okinawa area

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Company HP

http://www.fesco.co.jp

Note: This presentation is made to support diffusion of ESCO business. It is made based on public data during the author has been president of FESCO for 10 years. Therefore, please note that it does not show existing business condition in the company.

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