The document discusses cooling efficiency and energy efficiency projects in the Indonesian hospitality sector. It notes that global temperatures are rising and Indonesia is expected to experience more hot days, increasing demand for cooling. This will require increased investment and energy consumption. It then discusses how the Kigali Amendment aims to phase down hydrofluorocarbons and how SDCL is working on projects to improve cooling and energy efficiency in hotels through an innovative financing model called "Cooling as a Service". Preliminary findings from SDCL projects in Indonesian hotels show projected annual savings of US$285,000 and 3,301,000 kWh from efficiency upgrades.

1. introduction to
Sustainable development
capital
www.sdcl-ib.com
July 25, 2020
OECD - Clean Energy Finance & Investment Mobilization
“CEFIM”
Focus Group Discussion – Financing Models for Efficient
& Low Carbon Cooling Systems – Cooling as a Service

2. 2
 Global temperatures are rising, possibly by 3oC or more by 2100
 Jakarta’s average July temperature may hit 27.5oC or even
30.2oC by 2100, an increase of 1.8oC – 4.5oC from 1900
 Increases in hot and record-hot weather are disproportionately
worse in emerging Asia (Indonesia, Singapore, Thailand,
Malaysia), leading to more annual cooling degree days (CDD)
(Source: EIU 2019)
 EIU estimates 460 mm new cooling units will be sold annually by
2030, from 260 mm in 2010 and 336 mm in 2018
 Total annual market value trending to US$170 bn by 2030
 Indonesia and India predicted to be fastest growing markets
 The industrial, transport refrigeration and commercial sectors
will grow fastest to 2030 (Source: EIU 2019)
 Cooling demand will increase significantly to meet critical health, social and commercial needs
 Will require huge increases in investment and lead to increased energy consumption and GHG emissions
Temperature Increases
The World is getting hotter and needs more cooling…Why we’re mobilizing Capital!
Cooling Sales

3. 3
Kigali Amendment
Kigali Cooling Efficiency Program
Montreal Protocol
• The Kigali Cooling Efficiency Program (K-CEP) - a philanthropic initiative that works in tandem
with the Kigali Amendment to the Montreal Protocol
• K-CEP supports developing countries transition to energy-efficient, climate-friendly, and
affordable cooling solutions
• SDCL awarded a K-CEP grant to develop cooling and energy efficiency gains in the industrial and
commercial operations of global companies with operations in developing countries
• Cooling as a Service (“CaaS”) an innovative business model (borrows from project finance) where
cooling equipment is supplied and installed to customers with no upfront payment (pay-per-use)
• The 1987 Montreal Protocol on Substances that Deplete the Ozone Layer successfully reduced
the global production, consumption, and emissions of Ozone Depleting Substances (ODS)
• The Montreal Protocol signed by 196 countries and the European Union hailed as “perhaps the
single most successful international agreement to date” due to widespread adoption
• Kigali Amendment to the Montreal Protocol in force January 1, 2019 - obligates countries party to
the Montreal Protocol to phase down hydrofluorocarbon (HFC) production and consumption
• HFCs – powerful greenhouse gas used mainly in refrigeration, air conditioning and heat pump
equipment – is thousands of times more harmful to the climate than CO2 and could account for
20% of climate pollution by 2050
• Phasing down HFCs though improved efficiency and replacement with low Global Warming
Potential (GWP) refrigerants can avoid up to 0.5C of global warming by the end of the century
• Protect the ozone layer - drive innovation and economic opportunity in AC/refrigeration sectors
SDCL grant targets the mobilisation of US$100 million investment into Cooling Efficiency projects
SDCL and the Kigali Cooling Efficiency Program (K-CEP) – Mobilizing US$100 million in Capital

4. The Indonesian Hospitality Industry: Covid-19 Impact & Path to Recovery
4
• ITP 2019 report (pre-Covid 19): “The hotel industry has grown almost 20% in the last ten years and, with a global
development pipeline of over 2 million new hotel rooms, the industry needs to reduce absolute greenhouse gas emissions
per room by 66% from 2010 levels by 2030, and 90% by 2050 to stay in line with the Paris Agreement.”
• JLL Report: 2019 global transaction volumes reached US$68 billion with “strongest year for APAC region” in terms of
transaction investment (US$13.8 billion/61% YoY growth).
• ADB/Asia Clean Energy Forum: “Energy is the second largest spending category for a hotel, representing 3% to 6% of
operating costs and accounting for c. 60% of its CO2 emissions.
• Covid-19 Impact: Global, significant and end is not clearly seen
• The CaaS model: applied globally across not just Hospitality but other sectors of the economy including but not limited to
Healthcare, Property and Real Estate and Manufacturing. CaaS to provide high quality cooling and energy efficiency
equipment and new/cleaner refrigerants with lower GWP ratings
Global Hospitality
Sector impacted by
Covid 19: however,
the sector is a key
stakeholder in terms
of Cooling Efficiency
and the need to
reduce HFCs and
Green House Gas
Emissions.
• In 2018, the Indonesian hospitality sector, which includes hotels and food and drink establishments, was the second-
highest user of cooling in Indonesia just behind offices and buildings.
• As cooling demand soars, the need to retrofit old plant and equipment and move to lower GWP refrigerant and more
energy efficient technology becomes more important for the Indonesian Hospitality Sector.
• Recent Study by Horwath HTL (March 2020) highlights key points related to the impact of the Covid-19 pandemic to the
Indonesian Hospitality sector:
• Majority of hotels thought that their occupancy performance would be down 25% to 50% in H1 YoY; 25% of
respondents thought the fall would be greater than 50% YoY
• A larger volume of hotels thought that their total revenue would fall between 25% to 50% in H1 YoY
• 38% of hotels consider labour costs as greatest concern; 28% saw utilities cost (electricity, water etc.)
• Hospitality industry to move cooling efficiency to “brand standard” and/or the baseline for the sector as Cooling is now
recognized as one of the largest contributors to Climate Change, accelerating a warming planet.
Indonesian
Hospitality Sector –
Covid-19 Impact also
must be considered
within the context of
the “Cooling
Imperative”
Indonesia may
experience up to 123
Cooling Degree Days
(temperature of 35°
C. or higher) per
annum

5. Cooling Efficiency in the Indonesian Hospitality Industry - Preliminary Conclusions
5
 Cooling and energy efficiency is the most cost-effective way of reducing greenhouse gas emissions and improving energy
infrastructure, energy security and asset resilience.
 Cooling and energy efficiency drives cost savings, improves profits and infrastructure performance and benefits the
economy via cheaper, cleaner, more reliable energy
 Per the Economist Intelligence Unit, the Cooling market is a US$135 billion opportunity – in Indonesia (and elsewhere), can
and should be complimented with distributed solar – though regulatory challenges in some territories.
 Cost of capital – mobilizing private capital will require public (national or regional) and IFI support for non-payment risk
 Risk assessment on sectoral basis – not per hotel as cooling and energy efficiency investment by asset is too small.
 Cooling is now recognized as one of the largest contributors to Climate Change, accelerating a warming planet. The
Kigali amendment to the Montreal Protocol seeks to tackle human-made fluorination gases from air conditioning and
refrigeration that are 10,000 times more potent than CO2 in causing global warming.
SDCL Asia Cooling &
Energy Efficiency In
the Indonesian
Hospitality Sector -
Issues &
Considerations
 SDCL has funded four Investment Grade Audits in the Indonesian Hospitality Sector: three audits have completed with
one audit suspended due to Covid-19. Preliminary findings on monetary and kWh energy savings are positive:
 Three hotel projects with an aggregate c. US$1.45 million in project contract value
 Total projected savings (US$): c. US$285,000 per annum
 Total projected savings (kWh): c. 3,301,000
 SPB for projects is 4.73, 5.43 and 5.07 years: savings (US$ and kWh) more than justify investment
 OEMs need to do better introducing low GWP refrigerants – R134A is an HFC that is being phased out under Kigali
 The nexus between Cooling and Energy Efficiency and Indoor Air Quality is particularly important in the Hospitality Sector
– tourists will drive change in the global hospitality sector and asset owners need to rethink what guests value most?
 Cooling efficiency to become “Brand Standard” and/or the “new normal” in the Indonesian Hospitality sector: create
competitive advantage out of crisis.
 National or regional governments, supported by IFIs to provide risk guarantees as part of project financing process to
attract private capital: De-Risking the Indonesian Hospitality Sector to enable a “Wall of Capital” for deployment to finance
CaaS projects that support economic recovery whilst contributing to national environmental objectives.
SDCL Asia Cooling &
Energy Efficiency in
the Hospitality Sector
– Preliminary
Conclusions

6. 6
Simplified contracting structure
Equity & Debt (if any)
Service Charge
Project Capex
Energy & Cooling Services Agreement (ECSA)
Returns
ESCO
SDCL and/or Investors
• Energy Performance Contract (EPC)
• O&M
• Performance Guarantee
SPV
Host Company
1. The Host enters into an energy/cooling services agreement (ECSA) with the Special Purpose Vehicle (SPV) – which funds and implements the energy
efficiency project – in return for a service charge
2. The SPV sub-contracts implementation to an energy service company (ESCO) through an energy performance contract (EPC), financed by The Fund
3. The EPC typically incorporates a Performance Guarantee and ongoing Operations & Maintenance (O&M) services. Other EPC terms are designed
back-to-back with the ECSA, leaving the SPV with the obligation to fund the project and the ESCO the obligation to deliver the project
4. The Host has the right to terminate the ECSA at any time after implementation for the present value of the future cash flow streams
5. SDCL anticipates that such projects would qualify for off balance sheet treatment (for the Host)
Overview of an energy/cooling services agreement
1
2
3
4
5
 Cooling investment set to increase significantly driven by ESG and profit targets - companies seeking funds to meet these needs
 Cooling as a Service (CaaS) and Energy Services Agreements (ESA) combined as Energy and Cooling Services Agreements provide a fully
funded solution implemented by an Energy Service Company backstopped by performance guarantees
Delivering energy and cooling efficiency through Service Agreements (aka “CaaS”)

7. Project Development and Investment
7
 The Special Purpose Vehicle (“SPV”) as a Single point of responsibility with Risk of Loss, developing and delivering projects
 Systematic project development process in partnership with delivery partners
 Long term service solution for ongoing O&M, management, control, efficiency and productivity
 SDCL investment removes constraints of business-as-usual budgeting or CAPEX debates between asset owners and global brands
 Funding up to 100% of capital costs of projects, with returns based on performance achieved
 Green energy procurement, e.g. chiller replacement, rooftop or distributed solar, onsite combined heat and power solutions
 Procurement based on best available technology and best-in-class delivery partners for EPC and O&M
Feasibility Design Contract Build O&M/Service
Best available technology and best-in-class delivery partners
• Feasibility • Operation (O&M)
• Design and
Engineering
• Project Management
(EPC)
Energy Services
Agreement
Delivery of Service
Project Development and Project Management Process - Concept to Operation Phase

8. 8
 SDCL’s experience allows for effective identification and mitigation of potential risks
 The Fund to maximize use of financial risk management instruments (insurance, risk sharing, first-loss guarantee)
Energy and cooling efficiency investment: project risks and mitigants
Host Credit Risk
Performance
Risk
Technology Risk
Operating and
Maintenance
Risk
 Qualitative/quantitative host credit assessment – target “sponsored” portfolios
 Credit enhancement via financial risk management instruments (insurance)
 Securing parent company or risk participation guarantees (sovereign/IFIs)
 Performance guarantees from energy service companies (ESCOs) and OEMs
 For smaller energy service companies, qualitative risk assessment is undertaken
 Using commercially proven technologies with strong track record and equipment
warranties backed by insurance
 Operations & maintenance (O&M) counterparties with strong track records
 O&M contract matching the life of the performance guarantee, with operational
failure covered by the performance guarantee
 Inability of the host to meet the terms of the O&M contract is covered under the
terms of the energy service agreement (ESA) and may result in termination
The host’s ability (or
willingness) to make the
contracted payments
The energy efficiency or
cooling solution does not
result in the expected
savings
Technology used in the
energy efficiency project
fails
Energy efficiency
equipment is not
maintained resulting in
equipment failure and
financial loss
MitigantRisk Description

9. 9
• Indonesia Hospitality Sector Cooling Efficiency Guarantee Facility to de-risk projects and/or move “Hospitality” into the category of
“Eligible Project Types” – need to recalibrate Covid 19 de-risking support to more than infrastructure projects!
• Financial Risk Management Instruments include but not necessarily limited to:
 Partial Risk Guarantees/Partial Credit Guarantees
 Export Credit Guarantees
 IFIs and/or Multilateral lenders
• Lender of Record/Guarantor of Record
• Take Out Guarantees
• “System of Supports” to mobilize equity or debt capital for economic recovery in Indonesia’s Hospitality sector and the wider economy.
• Address labor concerns cited in Horwath study by doing more cooling efficiency projects faster – and asset owners back to profitability!
• Catalytic green finance deployed on a sectoral basis (versus mega-infrastructure projects) to address credit default and/or non-payment
risk associated with Covid-19.
• Incorporate sovereign, international financing institutions, philanthropic stakeholders, asset owners and global brands.
A “System of Supports” for the Indonesian Hospitality Sector

10. Investing throughout the project life-cycle
Development Phase
Construction Phase
Operational Phase
10
• Established with government
backed institutional funds
focussed on efficient &
decentralised energy assets
• 5 Offices and over 20 investment
professionals in London, Dublin,
New York, Hong Kong & Madrid
• On-site energy and energy efficient
solutions: deep experience in
project development, investment
and asset management
internationally
• Substantial experience at grid scale
across multiple renewable
technologies
UK Ireland Singapore New York
International investment vehicles
Overview of the SDCL Group
SDCL is based in London with offices in the UK & Europe, North America and Asia. It manages institutional energy
efficiency infrastructure funds in collaboration with the governments of the UK, Ireland, Singapore and New York.

11. Important notice
11
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