Bringing Infrastructure into the 21st Century: HALF-WAY TREE BUS TERMINAL ROOFTOP SOLAR ENERGY PROJECT (1.2 MW)

EXECUTIVE SUMMARY

Brittenwoods International Investment, LLC and operating as the Jamaica Diaspora Sustainable Development Initiative envision the installation of Solar Panels on top of the Half Way Tree Bus Terminal roof covering some 7,500 square meters and generating 1.2 MW of electricity. The solar PV system will be the largest urban off-grid system, generating almost 2.3 million kilowatt-hours of zero carbon emissions electricity each year to offset the total energy required to recharge batteries for bus/transit operations at the Half Way Tree Terminal and to offer Solar Power Panel Capital Leases (SPCL) to surrounding commercial and retail businesses.

The SPCL will be an important development in solar PV financing in Jamaica because they include both a solar power-sharing agreement in the form of a lease. The concept is an innovative idea to make it easier for businesses and public agencies to access solar power as they don’t have to source the upfront capital needed for equipment and installation. The goal is to fund the development of similar bus terminal facilities across Jamaica and the Caribbean to include providing solar-powered buses and a rapid transit rail system.

Project Summary

The Jamaica Diaspora Sustainable Development Initiative estimates that funding to support the development and construction of a 1.2 MW Solar Energy Rooftop Project on the Half-Way Tree Bus Terminal will have a capital structure of some US$790,000 in equity and approximately $3,000,000 in debt financing. The terminal sheet metal roof has an area of approximately 8,000 square meters and is located in one of the busiest transit hubs in the Caribbean.

ECONOMIC AND POLICY OVERVIEW

With an area of 11,000 square km and a population of 2.83 million people, Jamaica is the third-largest island in the Caribbean, with a gross domestic product (GDP) of US$11.4 billion. Jamaica is highly-dependent on commodity imports, particularly in energy (88% of its total energy is imported) and heavily relies on remittances and tourism, which account for about 15% and 20% of GDP, respectively.

The global economic downturn put Jamaica’s economy under severe stress and led to an increase of Jamaica’s already high public debt, estimated currently at about 140 percent of GDP. The Government of Jamaica (GoJ) adopted a proactive approach to address the challenging economic and fiscal situation and signed a Stand-By Arrangement (SBA) with the International Monetary Fund in late January 2010. Signs that Jamaica is exiting the recession are increasing even though economic activity remains weak.

Jamaica is heavily dependent on imported petroleum as its primary source of energy and in particular for its bauxite/alumina industry which is highly energy-intensive (Jamaica is the world’s 4th largest producer). Currently, over 70% of total Jamaica’s energy mix is supplied by imported fuels (mostly oil-based fuels) and over 90 percent of Jamaica’s electricity is supplied by imported petroleum-based fuel. In 2007, Jamaica imported about 25 Million Barrels of Oil Equivalent (BOE) for an approximate cost of US$2.6 billion, which was accounted as follows: (i) 40% for the bauxite industry; (ii) 25% for the electricity sector; (iii) 25% for the transportation sector, and (iv) the remaining 10% for shipping, aviation and lighting industries combined. As of 2008 (latest numbers available), Jamaica consumed around 75,000 barrels per day (bbl/d). Such high energy imports significantly contribute to Jamaica’s balance of payments deficits and places additional pressure on foreign exchange reserves and exchange rates in addition to exposing Jamaica to fluctuations in international oil prices.

The public sector in Jamaica accounts for approximately 12% of national consumption. Monthly costs for the GoJ are estimated at approximately US$10.4 million which in turn translates into an annual cost of US$130 million. In the past 5 years, electricity consumption has grown at an average rate of 4% per annum, except in 2007-2008 when the cost of oil significantly increased during that period.

Strategic Policy Framework

Jamaica’s National Renewable Energy Policy stipulates that 20 percent of the primary energy supply must come from renewable energy by 2030. In addition to policy, there is also an opportunity to add a sizeable amount of renewables as the country retires its dated and inefficient oil-based power plants. The strategic energy policy is based on the following principles which seek to address renewable energy technologies as well as energy management issues :

Security of Energy Supply through diversification of fuels as well as the development of renewable

Modernizing the country’s energy infrastructure

Development of renewable energy sources such as solar and hydro

Energy conservation and efficiency

Development of a comprehensive governance/regulatory framework

Enabling government ministries, departments and agencies to be model/leader for the rest of society in terms of energy management

Eco-efficiency in industries

By focusing on the seven priority areas listed above, the National Energy Policy will ensure that the country minimizes the effects of volatile and rising crude oil prices, takes advantage of renewable resources and promotes conservation and efficiency in the use of energy resources amongst all sectors of the society. The ultimate outcome of achieving the seven goals of this policy will be the provision of more affordable energy supplies to Jamaican consumers, an improved competitive base for the country, as well as sustainable growth and development of the nation.

Promoting Renewable Energy Development

The integration of renewable energy into Jamaica’s electricity grid is currently limited. To achieve the country’s 2030 targets, barriers to investment, especially for the private sector, need to be removed. Despite some limitation a number of major solar energy projects have already been implemented and included the following:

Solar PV Roof System at Grand Palladium Hotel & Spa in Hanover (1.6 MW) http://www.jamaicaobserver.com/environment/A-GRAND-solar-system_16779069

Omni Industries Solar PV Roof Top (1.0 MW)

Paradise Park Concentrated Solar Project (Planned 24 MW) http://www.worldconstructionnetwork.com/news/esa-renewables-signs-loi-for-24mw-photovoltaic-solar-project-jamaica-080512/

“High electricity cost and inefficiencies of around 40% (equivalent to 5 million barrel of oil) result in high energy cost. The combination of these and other factors drove the closure of the Jamaican Refineries as they are among the least efficient Alumina Plants in the World."-Al Binger, Energy Efficiency In Jamaica; Challenges, Opportunity, and Strategies for Implementation, UN 2011.

Sustainability Measures

The total equivalent emissions reduction of the Half-Way Tree Bus Terminal’s 1.2 MW Solar Roof Top project is approximately 6,410 ton of carbon dioxide (CO) per annum; which is equal to the reduction in greenhouse gas (GHG) emissions from 9,205 passenger cars and 5.7 million gallons of gasoline consumed.

The project's economic impact from local taxes and earning should add approximately US$2.0 million to the Gross Domestic Product (GDP) and create some fifteen (15-20) full-time jobs during construction. Impact during operation over the project life cycle is approximately thirty-five (35) full-time jobs and contributing some US$700,000 in GDP annually.

PROJECT DESCRIPTION

The Half-Way Tree Bus Terminal Solar Rooftop and SPCL will be the first phase of our strategic plan to work in a Public-Private Partnership with the Government of Jamaica in the development of a world-class sustainable transportation network powered by solar energy and the same time reducing the country’s dependency on imported oil. This project will act as the stepping stone to our vision in which five more similar designed terminals are built within the Corporate Area and St. Catherine including Spanish Town and Portmore The electric solar buses and rapid transit system will be the first in Jamaica and the Caribbean to be recharged using 100% solar power running on 11 Zebra battery modules that use sodium/nickel chloride technology. The batteries give the electric bus a range of 200 kilometers between recharges under typical urban traffic conditions.

The Solar Power Panel Capital Leases (SPCL) concept will serve to drive transportation-focused urban development to facilitate increased urban densities as part of a strategic urban development goal to concentrate up to two-thirds (2/3) of the Jamaican population in the five major urban centers guided by an integrated Growth Management Plan. At the core of this Sustainable Development Initiative (SDI) is the development of a modern commuter rail system linking these urban centers.

The objective of the SDI is to protect our major watersheds and environment from uncontrolled development and at the same time-saving billions of dollars in infrastructure spending by focusing on the renewal of current old and existing infrastructure instead of building new ones.

Project Location (Half-Way Tree)

Half Way Tree is a commercial and business district within the Kingston and St. Andrew Metropolitan Area. In recent years, as a result of crime and violence in Downtown Kingston and Cross Roads, Half Way Tree has overtaken these areas as the central hub of the capital, Kingston and, perhaps, the busiest thoroughfare in the city. The area has become a sought-after location to do business in Kingston because of its central location and close proximity to Downtown Kingston, the New Kingston Business District as well as it being the transportation of hub of Kingston. A busy shopping district, Half Way Tree is also home to the most well-known plazas and malls—such as Twin Gates, Mall Plaza, Tropical Plaza, Kings Plaza, Lane Plaza, the Pavilion Mall—in Kingston and Jamaica as a whole. There are also a number of prominent churches in the area such as Holy Cross Church and Webster Memorial.

The National Works Agency, for example, estimates that approximately 250,000 commutes through the Half Way Tree area on a daily basis from Monday through Saturdays. In recent years, the area has become increasingly attractive as a residential neighborhood to young professionals, again because of its proximity to where many of them work. The apartments and townhouses are located mainly on Surbiton Road, Winchester Road, Ruthven Road, and Cecelio Avenue. As a result, real estate in Half Way Tree has become quite expensive and the area is one of the most expensive in Kingston to purchase real estate: an acre of land can run as high as US$1.5 million.

Located within a mile of the clock tower marking the position of the old Half Way Tree is Devon House, a National Heritage Site and home of the first Jamaican millionaire of African descent. While the business and commercial areas are in the heart of Half Way Tree, the residential areas tend to be concentrated on the outer verges. A number of prominent schools, including St Andrew High Girls' School and Holy Childhood High for Girls, are located in the heart of Half Way Tree. The location also offers direct access to key institutional facilities such as Jamaica House, University of the West Indies, University of Technology Jamaica and the National Research Council.

Aerial View of the Half-Way Tree Bus Terminal

Strategic Development Planning

The Jamaica Diaspora Sustainable Development Initiative’s mission is to transform the Kingston and St. Andrew Metropolitan Area and St. Catherine as the most sustainable urban centers in the Caribbean and Latin America.

This will be achieved through the development of an integrated urban and regional transportation network powered by solar energy and tied to greater use and concentration of commercial and residential development within inner cities urban neighborhoods. Also, using existing and future development as fuel sources for biogas from wastewater treatment and as well as synthetic gas from Municipal Solid Waste. Rebuilding local roads will also be a key component of our strategic plan supported by the sale of biogas and other waste to energy byproducts.

We will endeavor to engage all the stakeholders and project participants who have worked on the bus terminal before. We are duplicating this across urban centers with the intent to finance the projects from the Solar Capital Lease Model cash flow.

Community Map

Strategic Site Plan Map

PROJECT FINANCIAL ANALYSIS

Solar Power Panel Capital Lease

The SPCL is a standard commercial lease having a five-year term at a set price with a seven to ten (7-10%) percent escalation upon renewable after five years for another five-year term.

Project Costing

The total development budget is estimated at $3,937,000 or $3,300/kw. This is divided into Total System Cost of $1,913,000; to include cable connections and tie to businesses of $165,000, Modules (3,358 panels) Cost of $1,195,000, Inverter (two 500,000w) at $240,000 and Installation and Accessories at $318,000.

(See Appendices B & C)

The project will also include the Pilot Implementation of a Solar Powered Bus operation to initially involve the conversion of four (4) diesel-operated buses to electric after securing lease agreement with Jamaica Urban Transit Company to supply the battery power packs. The initial capital cost for the conversation is estimated at $1,160,000 and will reduce the operating cost by 50%. (See Appendix D)

Key Financial Assumptions

The project’s financial modeling is based on an average cost escalation of 8% per annum over the twenty (20) year investment cycle of which is built into the revenue forecast. The revenue structure is an additive of Total Cost of Operation which is divided into Base Electricity Cost (O&M and debt service) plus the Capital Improvement Cost. In our cash flow analysis, we are assuming a 10% discount factor and 7.5% debt financing cost.

Return on Investments

From a market perspective, Jamaica offers a unique opportunity for renewable energy development as demand for electricity has more than doubled since 1970. Based on the current market and financial projections Jamaica holds a huge potential for the growth and development of rooftop solar and other renewable energy projects, albeit further improvement in gird connectivity.

Jamaica has one of the highest per capita energy consumption in the Caribbean and will see significant growth in the use of electricity with an expected decline in the cost when more efficient energy technologies are deployed in the generation and supply of electricity. It is with this positive outlook and the ability to capitalize on future trends and growth in the energy sector that Brittenwoods International Investment, LLC, operating as Jamaica Diaspora Sustainable Development Initiative is seeking out a number of creative and gap financing from regional and local investors as well as from the Inter American Development Bank and other International Private Lenders for permanent stand-alone debt financing.

Our financial plan includes a ten (20) year cash flow projection and investment analysis, a Pro-forma statement, and sources and uses of funds schedule attached to this report at appendices. If structured right or competitively our long term financing would allow us to realize even greater investment returns. For instance, this current model is based on a twenty-year (20) amortization schedule instead of thirty (30) would be more competitive. This underscores our conservative approach to the financial assumptions and inputs on which our financial model is based.

Appendix A

Financial Analysis (20 Years Discounted Cash Flow Analysis)