PROMOTION OF

BIOMASS GASIFICATION TECHNOLOGY

IN CAMBODIAN SMES

OCTOBER 2008
 eGs Gu w m Gu I exmbU D a
Small and Medium Enterprise Cambodia

PROMOTION OF BIOMASS GASIFICATION TECHNOLOGY

IN CAMBODIAN SMES

AN ACTION PLAN FOR PROMOTION OF LARGE SCALE INVESTMENT IN BIOMASS

GASIFICATION TECHNOLOGY IN THE CAMBODIAN COMMERCIAL RICE SECTOR AND
OTHER FOSSIL FUEL CONSUMING SMES

SME Cambodia
#92K, Russian Federation Boulevard
Toul Kork, Phnom Penh
P.O. Box 614
Cambodia
Tel/Fax: +855 (0)23 882 354
erik@SMERenewables or tknowles@online.com.kh
 Table of Contents

Abbreviations and Acronyms 4

1. Introduction and Executive Summary 5

2. Summary of Findings of Pilot Projects 7

3. SME Renewable Energy Ltd. Integrated Biomass 15

Gasification Services Program
A. Background 15
B. Integrated Biomass Gasification Services 15
C. Financing Issues and Alternatives 17
D. Integrated Services Program Achievements to Date 20

4. Proposed Action Plan 22

A. Objectives 22
B. Loan Fund/Credit Facility supported by WB/IFC or other Development Bank 22
C. Technical Assistance (TA) Grant to SME-RE Ltd 23
D. Technical Assistance Grant To MIME 23
E. Budget: Total Budget Year 1 through Year 4: $ 5.07 million 24
F. Implementation Schedule 24
a. Loan Fund Facility
b. Technical Assistance to SME-RE Ltd.
c. Technical Assistance to MIME

APPENDICES

1. Biomass Gasification Technology: Cambodia 2003-2008 28

2. Factors Affecting the SME Owners Decision to Invest in Gasification 32
Technology
3. Survey of Rice Mills and other SMEs Dependent on Diesel Fuel Energy 34
Sources and Analysis of Impact of Biomass Gasification Technology
on Cambodian Rice Mills and SMEs
4. Pilot trials for Financing Biomass Gasification Technology 55
in Rice Mills and other SMEs
5. Review of Biomass Gasification Technologies and Suppliers 58
 Abbreviations and Acronyms

Abbreviations/Terms Full Meaning

AIT Asian Institute of Technology
ANKUR Scientific Energy Technologies Pvt. Ltd. biomass gasifier
ANKUR
system pioneer, developer and manufacturer, Vadadora, India
the biomass remaining after sugarcane stalks are crushed to extract
bagasse
their juice.
Organic carbon-containing material produced by photosynthesis in
biomass
plants.
heating value or calorific value of a substance is the amount of heat
calorific value
released during the combustion of a specified amount of it.
CGPL Combustion, Gasification & Propulsion Laboratory, Bangalore, India
Char Fixed carbon remaining after gasification of organic materials
CelAgrid Center for Agriculture Research and Training, Cambodia
CFB Circulating fluidized bed
E+Co U.S. based non-profit clean energy investment organization.
Ferro cement is a composite material which is used in building or
Ferro cement
sculpture with cement, sand, water and wire or mesh material
Complete thermal breakdown of biomass into combustible gases,
gasification
volatiles, char, and ash in a closed reactor
Converts carbonaceous materials, such as wood biomass, into carbon
gasifier monoxide and hydrogen by reacting the raw materials.
IIST Indian Institute of Science and Technology, Bangalore, India
kW Unit of energy = 1,000 Watts
kWe Unit of electrical energy = 1,000 Watts
Kilo Watt Hour: Electrical energy (Watts) generated or consumed in 1
kWh
hour
LCV [MJ/ Nm3] Lower calorific value
MIME Cambodian Ministry of Industry, Mines and Energy
O&M Operation and maintenance
Gas that contains CO, H2, CH4, CxHy aliphatic hydrocarbons,
Producer or Syn Gas benzene, toluene, and tars (besides the combustion products CO2
and H2O)
the chemical decomposition of organic materials by heating in the
pyrolysis
absence of oxygen or any other reagents
REE Rural Electricity Enterprise
Rps Indian rupees
SMEs Small and medium sized enterprises
SME Cambodia Cambodian NGO promoting Cambodian private sector development
SME Renewable Energy Cambodian biomass gasification system financial services and
Ltd. (SME-RE) equipment supplier, owned by SME Cambodia and E+Co Inc.
World Bank ESMAP Energy Sector Management Assistance Programme

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 Action Plan to Promote Large Scale Investment in Biomass
Gasification Technology in Cambodian SMEs

1. Introduction and Executive Summary

The development of this action plan is based on field work and analyses undertaken by
SME-Cambodia with support from the World Bank ESMAP, “Cambodian SMEs in
Decentralized Energy Services” program. A sample of thirty rice mills, rural electricity
enterprises (REEs), brick factories and ice plants currently dependent on diesel fuel to power
their machinery were studied. The aim of the pilot project was to:
1. Survey and assess the financial savings that could be realized if rice mills and other
rural SMEs invested in and utilized biomass gasification technology to reduce diesel
fuel consumption;
2. Develop an investment plan for rice mills to install gasification equipment;
3. Trial a financial mechanism that SME-Cambodia and E+CO Inc. have developed to
make investment in biomass gasification accessible and economically viable for rural
Cambodian SMEs;
4. Based on the findings and analyses from the survey and trials, prepare an action
plan for promotion of large scale investment in biomass gasification technology in the
Cambodian commercial rice sector and other fossil fuel consuming SMEs.
SME Cambodia (NGO) and E+Co, (US non-profit clean energy investment organization),
through a jointly owned subsidiary, SME Renewable Energy Ltd.(SME-RE), achieved their
objective of developing an integrated set of services to promote biomass gasification
technology in Cambodia. The objective of this partnership is to assist Cambodian rice mills
and other SMEs to acquire biomass gasification technology, finance these projects and help
enterprises realize substantial energy savings.
The SME-RE approach integrates the following component services:
1. evaluation of enterprise potential to use biomass gasification technology, including
identifying financial and fossil fuel savings;
2. specification of biomass gasification equipment and systems required to meet the
SMEs’ needs;
3. provision of affordable loan financing schema with terms tailored to allow repayment
from fuel oil savings;
4. supply, installation and commissioning of biomass gasification systems at the
enterprise site
5. SME operator and staff training;
6. equipment manufacturer warranty;
7. after-sales maintenance services.
During the course of this pilot project, (June 2007- June 2008), SME-Cambodia collected
and analyzed data from rice mills and other SMEs to determine the potential financial
benefits possible from this technology. Further, SME Cambodia committed to demonstrate
its integrated service approach through implementing at least 5 gasification projects and
trialing alternative financing schemes. By June 30, 2008, 11 systems had been installed and
provided financing and 10 additional systems were ordered and financing approved for
installation by the end of 2008.

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The “Action Plan” for large scale investment in biomass gasification technology proposes
that SME Cambodia and E+Co, through SME Renewable Energy Ltd., be provided access
to additional financial resources to install biomass gasification systems in up to 100 rice mills
and 50 other SMEs. The program will be completed over 4 years. It is projected that as a
result of these investments, each enterprise will save, on average, 4,500 liters of diesel fuel
per month, with a value of more than US$5,000.
Once installed the 150 SMEs will realize annual savings of 7.5 million liters of diesel fuel
each year valued at more than US$9,000,000 (1 liter= $1.20)
The proposed Action Plan includes:
• Establishing a loan fund/credit facility of $4.5 million:
• A technical assistance grant to SME-RE Ltd. of $350,000 for staff training, technical
services and financial management capacity building,
• A technical assistance grant to MIME of $220,000 for research and preparation of
biomass gasification equipment standards for implementation in Cambodia.

Support for this Action Plan will ensure that:

• rice mills and other rural Cambodian SMEs realize significant reduction in fossil fuel
energy consumption and expenditures,
• a sustainable, effective biomass gasification supply sector develops
• Cambodian SMEs will be utilizing equipment and systems of a high standard tailored
to meet their long term needs.

Workshop-seminar in Battambang City, Cambodia with rice millers, REE, brick plant
and ice plant operators to explain and discuss biomass gasification technology
potential, cost/benefit and equipment financing alternatives. (February 2008)

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2. Summary of Pilot Projects Findings

Survey and Analysis of Rice Mills and SMEs

1. Potential fuel savings from the use of biomass gasification systems in Cambodia
rice mills and other SMEs.
a. Using their existing diesel engines, Cambodian commercial rice mills and
other rural SMEs can reduce diesel fuel consumption and expenditures by
70%-75%. This can be accomplished by gasifying rice husks or corn cobs,
wood chips, coconut shells, cane sugar residues (“bagasse”), peanut shells
etc. and substituting 70%-75% of diesel fuel currently consumed with
“producer gas”.
b. If rice mills and other SMEs use 100% “gas” engines they can reduce current
diesel fuel consumption by 100% using rice husks, corn cobs, wood chips,
coconut shells, cane sugar bagasse biomass. The 100% alternative requires
investment in both a biomass gasifier and replacement of the diesel engine
with a 100% gas engine.
c. Gasifying 6 kgs of rice husk will provide “producer gas” with energy equal to
that supplied by 1 liter of diesel fuel.

Examples of the Impact of Biomass Gasifier Installation on Rice Mill Fuel

Consumption, Fuel Expenditures and Milling Costs Per Ton
Gasifier System Capacity > 400 kW 200 kW 100-150 kW 60-80 kW
Capacity of Rice Mills in Tons per hour 2-4 2 1.5 1-1.5
Tons Rice Milled per year (sample avg.) 18,480 7,678 4,101 3,672
Number of Days Operating Per Year 308 297 231 255
Liters of diesel saved per month 15,758 6,388 4,041 2,827
Reduced liters of fuel per ton of rice milled 10.23 9.93 12.02 9.47
Price of diesel fuel (May 2008) $ 0.90 $ 0.90 $ 0.90 $ 0.90
Reduced fuel cost/ton of rice milled $ 9.21 $ 8.93 $ 10.82 $ 8.52
Reduction in Direct Milling Costs per ton 49.0% 49.0% 49.0% 49.0%
Estimated total investment cost for gasifier $ 145,112 $ 78,882 $ 68,365 $ 48,211
Simple payback period in months 10.9 15.7 21.8 24.3
Potential CO2 saving tons/yr 506.28 205.24 129.82 90.81

Example of the Impact of Biomass Gasifier Installation on Rural Electricity

Enterprise (REE) Fuel Consumption, Fuel Expenditures and Cost / kWh
Gasifier Capacity FBG 60 kW REE 1 REE 2 Avg.
Operating Hours per year 1,440 4,500 2,970
kW hrs generated per year 92,160 251,280 171,720
Liters of diesel fuel saved per month 2,268 3,203 2,735
Reduced liters of fuel per kWh 0.30 0.15 0.22
Reduced cost per kWh $ 0.27 $ 0.14 $ 0.20
Estimated investment cost for gasifier $ 43,753 $ 43,483 $ 43,618
Simple payback period months 25 17 21
Potential CO2 saving ton/year 73 103 88

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2. Availability of biomass
a. 25%-30% of the volume of paddy rice milled in Cambodian rice mills is rice
husk waste.
b. Mechanically driven rice mills using their existing diesel engines need only
25%-30% of the rice husk produced by the mill to replace 70%-75% of the
diesel fuel consumed.
c. After satisfying the mill’s requirement for rice husk, the rice mill will still have
70% of the total husk produced to sell to other users.
d. Corn cobs and woody biomass fuel can be grown by farmers and sourced
locally. Farmers can be encouraged to establish tree farms as a new source
of income. Cutting of natural forest for gasification fuel is not required and
should not be encouraged nor permitted.
3. Financial capacity of Rice Mills and other SMEs
a. Accounts record keeping, accounting systems and staff capacity of rural
SMEs is weak.
b. Management capacity to complete calculation of rates of return and related
financial analysis is limited.
c. Management capacity to compare and evaluate different investment streams
is limited.
d. Management analysis of opportunity costs and identification of potential for
increasing mill and factory efficiency and productivity is limited.
4. Access to financing and credit
a. Most rice mills and other SMEs rely on family and friends as sources of
financing for working capital, equipment purchases and operational expenses
on a short term seasonal or annual basis,
b. Limited commercial bank credit is available to SME owners wishing to
purchase new capital goods using long term financing.
c. Loan terms tend to be of short term duration with high interest rates.
d. The loan collateral and guarantor requirements of banks are usually 200%-
300% of the loan value.
5. Rice Miller and other SME operator awareness and perception
a. Renewable Energy Technologies
Cambodian rice millers and other SMEs owners are generally unaware and
unfamiliar with renewable energy technologies and their application to
commercial operations.
b. Efficiency investments
Most rural SME managers have not, until very recently, focused on ways to
configure, upgrade equipment or introduce new technologies to improve
production efficiency, energy efficiency or worker productivity.
c. Reducing environmental impacts
Rice millers and other SMEs managers have not been conscious or motivated
to reduce environmental impacts of their operations. Waste disposable and
pollution issues have not been a priority. CO2 and other emissions concerns
are very new and unfamiliar concepts.

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 6. Summary of Biomass Gasification Technology and Suppliers Review1

a. Power requirement of rice mills and SMEs

The calculation of gasifier capacity required for a rice mill or other SME is
based upon the volume of diesel fuel being substituted by the biomass
producer gas. The most common size gasifier system is 200 kW required for
1.5 - 2.0 ton per hour capacity rice mills.
b. Choice of gasifier technology
Down draft gasifiers using dual fuel mode are recommended for Cambodian
rice mills and other diesel dependent SMEs. Dual fuel mode means the
system will use 30% diesel fuel and 70% biomass producer gas.
c. Indian or Chinese systems?
A review of available commercial gasifier found that the Indian developed
gasifiers in the 20 kW to 800 kW range are the most suitable size for the
Cambodian worker environment, energy requirements and operating
environment.
d. Local manufacture of Gasification Equipment
Manufacture of gasifiers in Cambodia should not be rushed nor initiated
without experienced technical partners and sufficient demand. Some local
sourcing and fabrication of components has potential. At this time major
emphasis should be placed upon introducing proven, robust designs that
have demonstrated consistent high performance. Savings gained from
introducing small scale manufacturing of gasifiers in Cambodia is not
particularly attractive from a business standpoint nor from a technology
standard point of view. Steel prices are higher in Cambodia; labor rates are
higher in Cambodia than India,

1 See APPENDIX 5 for full review

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Loan Financing Conditions, Alternatives and Terms for Gasification systems

1. Project components and loan structure

Experience gained during the pilot testing of financing packages for 5 gasifier projects
indicates:
a. Gasifier system purchasers should be required to pay 20%-30% down
payment of total system cost,
b. Loan term for repaying project loan balance should be for period of 4-5 years,
c. Lowest available competitive rates available should be applied, currently 13%
to 15% pa.
d. Loan Amounts: Most rice mills and other Cambodian enterprises will require
loans from ranging from $40,000 to $100,000.

2. Important issues related to financing gasification systems:

a. Client deposits and down payment timing
Cambodian rice millers and other SME operators generally operate on limited
or minimal working capital. Most of their available cash is used to purchase
inputs (rice paddy) and to pay for daily operating costs (fuel and labor).
Therefore, down payment amounts and the timing should be scheduled so
that the time lag between these payments and completion of the gasifier
system commissioning is minimized.
b. Interest rates, repayment schedule and grace periods
Interest rates should be established in the lowest range of competitive rates.
Loans should be formulated using a declining principal payment schedule.
Interest and principal repayment grace periods should be set to minimize
payments until system commissioning is complete, fuel consumption is
reduced and fuel savings begin.
c. Warranty/ Guaranties
All equipment components and the complete gasification system should be
guaranteed by the manufacturer and the service/equipment supplier.
Guaranties should include quality of manufacture and achievement of
advertised fuel substitution performance standards. Warranties and
guaranties should cover a period of at least 1 year or 2,000 operating hrs,
whichever comes first.
d. Maintenance and after sales services
To instill confidence in the new technology, the gasification system purchase
agreement should include initial training of operator staff and a 1 year after-
sales routine maintenance and operations monitoring agreement.
e. Parts availability
System manufacturers and service providers must ensure that replacement
parts are readily available and convenient to access in local market places or
are available in a timely manner through express transport.

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 3. Integration of Gasifier System Supply, Training, Maintenance-Services and the
Financing Package
a. Perspective of the Rice Miller and SME borrowers
• Borrowers are hesitant to make large financial commitments to purchase
new technology unless they have assurances that the technology supplier
is capable of assisting them to solve operating problems and maintenance
needs.
• Experience of most Cambodian SME/family businesses in borrowing from
banks to purchase production equipment is very limited or non-existent.
• Banks and other financial institutions have little or no understanding of
gasification technology nor will they take responsibility for equipment
performance, repair and maintenance.
• For Cambodian rice millers and rural SME operators, the prospect of
dealing simultaneously with: 1) an unknown, probably foreign based
equipment supplier; 2) obtaining financing from banking institutions; and
3) negotiating maintenance services and parts supply agreements is
formidable. They have very low confidence that they will receive diligent
customer service and support from these sources.
• A purchase agreement that integrates these component services is much
more attractive to the miller and the SME owner. He/she feels confident
in investing in a system if it is supported by an equipment seller that
provides staff training, includes installation and commissioning and
provides a conveniently structured financing package. The buyer is more
confident with this arrangement since he/she sees that the single
equipment-financial service-provider has a continuing interest in the
successful operation of the system. This continuing commitment to
operational maintenance of the system is not the concern nor within the
competency of banks or other lenders. Financial institutions are only
concerned with loan repayment schedules, not operational issues.
b. Perspective of the technology supplier/lender
• The linking of system design, installation, financing, training and after-
sales-service allows the technology provider/lender the opportunity to
develop a close ongoing relationship which permits monitoring client’s
business status and anticipate loan repayment problems before they
arise.

The Impact of Gasification Technology on Rice Mills, REEs and other SMEs

1. Impact on operating expenditures

a. the amount of fuel savings realized by an enterprise is directly related to: the
quantity of fuel consumed per hour by the engine and the number of engine
operating hours per day, per month and per year,
b. the portion of total direct operating expenses expended on diesel fuel,
• Rice mills: Fuel and lubrication = 65%-75% of direct milling costs
• REEs : Fuel and lubrication = 70%-80% of direct generating costs
• Ice Plants: Fuel and lubricants = 80% -85% of direct freezing costs

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 c. the cost of the biomass
• Rice Mills: No cost. Rice husk is a waste product of the rice milling process.
• REEs , Ice Plants and Others: Current rice husk price = $ 0 - $ 5 per ton
d. the transportation costs to deliver the biomass
• Cost of transporting biomass: 1-20 km = $ 1 - $ 3 per ton
for >40 km = $ 5 - $ 8 per ton

Example of the Impact of Biomass Gasifier Installation on Rural Electricity

Enterprise Fuel Consumption, Fuel Expenditures and Cost / kWh
FBG 60 REE 1 REE 2 Avg.
Operating Hours per year 1,440 4,500 2,970
kW hrs generated per year 92,160 251,280 171,720
liters of diesel saved per month 2,268 3,203 2,735
Reduced liters of fuel per kWh 0.30 0.15 0.22
Reduced cost per kWh $ 0.27 $ 0.14 $ 0.20
Estimated investment cost for gasifier $ 43,753 $ 43,483 $ 43,618
Simple payback period months 25 17 21
Potential CO2 saving ton/year 73 103 88

2. The Impact of gasification system fuel savings on profitability

a. Rice mills : Gross profit per ton of rice increased by $ 9 to $ 11
b. REEs: Gross profit per kWh increased by about 20%
c. Ice Plants: Gross profit per kg of ice increased by 40%-45%

3. Impact on competitiveness:
a. The savings realized by rice millers that have installed gasification technology are
being used to invest in upgrading and adding new, more advanced milling
equipment. This investment will expand mill capacity, improve mill production
efficiency, reduce broken rice percentage, increase the quality of milled rice and
provide improved opportunities to compete in international markets.
b. The savings realized by ice factories installing gasification technology are used to
invest in upgrading and adding new water filtration equipment etc. One operator
has lowered the retail price of ice to its customers.
c. REEs using biomass gasification technology have the financial capacity to reduce
tariffs by 20%-25% and thereby expand sales and add new customers.

4. Macro-economic benefits of reducing consumption of diesel fuel

a. Biomass gasification is a technology that substitutes locally grown biomass for
imported fossil fuels. All of Cambodia’s fossil fuel is currently imported. Therefore,
any reduction in diesel consumption will have a direct impact on National Balance
of Trade. A typical rice mill will reduce its consumption by 60,000 liters per year.
Therefore, 100 installations would have an impact of 6,000,000 liters per year.

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5. Market for Biomass gasification systems
a. There are more than 500 rice mills operating in Cambodia with more than 1.0 ton
per hour capacity. About 25 % of these have capacity of > than 2.0 tons/hr. It has
been estimated that about 50% or 250 of the total will be interested in purchasing
gasification systems.
b. Additionally, there are an estimated 100-200 ice plants, brick factories, REEs, rural
garment factories, hotels and other SMEs that will benefit from gasifier systems.

6. Environmental benefits (tons of CO2)

a. CO2 Emission reduction
CO2 emissions from burning diesel fuel are calculated as follows:
(liters of diesel)*(0.840336 kg/l)*(3.186 CO2/kg fuel burned) /1000 = tons of CO2.
A 2.0 ton per hour rice mill using a 200 kW biomass gasifier will reduce its carbon
dioxide emissions by approximately 200 tons of CO2 per year. REEs with smaller
generator sets (60-100 kW) will reduce its CO2 emissions by 75-100 tons per year.

13
Itallation of biomass gasifier
Installation of a gasifier system

Rice husk biomass Wood biomass gasifier system

Gasification of biomass Typical Cambodian rice mill

14
3. SME Renewable Energy Ltd. Integrated Biomass Gasification Services
Program

a. Background:
Since 1998 SME Cambodia has supported small and medium enterprises (SMEs) in rural
Cambodia with analyses of competitiveness issues, enterprise and association capacity
building initiatives, production technology information, access to credit and assisting SMEs in
market identification and linkages. This experience and research has shown that rural
Cambodian SMEs have higher operating and production costs than their counterparts in
neighboring ASEAN countries.
The main factors limiting international competitiveness are: a lack of advanced processing
technology; high energy costs; unskilled labor force; deficient transportation infrastructure;
limited access to credit; weak management skills; and lack of supporting public services. Of
these factors, energy expenditures stand out as a major constraint to growth and
development. High energy costs continue to be an important obstacle to private sector
investment, especially in rural areas not serviced by reliable, lower cost electricity services.
The cost of both liquid fossil fuels and electrical energy in rural Cambodia is 2-5 times higher
than in neighboring Thailand, Vietnam, Laos and Malaysia. As a result, even local primary
products such as Cambodian milled rice, common clay bricks and ceramic tiles have
difficulty competing with products imported from Cambodia’s neighbors.
While researching solutions to this energy cost problem SME Cambodia identified biomass
gasification equipment and systems developed and refined over the last 20 years by Indian
technical institutions (IIST) and companies such as ANKUR Scientific Energy Technologies
Pvt. Ltd. Hundreds of gasifiers have been installed in Indian SMEs and proven to be
reliable, effective and economic in reducing fossil fuel consumption for various thermal,
electrical and mechanical applications. Gasification technology has proven to be a good
investment especially for smaller applications from 20 kW to 2.0 mgW where no inexpensive
“grid” electricity source or inexpensive local fossil fuel source is available.

b. Integrated Biomass Gasification Services

To address these issues, SME Cambodia and its partner E+Co. Inc. have developed
mechanisms, methods and procedures to promote, introduce and finance investment in
biomass gasification technology in Cambodian SMEs and in village electrification projects.
For individual SMEs, the approach involves providing an integrated set of services designed
to assist the SME operator to make a smooth transition from diesel dependent operation to
utilizing biomass gasification technology that reduces fuel consumption and costs by +70%.
Over the last 3 years the approach has been demonstrated in more than 20 Cambodian rice
mills, ice plants and brick factories. Each has achieved significant energy cost savings.
Offering information, technical support, financing and maintenance support services through
a single “turn-key project window” enables SME Renewable Energy Ltd. to establish a long
term trust relationship with its clients. Services are offered and delivered using a step-by-
step approach that ensures that: clients fully understand the technology, the potential
benefits/risks; and acquire the technical skills needed to operate biomass gasification
systems successfully and profitably. Financing schedules are developed to minimize the
impact on the borrower’s working capital. The integration of client financing, training and
after sales service allows SME Renewable Energy Ltd. managers the opportunity to monitor
clients’ business status and anticipate loan repayment problems before they arise.
The steps and methodology demonstrated and proven during pilot demonstrations
completed in 2007-2008 are listed below and illustrated in the diagram on page 19.

15
1. Market “opening” promotion and awareness workshops and seminars were held
in several locations throughout Cambodia during 2007 and repeated again in
2008. Owners of rice mills, ice plants, brick factories and rural electricity
enterprises were invited to attend and learn about biomass gasification
technology and its application. Data collected from the first installations operating
in Cambodia were presented and the “early adopters” (a rice miller and 2 ice
plant operators) provided testimonial presentations explaining and confirming the
energy savings they were realizing.
2. Several commercial banks were invited to present their lending policies and loan
terms available to finance gasification equipment purchases. None had financed
renewable energy equipment before and were at the time, unsure as to the
eligibility and collateral value of gasifier equipment.
3. Follow-up visits by SME Renewable Energy Ltd. staff were made to provide
additional information to SME owners expressing interest in assessing the
potential for using biomass gasification equipment in their mills or factories,
4. An energy “audit” and evaluation was conducted to determine the SME’s
potential to use biomass gasification technology profitably and sustainably,
5. If the results of the energy audit and evaluation were positive a biomass
gasification system design and equipment specification was developed,
6. A project plan was formulated and a detailed turn-key project budget quotation
was produced and presented to the SME owner,
Note: Only complete turn-key project installations were offered. SME Renewable
Energy Ltd, and its gasifier manufacturer supplier (ANKUR) and financial
institution partner (E+Co) do not market or finance gasification equipment
components separately to be installed by purchasers. Experience with more than
900 installations, in India and other developing countries, has shown that a
complete system design, commissioning, training and after sales service
approach is preferable to ensure that the energy requirements of the clients’
diesel or gasoline engine(s) and the quality of gas supplied is properly matched
so that fuel savings, engine life and operator safety are not compromised.
7. financing options tailored to the individual client’s requirements were discussed
and terms negotiated,
SME-RE and E+Co. Inc. develop with each client, a set of loan terms, flexible
collateral arrangements, deposit and repayment schedules designed to minimize
the initial costs to the borrower. Payment schedules were adjusted to provide a
“grace” period that allowed clients to first realize fuel savings from the new
gasifier equipment before loan principal payments were required. In some cases,
down payments were minimized at the time the order was placed and final
deposits were collected after the equipment began to operate and started to yield
energy savings. The gasification system itself was taken by SME-RE and E+Co
as collateral. Additional collateral coverage was provided through promissory
notes for rice paddy or other product equivalents.
8. A due diligence process was completed to confirm the borrower’s operational and
financial status and to assess the purchaser/borrower’s ability to repay the
proposed loan. A joint SME-RE Ltd./E+Co team conducted interviews and
inspection of the SME site. A questionnaire was completed with the borrower and
data was collected at the SME site. The field process was usually completed in 1-
2 days. Compilation and analyses of the data collected was completed at SME-
RE Ltd. and E+Co offices. Cash flow projections and balance sheet formats were
then produced and analyzed. This information was then submitted with the loan
application and related agreements to the E+Co loan approval committees.

16
 9. Equipment procurement, system installation and commissioning,
Gasifier systems were imported to Cambodia and transported to the client’s mill
or factory site. The equipment was assembled, commissioned and tested by
SME-RE Ltd staff. Civil works including buildings housing the gasifier, fuel
storage areas, cooling pond etc. were designed and constructed by the client.
10. SME operator and staff training was provided at each stage of installation and
commissioning,
11. After-sales technical and maintenance services is provided for one year after
equipment commissioning. A manufacturers warranty on equipment flaws is
issued for 1 year,
12. On-going client advisory and information services (re: enterprise management,
CDM options etc.) are provided as required.

c. Financing Issues and Alternatives

Lending institutions confront several issues when considering financing gasification
equipment purchases by rural SMEs. These include:
1. Unfamiliarity of Bank or MFI staff with biomass gasification technology,
2. Uncertainty re: quality, durability and reliability of the gasification equipment
being financed,
The gasification equipment should be manufactured by an established company
to good standards and be operationally proven to ensure gas quality, durability
and performance reliability and operator safety.
System performance in terms of % substitution of diesel fuel is critical for the
client enterprise to achieve a sufficient return from the investment and for the
lending party to have all loans repaid. The quality and purity of the gas produced
is important to ensure that no damage occurs in the engine from tar and other
gas impurities. The length of gasification equipment life is important as it relates
to calculation of depreciation and replacement costs.
For these reasons lending institutions usually require that equipment financed by
their loans is manufactured by qualified companies and the equipment has
proven operating lifetimes and safe system designs.
3. Collateral requirement to “cover” the loan, and type of collateral accepted,
The amount of collateral required by lending institutions depends upon the
lender’s particular policies and the regulations under governing banks or MFIs.
Typically, commercial banks in Cambodia require collateral of fixed assets equal
to 200%-300% of the loan value. Rice mills with equipment located in rural areas
outside of main provincial towns have not been attractive to commercial Banks for
collateral purposes.
At this time, Cambodian banks have little or no experience with gasification
technology thus are hesitant to offer competitive conditions for loans to purchase
the equipment. Until recently there were no laws governing unsecured assets, so
moveable equipment such as gasifier systems, could not be designated as
collateral. Commercial banks surveyed during the study period indicated that they
would require fixed asset collateral to back gasifier system loans.

17
4. Term of loans,
Commercial loans in Cambodia are typically limited to terms of 1-3 years. A few
banks have recently offered 3- 5 year loan terms for manufacturing equipment.
Actual terms and conditions received by individual SMEs depends upon the
lender of collateral value and projected cash flow.
5. Interest rates
During the last 15 years Interest rates for small business loans have been
consistently high in Cambodia. Uncollateralized micro-credit borrowers are
routinely charged 2%-4% per month. Larger enterprises (SMEs) have been
charged 15%-36% per annum for US $ loans with collateral and guarantor
requirements of 200%-300%. Recently, some commercial banks have advertised
lower interest rates (10-18%) but appear to be mainly targeting large companies
located mainly in high growth centers of Phnom Penh, Siem Reap and
Sihanoukville where rising land values have created larger collateral values.
Rural based SMEs have not received similar consideration.
6. Grace periods on interest and/or principal payments
The period that institutional lenders are willing to wait for interest and/or principal
payments is usually one month. Commercial bank lenders do not offer grace
periods on loan principal and almost never give grace periods on interest due.
This means the borrower must have sufficient working capital and cash flow
available to make payments immediately after placing a system order and loan
disbursement. If the equipment manufacture, project construction, shipping,
assembly and commissioning process takes several months following the loan
disbursement date, then financing payments will begin before the new system is
installed and begins to yield savings. This is an additional concern for the SME
operator/borrower and makes the decision to invest in the new technology more
difficult.
To address these issues and to make investment in biomass gasification technology
easier for the SME owner, SME-RE Ltd. and E+Co have developed a flexible
approach that includes:
1) varying the % of project down payment required;
2) adjusting the initial loan repayment schedule to allow for delayed interest and
principal payments;
3) flexible collateral arrangements (100% of loan value);
4) long loan term of 5 years; and competitive interest rate of 13% pa.
This approach provides a smooth path for SME owners to acquire and capture the
benefits of this fuel saving technology (see table in APPENDIX 4).

18
d. Integrated Services Program Achievements to Date
1) Gasifiers Purchased, Installed and Ordered:
The integrated gasifier services program developed by SME-RE and E&Co has an
impressive record. Between August 2006 and November 2007, five (5) SMEs
purchased biomass gasification systems in the 150 kW to 200 kW capacity range.
Verified fuel audits, demonstrated that these investments could be recovered within
1.5 - 3 years on the basis of energy savings realized.
During Dec 2007-June 30, 2008, 16 more rice mills and 3 other rural SMEs
purchased biomass gasification systems. All applied for and received loans to
finance the purchases through the credit mechanism of SME Renewable Energy Ltd.
and E+Co. Inc. The 21 installed and ordered systems by end of June 2008 included
13 rice mills, 2 brick manufacturing plants, 1 garment factory, 3 rural electricity
enterprises and 2 ice making plants. There have been no loan repayment default
problems during the first two years of financing operations. As of June 2008, a total
of US$ 850,000 in loans had been approved and disbursed.
SME Renewable Energy Ltd estimates that orders for biomass gasifier systems will
continue to grow at a rate of 2-3 per month. Currently, requests and applications for
SME-RE Ltd. to complete assessments and energy audits are received at a rate of 3
per month. Fossil fuel prices remaining above $ 1.20 per liter and the widely
disseminated information re: the financial benefits realized by the first SMEs to install
gasification systems has stimulated demand. It is estimated that up to 200 rice mills
and 150 other SMEs will be interested in investing and installing this technology over
the next 6-10 years.

2) Economic Benefits of Gasifiers

During the period August 2006 - September 2007, fuel prices in Cambodia increased
from $0.55 to $0.70 per liter. From October 2007 to May 2008, diesel fuel prices
continued to rise steadily from $0.70 to more than $1.40 per liter.
Fuel expenditures of medium sized rice mills 2 similar to the “early adopter’s”,
increased during this period from $ 4,500 to $ 9,600 per month. The rice miller that
first installed a gasifier system in August 2006 saw his monthly diesel fuel
expenditures initially fall 75% from $4,500 to $1,100 per month in October 2006.
Subsequently, as oil prices rose over the next 18 months, his fuel expenses rose
$1,300 to $ 2,400 per month. The fuel savings during the same period increased
from $ 3,300 per month in October 2006 to $ 7,200 per month in June 2008.
During the first 4 months of 2008, 5 more gasification systems were purchased and
installed in 4 rice mills and 1 REE. To date each “dual fuel” gasifier 3 installed has
reduced diesel oil consumption by about 5,500 liters per month or approximately
66,000 liters per year4. Ice plants that routinely operate up to 22 hours per day save
even more, approximately 118,000 liters valued at $11,800 per month.
With the money saved, rice millers are investing in other new milling machinery such
as hullers, sorting tables and paddy dryers. One ice plant has reduced the retail price
of his ice as a result of his fuel savings.

2 1.5-2.0 tons of milled rice output per hour using a 300 hp Mitsubishi diesel engine with a 200 kW
gasifier.
3 Dual fuel gasifiers burn 30% diesel fuel and substitute 70% of the usual diesel consumption with
“producer” gas created in the gasifier.

4 Actual enterprise savings depend on the number of hours per day and per year of gasifier and engine(s).

20
Large scale investment in this technology will contribute significantly to individual
enterprise competitiveness and reduce the country’s overall demand for imported
fossil fuels by several millions of liters and millions of dollars spend per year.
Reduction in fossil fuel consumption and removal of rice husk waste will also reduce
both CO2 and methane gas emissions.

A 200 kW biomass gasifier operating in a rice mill in Battambang Province, Cambodia

since September 2006. Diesel substitution averages 75%.

21
4. Proposed Action Plan
A. Objectives
1. Encourage, over the next 4 years, investment by SMEs in 100-150 biomass
gasification systems.
2. Once the systems are installed, save 7.5 million liters of diesel fuel valued at over
$ 9,000,000 each year. Each SME installing a gasifier system will save, on
average, 4,500 liters per month (value of >US$5,000 per month).
3. Create a self supporting integrated biomass gasification supply and support
service sector by year 4.
4. Support national climate change and environmental protection goals by reducing
carbon dioxide production from burning fossil fuels and facilitating sales of carbon
related CDM credits,
5. National balance of trade will be strengthened by reducing the amount of fossil
fuel imported and consumed in Cambodia,

B. Loan Fund/Credit Facility supported by WB/IFC or other Development Bank

1. Establish a $4.5m loan fund/credit facility with E+Co Inc. and SME Renewable
Energy Ltd. for the purpose of financing 100 -150 turn-key gasifier projects in
Cambodian rice mills and other SMEs. These funds will be added to the $2.0 m
already mobilized and disbursed by E+Co Inc. and SME-RE during 2006-2008.
2. E+Co Inc. and SME-RE Ltd. will access over a 4 year period the loan fund/credit
facility at “soft” (SIBOR or LIBOR interest rates). Loan fund requirement is
projected to be: Yr 1 - $ 1.5M, Yr 2 - $1.5M, Yr 3 - $1.5M.
3. Interest calculation and payments will begin upon loan disbursement. Principal
payments for each fund trenche should begin after a 3 year grace period, i.e. at
the end of Year 3, Year 4 and Year 5. Loan repayment for each trenche will be
completed at the end of Year 8, Year 9 and Year 10 respectively.
4. These funds will be on-lent by SME-RE Ltd. to eligible SMEs to finance
purchases of gasification systems. Loan mechanisms currently used by E+Co
Inc. and IFC or similar arrangements should be considered.
5. A two tier system to manage loan funds will be established with E+Co. Inc. acting
as financial intermediary institution and SME Renewable Energy Ltd. providing its
integrated turn-key project financing services to eligible and qualified rice mills
and other SMEs.
6. SME Renewable Energy Ltd. will provide design/build services, finance and
install turn-key biomass gasification systems and provide operator training for ~
100 Cambodian rice mills and up to 50 other SMEs (ice plants, brick, REEs, brick
& tile factories, garment factories etc.) over a period of 4 years, 2009-2012. The
total value of the resulting loans will exceed $6,000,000.
7. After 4 years, the dependence of Cambodian rice mills and other SMEs on diesel
fuel will be reduced by ~ 7,500,000 liters each year.

22
C. Technical Assistance (TA) Grant to SME-RE Ltd
1. TA funding grant of $350,000 to SME Renewable Energy Ltd. to upgrade and
develop loan portfolio management systems and staff capacity including:
a. Loan/lease processing, loan portfolio management and credit management
specialist(s),

b. Biomass gasification system operation/maintenance and after sale services

specialist(s) to upgrade and develop technical staff capacity.

2. TA Grant Outputs
a. The technical systems operations and financial services capacity of SME
Renewable Energy Ltd. will be expanded and strengthened to provide and
manage gasification system design, financing and to provide technical after-
sales support to 100-150 new clients
a. expand SME-RE capacity to provide integrated services, (design, installation,
training, finance and after sales service), to 100-150 new biomass gasifier
systems customers,
b. promote awareness of rural SME owners of biomass gasification technology
and the potential financial benefits available to rice milling and other SMEs,
c. provide and administer loan financing for 100-150 turnkey projects applying
the services and financing mechanisms demonstrated in the pilot program.
d. complete installation, commissioning, client training and after sales services
for 100-150 new biomass gasification systems.

D. Technical Assistance Grant To MIME

TA grants are required to assist MIME, in consultation with gasification system
manufacturers and system suppliers, to establish Cambodian biomass gasification
equipment standards and certification procedures. Standards are required to ensure
reliability, safety, high levels of fossil fuel substitution, and high returns on investment
to Cambodian SMEs.
1. Provide a TA grant of $220,000 to MIME to develop quality, safety and
performance standards for biomass gasification equipment manufactured and/or
imported into Cambodia. The grant(s) should be used to:
a. hire consultant expert(s) to draft a set of Standards ($100,000) for
implementation by the RGC and
b. provide technical training to an MIME specialist team ($120,000) to prepare
for and to implement the regulations related to “biomass gasification
equipment standards”.
2. Technical Assistance Grant Outputs
Biomass gasification equipment and system standards and certification
procedures will be developed and implemented by MIME, in cooperation with
equipment manufacturers and Cambodian technology service providers.
MIME will:
a) Develop and publish technical specifications and standards for gasification
equipment manufacture, performance and gas quality,
b) Create an Equipment Standards Advisory Committee to develop and
recommend equipment testing, certification and registration procedures.

23
 c) Implement and enforce the new Technical Standards, Inspection and
Certification Procedures.
d) Advise industry and government re: protection of proprietary industrial
designs and information and manufacturing standards.

E. Budget: Total Budget Year 1 through Year 4: $ 5.07 million

1. Loan Fund – ($4.5 million)
(1) Loan Fund Credit Facility of $4.5 million will be made available to E+Co
Inc. a qualified financial intermediary organization and SME-RE Ltd. an
established Cambodian gasification equipment supply and financing
company.

2. Technical Assistance to SME-Re Ltd. 20 - 32 person months - ($350,000)

(1) Biomass gasification system technical engineering specialist: 6 - 8 person
months (over 1 year),
(2) Biomass gasification system operations training and after sales services
specialist : 6 - 12 person months (over years 1 and 2),
(3) Technical Information, Media Publications Specialist,

(4) Loan/lease processing, loan portfolio/ financial management specialist:

12 -24 person months (over years 1-4).
3. Technical Assistance to MIME - ($ 220,000)
(1) Gasification system specialist to research, facilitate and assist MIME to
draft equipment operating and performance and manufacturing standards
and design certification procedures: 10-18 person months (over 2-3 years)

F. Implementation Schedule
The proposed Plan envisions an implementation timetable of 4 years from 2009-2012.
The following chart illustrates the component activities and implementation schedule.

24
Implementation Schedule Program Month 1-4 5-8 9-12 13-16 17-20 21-24
Program Components Total # of Gasifier Systems Installed 8 12 24 36 48 60
a) Promotion by SME Cambodia / E+Co of Awareness of Gasification Technology and Applications to Save Fuel
(1) Conduct technology awareness workshops for SMEs Owners
(2) Produce and distribute media re: benefits of biomass gasification
(3) Facilitate visits of SME owners to observe existing installations
(4) Create CDM Information exchange network of biomass gasifier system owners
(5) Complete site visits and present follow-up information to interested SMEs
b) Establish $4.5 m. Loan Fund Facility for E+Co-SME Renewable Energy Ltd
(1) Establish fund access agreements between WB and E+Co Inc.
(2) Establish agreements and terms for on-lending funds to SME - RE Ltd.
(3) E+Co to disburse loan funds to SME Renewable Energy Ltd.
(4) SME Renewable Energy Ltd processes loan applications from Rice Mills + SMEs
(5) SME Renewable Energy Ltd to disburse loans to approved applicants
(6) E+Co to monitor-audit and evaluate loan fund performance
c) Technical Assistance grant(s) to strengthen SME-RE Ltd. capacity
(1) Loan / Lease Processing and Loan Portfolio Management Specialist
(2) Biomass Gasification Technology After Sales services Specialist(s)
(3) Technical Information, Media Publications Specialist
d) MIME & Industry Develop Gasification Equipment Performance Standards
(1) Create Standards Committee (Manufacturers/Experts/MIME)
(2) Develop equipment manufacturing standards
(3) Develop equipment performance, reliability, gas quality and safety standards
(4) Implement Technical Standards, Inspection and Certification Procedures.

e) Technical Assistance grants to assist MIME

(1) Performance Standards and Biomass Gasification Technology Specialist
Implementation Schedule Program Month 25-28 29-32 33-36 37-40 41-44 45-48
Program Components Gasifier Systems Installed 72 90 102 118 130 142
a) Promote Awareness of Gasification Technology and Application to SMEs
(1) Conduct technology awareness workshops for SMEs Owners
(2) Produce and distribute media re: benefits of biomass gasification
(3) Facilitate visits of SME owners to observe existing installations
(4) Create CDM Information exchange network of biomass gasifier system owners
(5) Complete site visits and present follow-up information to interested SMEs
b) Establish $4.5 m. Loan Fund Facility for E+Co-SME Renewable Energy Ltd
(1) Establish fund access agreements between WB and E+Co. Inc.
(2) Establish agreements and terms for on-lending funds to SME Renewable Energy Ltd.
(3) E+Co. Inc to disburse loan fund trenches to SME Renewable Energy Ltd.
(4) SME Renewable Energy Ltd processes loan applications from Rice Mills and SMEs
(5) SME Renewable Energy Ltd to disburse loans to approved applicants
(6) E &C0 to monitor-audit and evaluate loan fund performance
c) Technical Assistance grant(s) to strengthen SME-RE Ltd. capacity
(1) Loan / Lease Processing and Loan Portfolio Management Specialist
(2) Biomass Gasification Technology After Sales Specialist
(3) Technical Information, Media Publications Specialist
d) MIME and Industry Develop Gasification Performance & Safety Standards
(1) Create Standards Committee (Manufacturers/Experts/MIME)
(2) Develop equipment manufacturing standards
(3) Develop equipment performance, reliability, gas quality and safety standards
(4) Implement Technical Standards, Inspection and Certification Procedures.
e) TA grants to MIME to Develop Gasification Equip. Performance Standards
(1) Performance Standards and Biomass Gasification Technology Specialist
APPENDICES
 APPENDIX 1

Biomass Gasification Technology: Cambodia 2003-2008

Background
Throughout the twentieth century biomass gasification systems and equipment have been
used widely in European cities (coal gasification) and in vehicles (wood gasification). During
World War II over 3 million wood burning vehicles, tractors, trucks, buses etc. were operated
in Europe. Since then the technology has evolved and been modified by various research
and engineering institutions around the world.
Since the 1980’s Indian research institutions and Indian companies have revisited the
technology and converted laboratory experiments into practical, reliable and economic small
scale 5 gasification systems suitable for use in enterprise and village level applications in
developing economies. These systems have demonstrated significant results. In India,
gasifiers have been installed in hundreds of SMEs including rice mills, ceramic tile factories,
activated charcoal plants and isolated community electricity grid systems6.
Village Electricity Pilot Project
In 2003, SME Cambodia initiated a village electrification demonstration and pilot project in
Anglong Tha Mey, Banan District, Battambang province. The system produces electricity
from wood and corn cob biomass fuel grown locally. Improved seed for rapid growing topical
legume trees (species: Leuceana Leucocephala), was imported from Australia. Tree
nurseries were established in 2004 and farmers began growing and harvesting by
“coppicing” method 7 the branches to burn in a 100% biomass gasifier- electricity generator
set. A village electrification grid was designed, equipment imported from ANKUR
Technologies Pvt. Ltd. (India) and installed to demonstrate the potential for rural
communities to utilize biomass technology and reduce the high cost of diesel generated
electricity.
This pilot project has operated over 3 years and has successfully demonstrated the potential
for farmer-villagers to grow biomass fuel and generate electrical energy for local
consumption at about 30% of the cost of the producing electricity with diesel fueled
generators. The small (7kW) pilot project was expanded in 2007 from 70 households to 250
households. This demonstration of the feasibility of the technology served to propel biomass
gasification technology from obscurity in the Cambodian renewable energy sector to a place
near the top of the list of potential technologies. A JICA (Japan) sponsored “Renewable
Energy Master Plan Study” completed for MIME in 2006 reviewed the pilot project results
and confirmed that biomass gasification technology represented a leading energy
opportunity for rural communities not connected or within reach of larger grid systems.

6 Many Indian factories, rice mills villages and several Sri Lanka demonstration and commercial sites were visited by
SME Cambodia staff during 2002-2006, to confirmed positive results with the owners and operators of these
systems.
7Rapid growing topical trees such as leuceana can be repeatedly cut or “coppiced” approximately 1 meter
above ground after which the branches will grow back every 4-6 month. This practice can be continued
for up to 20 years.

28
As a result of this success, SME Cambodia committed itself to promoting awareness of the
Cambodian private sector re: gasification technology and to expand the adoption of the
technology by rural SMEs. The goal was to have significant impact on rural economic growth
and on the competitiveness of rural based enterprises, through reducing consumption of
expensive imported fossil fuel.

20 kW 100% wood biomass gasifier and electricity generator set at Anglong Tha Mey 250
member Community Energy Cooperative, Battambang, Cambodia

Establishment of SME Renewable Energy Ltd.

In October 2005, SME Cambodia and E+Co Inc. created SME Renewable Energy Ltd., a
Cambodian registered company, to promote gasification technology, import and install
commercial sized units and offer financing to rural based SMEs. The newly formed company
conducted “market opening” seminars throughout Cambodia in 2006 and 2007 to explain to
rural entrepreneurs, the potential to improve their competitiveness through reducing
consumption and expenditures on fossil fuels. Rice mills, ice plants and REEs were a
particular focus of the market opening seminars since many of these firms were totally
dependent on diesel fuel and thus affected greatly by increases in diesel fuel prices.
Over the next 2 years, the promotional efforts of SME Renewable Energy Ltd. gradually
yielded results. Initially, there was hesitation to invest in the “new” technology by most SMEs
owners. To instill confidence in the technology and its application in rural enterprises SME
Cambodia facilitated exposure visits to see rice mills, factories and villages in West Bengal,
Gujarat and Karnataka that have used biomass gasification technology for many years.

29
 Cambodian NGO
US Based Not-For Profit
(1999) Energy Investment Company (1994)

67% 33%

Cambodian

RE Company (2005)

Installation of Gasifier Systems in Cambodian Rice Mills and Other SMEs during 2006-
2007
Following the promotional efforts of 2005/2006, a leading Battambang rice miller8 decided to
invest in the new technology. SME Renewable Energy Ltd. specified a rice husk burning
biomass gasification system developed by ANKUR Technologies and provided a turn-key
project financing package9 to facilitate the equipment purchase. The system was installed
and commissioned in August 2006. This 200 kW gasifier fueled with waste rice husks
reduced diesel oil consumption of the mill’s diesel engine10 by 75% or about 5,500 liters
month.
The Song Heng Mill installation provided a demonstration of the benefits that could be
realized by Cambodian SMEs. During 2007, four more NW Cambodian rice mills (2), a brick
factory (1) and ice making plants (2) purchased and installed gasifier equipment. SME
Renewable Energy Ltd. and E+Co. provided project financing loans to these SMEs with
terms tailored to meet the specific needs and capacity of each enterprise.11 The energy
savings realized by the first 5 SMEs to install gasification equipment was and continues to
be impressive, with (70%-75%) substitution rates..
In response to the success of these 5 “early adopters” of gasification technology and also
due to the steady rise of diesel fuel prices during 2007-2008, more rice millers and other
SME operators began to indicate interest in investing in gasification systems. The “early
adopters” provided the credible demonstration that hesitant Cambodian SME operators

8 Mr. Song Hong owner of the Song Heng Rice Mill., Battambang
9A turn-key project includes design, manufacturing, importation, installation and commissioning. The
project price was ~ $70,000 client down-payment = 30% or $ 21,000 Loan terms: Principal $49,000 over
5 years with interest rate of 12% p.a..
10 Mitsubishi 300 hp truck engine running at 1,800 rpm. Normal diesel fuel consumption was 26 liters/hr.
11 See discussion re: turn-key project financing, Appendix 3

30
needed to convince them that the equipment would operate successfully and provide both
immediate and long term energy savings.
By the end of June 2008, 10 Cambodian SMEs had installed gasification systems and 11
more have ordered systems that will be installed by the end of the year.

31
 APPENDIX 2

Factors Affecting Cambodian SME Owners Decision to Invest in

Gasification Technology

Cambodian rural entrepreneurs are very conservative and cautious in terms of embracing
technological change. This is a result of past social trauma, war, economic hardship and
political uncertainty. The average SME operator/owner has a deep distrust of changes to
familiar practices and methods. This characteristic is exacerbated by the fact that few
business owners have skills to apply advanced business analyses to their operations nor do
they have a broad understanding of the competitive factors that affect the markets for their
products. Awareness of advanced production technologies is low and access to funds for
both working capital and long term investment capital is limited.
This situation impedes the rate at which Cambodian rural business owners recognize and
take advantage of new technologies. The approach of most family business operators is to
wait and watch others take risks with new technologies. If the neighbor’s investment is
successful they simply copy rather than analyze market opportunities themselves and make
separate, independent business investment decisions.
In addition to a general tendency to hesitate in purchasing new equipment and risking
money on new technologies, rice millers and other SMEs also express other reservations.
These include:
• the high price of equipment,
• questions concerning the proven operational reliability of equipment,
• availability and cost of replacement parts,
• availability of operator training,
• assurance that after-sales-technical support will be provided when technical
problems or issues arise.
• availability and access to long term loan credit, and
• high Interest rates charged by financial institutions and lack of credit for long term
equipment investment.
Cambodian business owners are generally very “price sensitive”. They almost always
choose the cheaper priced equipment to “save” money. Buying the lowest priced equipment
usually means it is not as durable, reliable nor long lasting as higher quality more expensive
equipment, but it suits the short term business planning and operating mentality that has
been the norm in rural Cambodia.
The uncertainties caused by decades of social and political upheaval has created a mentality
of opting for immediate cash returns, season to season, year to year and investing only the
minimum required. Their business models have not been based on calculation of long term
return on investment.
Despite the very high fuel savings demonstrated by initial gasifier installations there remains
resistance to invest in new, reliable, proven gasification equipment. Many SMEs instinctively
look for a “bargain” approach to achieving the benefits demonstrated by the imported
equipment.
Over the last 2-3 years several Cambodia individuals have produced copies of imported
gasifiers and sold them at cut rate prices to SME owners. These individuals have limited or

32
no previous gasifier technology training or manufacturing experience. The price and
standard of fabrication is very low.

The result has been problematic for the SME equipment buyers since minimum engineering
design and testing has been completed and no performance guarantees are provided. The
result is limited substitution of diesel fuel, damage to engines and loss of revenues through
higher energy operating costs.

The poor performance of this “back yard” equipment and damage caused to engines will
ultimately give biomass gasification technology a “black eye” and fuel skepticism and
misinformation amongst some of the business and public sector. Further, it wastes time that
Cambodian enterprises don’t have to improve their operational efficiency and
competitiveness.
The “cheap copy” phenomenon must be addressed by the industry and government if
Cambodian SMEs are to be adequately served in terms of maximum fuel savings, engine
performance, safety and return on their investments. None of the imported equipment
installed by SME-Re Ltd. has encountered operational failures. Operating problems are
routinely corrected through adjustment by trained SME Renewable Energy Ltd. technicians
and engineers. The imported equipment includes performance warranties, manufacturing
guarantees for three years and one year of after-sales-maintenance service.
In future, manufacturing, performance and engineering design standards should be adopted
and implemented by the Royal Government of Cambodia to protect purchaser’s investment,
worker safety, and bank’s loan security and confidence.

33
 APPENDIX 3

Survey of Rice Mills and other SMEs Dependent on Diesel Fuel

Energy Sources and Analysis of Impact of Biomass Gasification
Technology on Cambodian Rice Mills and SMEs

Data Collection Methodology

The survey/data collection component of Task 1 consisted of interviews with 30 enterprise
owners located in rural Cambodian provinces of Battambang, Banteay Meanchey, Siem
Reap, Svay Rieng, Prey Veng, Kampong Cham, and Kampong Chhnang (See Table 1, List
of Interviewees). Types of enterprises included: rice mills (23), rural electricity enterprises
(3), brick factories (1), ice plants (3) and a stone crushing plant (1). These SMEs were not
selected at random. The enterprise owners had expressed interest in biomass gasification
technology or were considered by the SME Renewable Energy Ltd. team as enterprises that
could potentially utilize this technology. Many of those selected had some previous exposure
or knowledge of biomass gasification technology through: information received at renewable
energy information workshops conducted by SME Cambodia and E & C0. Inc during 2006-
2007, word-of-mouth contact with SME operators already using biomass gasification
equipment, and for a few, exposure visits to India to visit gasifier installations, (15
entrepreneurs in 2005-2006); and finally Cambodia print and TV media coverage of early
village or enterprise gasification projects.

Twenty six of the thirty (30) SMEs are members of Provincial business sector Associations
(Rice Millers, Brick and Tile Manufacturers or Rural Electricity Enterprises). Four (4) of the
enterprises interviewed are from unorganized sectors i.e. stone crushing plant and ice
making plants.

Discussions were conducted by the SME Cambodia team with enterprise owners at their
mills and factories. Background information was collected, observations made and
operational data requested concerning:
1. energy consumption and energy expenditures,
2. production technology used,
3. raw material costs,
4. labor expenses,
5. other production costs,
6. enterprise marketing strategies,
7. ownership and management structure,
8. legal status,
9. existence of business plans and planning process,
10. land values,
11. credit access,
12. taxes,
13. sources of borrowed funds,
14. current debt situation and
15. the value of company fixed and movable assets.

Specific focus of the interview included an “energy audit” concerning actual diesel fuel and
lubricant consumption (liters/hr), fuel costs, recent price trends, and strategies used for
combating rising energy prices.

34
The potential impact of biomass gasification technology on enterprise operating costs was
calculated using this information. Through these interviews and informal discussion, the level
and depth of entrepreneurs’ awareness re: biomass gasification technologies was observed
and noted.

Quality of Data Collected:

SME Cambodia interviewers found that the selected business owners were generally willing
to verbally discuss most aspects of their enterprise operations. Specific recorded information
concerning business operations and accounts was, however, more difficult to obtain. The
closed and somewhat suspicious mentality of Cambodian rural family business owners is an
obstacle to getting complete and accurate operating data information. The longstanding
relationship between SME Cambodia staff and many of the entrepreneurs (through
Association formation processes and other BDS activities since 1998), has established a
degree of trust and confidence that makes it somewhat easier to collect but much of the
information is undocumented and unrecorded data. The data is considered by the SME
Cambodia team as reasonably accurate but was not provided in standardized format nor is it
complete for each enterprise.

Even with an owner’s full cooperation, the amount of hard, documented and verifiable data
with respect to product sales, input purchases, taxes paid, profits etc. for each enterprise is
limited due to generally poor record keeping practices. This lack of records is a common
feature of Cambodian small business at this time. Historically, there has not been any
incentive for enterprise owners to keep records in modern accounting formats.

For example, a rice mill may not have complete receipts of fuel purchases since the fuel
seller from whom fuel was purchased also did not issue receipts. This lack of records makes
it difficult to analyze specific operational expenditures and to identify and disaggregate sales
and expense data (e.g. purchases of different rice types and breakdown of different
consumables used in the milling, manufacturing and packaging processes).

In this survey two separate categories of data were compiled:

1. Group 1 (Energy Audit) :

Data was collected for 24 enterprises based upon site visits where verbal interviews
re: operational expenditures, production data, credit status and energy consumption.
This data was used to complete “energy audits” of the enterprises. See example of
Energy Audit Tables attached).
2. Group 2: (Due Diligence Financial Model)
More detailed data became available for 9 enterprises whose owners made the
decision to purchase new biomass gasification equipment during the survey period
(June 2007 – Dec 2008). The data became available since the purchase of a
biomass gasification equipment and the loan application process involves agreeing to
participate in a “due diligence” process in order to qualify for and gain approval of a
loan to finance up to 80% of the purchase. The Group 2 rice mill and other plant
owners were consequently willing to reveal deeper and more extensive information
concerning their operations than the Group 1 owners who agreed to be interviewed
but had not yet committed to investing in the equipment.
Data for the Group 2 enterprises was compiled into an “Enterprise Financial Model” that
includes balance sheet, financing calculations, cash flow projections and net profit
projections for the next five years. (See Enterprise Financial Model Tables attached).
For the reasons state above, the data collected re: production expenses and sales revenues
for Group 1 individual enterprises is not comprehensive nor uniformly disaggregated. The

35
individual enterprise production cost data should therefore not be used to make sector wide
extrapolations re: net profitability.

Information provided re: fuel and lubricant consumption, expenditures and calculation of the
impact of biomass gasification technology on the energy portion of production costs is
considered reliable and complete since the engine types, capacities, fuel consumption
characteristics and maintenance costs etc. are verifiable and consistent amongst different
mills and factories.

“Energy audit information” can therefore, be used to reliably estimate diesel fuel
consumption, potential impact of fuel substitution, and the effect of substitution on fuel costs
per month and on fuel cost per tonne of production.

36
Biomass Gasification Technology Impact Study
Type of
No. Name of Enterprise Name of Owner Address Date of Interview
Business

1 LEAP Man Ice Factory Mr. LEAP Man Ice Factory Mongkul Borei, Banteay Mean Chey 1-Jul-07

2 EAP Sophat Ice Factory Mr. EAP Sophat Ice Factory Kralanh district town, Siem Reap 2-Jul-07
Prey Totoeng, Prey Chhor, Kampong
3 Electricity Prey Totoeng Mr. KHUN Sambo REE 28-Jul-07
Cham

4 Lor Gnor Pheng Rice Mill Mr. LOR Eak Kim Rice Mill Skun town, Choeung Prey, Kampong Cham 29-Jul-07

5 Lor Eak You Rice Mill Mr. LOR Eak You Rice Mill Pa Av, Choeung Prey, Kampong Cham 29-Jul-07
HENG Chhat Stone Stone
6 Mr. HENG Chhat Takream, Banan, Battambang 11-Sep-07
Crushing Crushing
Chum Teav, Mongkul Borei, Banteay Mean
7 SOK Kung Rice Mill Mr. SOK Kung Rice Mill 12-Sep-07
Chey
Kork Tumlap, Mongkul Borei, Banteay Mean
8 TAN Va Rice Mill Mr. TAN Va Rice Mill 12-Sep-07
Chey
9 LAY Ser Rice Mill Mr. LAY Ser Rice Mill Thmar Korl Town, Battambang 18-Sep-07
Chamnorm, Mongkul Borei, Banteay Mean
10 CHAO Mei Rice Mill Mr. CHAO Mei Rice Mill 19-Sep-07
Chey
Kork Tumlap, Mongkul Borei, Banteay
11 YIN Pou Rice Mill Mr. YIN Pou Rice Mill 22-Sep-07
Mean Chey

12 NGOV Meng Rice Mill Mr. NGOV Meng Rice Mill Thmar Korl Town, Battambang 23-Sep-07

13 HUO Rice Mill Mr. Huo Rice Mill Thmar Korl Town, Battambang 23-Sep-07

14 Electricity Kanh Chreach Mr. KEO Chamroeun REE Pra Srer Muk, Kanhchreach Town, Prey Veng 16-Oct-07
15 UNG Simon Rice Mill Mr. UNG Simon Rice Mill Svay Antor Town, Prey Veng 17-Oct-07
 Type of
No. Name of Enterprise Name of Owner Address Date of Interview
Business
16 ROS Neng Rice Mill Mr. ROS Neng Rice Mill Svay Antor Town, Prey Veng 17-Oct-07
17 CHHUN Thom Rice Mill Mr. CHHUN Thom Rice Mill Svay Antor Town, Prey Veng 17-Oct-07
18 Electricity Svay Antor Mr. Heng Huo REE Svay Antor Town, Prey Veng 17-Oct-07
CHHITH Bun Than Rice
19 Mr. CHHITH Bun Than Rice Mill Prey Veng Town, Prey Veng 18-Oct-07
Mill
20 NGOV Huong Rice Mill Mr. NGOV Huong Rice Mill Prey Veng Town, Prey Veng 18-Oct-07
21 PHEACH Sophat Rice Mill Mr. PHEACH Sophat Rice Mill Takeo Town, Takeo 18-Oct-07
Kork Tumlap, Mongkul Borei, Banteay
22 CHAY Kimting Rice Mill Mr. CHAY Kimting Rice Mill 20-Oct-07
Mean Chey

23 TOEM Prech Rice Mill Ms. TOEM Prech Rice Mill Takeo Town, Takeo 22-Oct-07

24 KHUTH Thanh Rice Mill Mr. KHUTH Thanh Rice Mill Kralanh district town, Siem Reap 8-Nov-07

25 THOUNG Vay Ice Factory Mr. THOUNG Vay Ice Factory Kralanh district town, Siem Reap 9-Nov-07

26 LOEM Lom Rice Mill Mr. LOEM Lom Rice Mill Siem Reap District Town, Siem Reap 9-Nov-07

27 HOEU Chy Rice Mill Mr. HOEU Chy Rice Mill Kralanh district town, Siem Reap 9-Nov-07

28 Heng Lay Rice Mill Mr. SENG Chhun Lay Rice Mill Boeng Pring, Thmar Korl, Battambang 14-Nov-07

29 HENG Sokha Rice Mill Mr. HENG Sokha Rice Mill O'Porng Morn, Takream, Banan, Battambang 15-Nov-07

30 TAING Cheng Rice Mill Mr. TAING Cheng Rice Mill O'Taky, Battambang 15-Nov-07

31 Electricity of Bovel Mr. Kun Sarun REE Bavel District, Battambang 15-June-08

Note: Mills shown in bold type installed gasifiers in rice mills in 2007 or are currently waiting delivery and installation of biomass
gasification equipment.
GROUP 1
Annual Production MILL 1 MILL 2 MILL 3 MILL 4 MILL 5 Total
Operating window Hours per year 3,696 3,080 0 1,400 3,000
Plant capacity tonnes per hr. 5.0 1.5 0.0 3.5 1.5
Estimated production per yr Tons milled rice yr 18,480 4,620 2,500 4,900 4,500
Enter Production to be used: Tons milled rice yr 18,480.00 4,200 4,200 4,200 4,200 35,280
Fuel consumption
Monthly production Tons per month 1,680 382 420 600 350 3,432
Specific fuel consumption Liters per day 804 210 120 256 220 1,610
Estimated fuel consumption Liters per month 22,512 5,880 3,000 6,400 5,500 43,292
Current fuel price $/liter $ 0.90 0.90 $ 0.90 $ 0.90 $ 0.90
Fuel expenses $ per month 20,261 5,000 5,000 5,000 5,000 $40,261
Check with provided figure $ per month $ 20,261 5,292 2,700 5,760 4,950 $ 38,963
Fuel Consumption Liters per months 22,512 5,292 2,700 5,760 4,950 41,214
Potential Saving
Savings percentage 70% 70% 70% 70% 70%
Fuel savings Liters per month 15,758 3,704 1,890 4,032 3,465 28,850
$ savings $ per month $ 14,183 3,334 1,701 3,629 3,119 $ 25,965
Rice Husk
Diesel replaced per hour Liter / hour 46.9 14.7 8.4 22.4 15.4 108
Husks needed (6 kg per l) Kg / hour 281.40 88 50.4 134.4 92 647
Husks needed (6 kg per l) Tonne / month 94.55 116 210
Costs and Payback
Capacity of Gasifier kW FBG-400 FBG-80 FBG-80 FBG-80 FBG-120
Turn-key costs $ 140,112 40,000 40,000 40,000 56,695
Civil Works $ 5,000 3,000 3,000 3,000 5,000
Estimated investment costs $ 145,112 43,000 43,000 43,000 61,695 $ 335,807
O&M Expenses
Rice husk (opportunity costs) per month $ 284 154 79 $ 168 92
Labor (1 techn + 1 worker) per month $ 140 140 140 $ 140 140
Sawdust for filters per month $ 50 20 20 $ 20 20
Maint. (3-4% of equip costs) per month $ 363 125 125 $ 125 180
Payback
Net monthly savings per month 13,346 2,870 1,312 3,151 2,716
Simple Payback (months) months 10.9 15.0 32.8 13.6 22.7
Simple Payback (years) years 0.9 1.2 2.7 1.1 1.9
Monthly Installment (P+Int) per month $ 2,794 $ 898 $ 898 $ 898 $ 898
Net after loan payment per month $ 10,552 $ 1,972 $ 415 $ 2,253 $ 1,819
GROUP 1 (Cont’d)
Annual Production MILL 6 MILL 7 MILL 8 MILL 9 MILL 10 MILL 11
Operating window Hours per year 3,696 0 3,000 4,320 0 2,888
Plant capacity tonnes per day 2.0 0.0 2.0 1.2 0.0 1.1
Estimated production per year Tons milled rice 7,200 3,000 6,000 5,184 3,875 3,176
Enter Production to be used: Tons milled rice yr 7,392 3,000 5,000 5,184 3,875 3,176
Fuel consumption
Monthly prod. (Milled Rice) Tons per month 616 240 500 432 420 289
Specific fuel consumption Liters per day 288 150 300 168 270 195
Estimated fuel consumption Liters per month 8,064 3,000 7,500 5,040 6,750 4875
Current fuel price $/liter $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90
Fuel expenses $ per month 7,258 2,700 6,750 $ 4,536 6,075 $ 3,413
Check with provided figure $ per month 8,064 N/A N/A N/A N/A N/A
Fuel Consumption Liters per months 8,064 3,000 7,500 5,040 6,750 $ 4,875
Potential Saving
Savings percentage 70.00% 70% 70% 70% 70% 70%
Fuel savings Liters per month 5,645 2,100 5,250 3,528 4,725 3,413
$ savings $ per month 5,080 $ 1,890 $ 4,725 $ 3,175 $ 4,253 $ 3,071
Rice Husk
Diesel replaced per hour Liter / hour 18.3 10.5 21.0 9.8 18.0 13.00
Husks needed (6 kg per l) Kg / hour 110 63 126 59 108.00 78.00
Husks needed (6 kg per l) Tonnes / month 79 158 74 135 97.5
Costs and Payback
Capacity of Gasifier kW FBG-200 FBG-80 FBG-150 FBG-80 FBG-150 FBG-100
Turn-key costs $ 73,550 45,915 64,236 45,915 64,236.02 $ 52,504.77
Civil Works $ 5,000 4,500 5,000 5,000 5,000.00 $ 5,000.00
Estimated investment costs $ 78,550 50,415 69,236 50,915 $69,236.02 $ 57,504.77
O&M Expenses
Rice husk (opportunity costs) per month $ 231 $ 79 $ 197 $ 132 $ 177 $ 94
Labor (1 techn + 1 worker) per month $ 140 $ 140 $ 140 $ 140 140.00 $ 140.00
Sawdust for filters per month $ 50 $ 50 $ 50 $ 50 50.00 $ 50.00
Maintenance per month $ 229 $ 147 $ 202 $ 149 $ 202 $ 167.72
Payback
Net monthly savings per month $ 4,509 $ 1,474 $ 4,136 $ 2,704 $ 4,136 $ 2,619.68
Simple Payback (months) months 17.4 34 16.7 18.8 16.7 22.0
Simple Payback (years) years 1.5 2.8 1.4 1.6 1.4 1.8
Monthly Install (Princ.+ Intt) per month 1,467 $ 898 1,253 $ 898 1,252.69 $ 1,025.26
Net surplus after paying loan per month 3,043 $ 577 $ 2,883 $ 1,807 $ 2,883 $ 1,594
GROUP 1 (Cont’d)
Annual Production 12 13 14 15 16 17 Total
Operating window Hours per year 3,000 3,696 3,600 2,160 1,760 3,300
Plant capacity Tons/hr 1.3 2.0 0.7 1.0 1.5 2.5
Production per year Tons milled rice 5,200 7,392 2,520 2,160 2,640 8,250
Production to be used: Tons milled rice yr 5,200 7,392 2,930 2,160 2,640 8,250 $ 91,479
Fuel consumption
Monthly prod. (Milled Rice) Tons per month 520 616 252 180 240 750 $ 8,487
Specific fuel consumption Liters per day 0 288 120 90 192 375 $ 4,046
Fuel consumption Liters Per month 3,906 8,064 3,600 2,700 3,840 11,250 $ 111,881
Current fuel price $/liter $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.92
Fuel expenses $ per month 2,930 $ 7,258 3,516 $ 2,430 $ 3,456 $ 10,350 $ 100,931
Provided figure $ per month N/A $ 7,258 $ 3,906 N/A N/A N/A
Fuel Consumption Liters per months 3,906 8,064 3,906 2,700 3,840 11,250 $ 110,109
Potential Saving
Savings percentage 70% 70% 70% 70% 70% 70%
Fuel savings Liters per month 2,734 5,645 2,734 1,890 2,688 7,875 $ 23,566
$ savings $ per month 2,461 $ 5,080 $ 2,461 1,701 $ 2,419 $ 7,245 $ 21,367
Rice Husk
Diesel replaced per hour Liter / hour 7.3 16.8 7.0 10.5 16.8 26.3 $ 283
Husks needed (6 kg per l) Kg / hour 43.75 126 42 63 100.8 157.5 $ 1,724
Husks needed (6 kg per l) Tonne / month 54.7 52.5 78.8 126.0 196.9 $ 1,261
Costs and Payback
Capacity of Gasifier kW FBG-60 FBG-200 FBG-60 FBG-80 FBG-150 FBG-200
Turn-key costs $ $ 38,983 $ 73,550 38,983 45,695 $ 64,016 $ 73,546
Civil Works $ 4,500 $ 5,000 4,000 4,500 $ 5,000 $ 6,000
Est. investment costs $ 43,483 $ 78,550 42,983 50,195 $ 69,016 $ 79,546 $ 1,158,938
O&M Expenses
Rice husk (opport.costs) per month 55 $ 194 76 $ 57 $ 81 $ 236
Labor (1 tech+1 worker) per month 140 $ 140 140 140 $ 140 $ 140
Sawdust for filters per month 50 $ 50 50 50 $ 50 $ 50
Maint (3-4% of equip costs) per month 126 $ 229 125 146 $ 201 $ 200
Payback
Net monthly savings per month 2,089 $ 4,467 2,070 1,308 1,947.3 $ 6,619
Simple Payback (months) months 20.8 17.6 20.8 38.4 35.4 12.0
Simple Payback (years) years 1.7 1.5 2.1 3.2 3.2 1.1
Month. (Principal+Interest) per month 763 $ 1,467 $ 763 893 $ 1,248 $ 1,433
Net after loan payment per month $ 1,326 $ 3,001 $ 1,307 $ 415 $ 699 $ 5,185
Improvement in Operating Costs with Introduction of Biomass Gasification Systems
in Different sized Rice Mills with Different Size Power Plants (based on energy audits of 21 Mills)

FBG- 400 Mill 1 > 400 kW

Tons Rice Milled per year 18,480 18,480
Number Days Operating Per Year 308 308
liters of diesel saved per month 15,758 15,758
Reduced ltr Fuel per ton of rice milled 10.2 10.2
Reduced Fuel cost/ton of rice milled $ 9.21 $ 9.21
Reduction in Direct Milling Cost/Ton 49% 49% ** Fuel expenses represent about 70% of direct milling costs
'Direct milling costs include Fuel, Lubricants, maintenance,
Estimated cost of gasifier $ 145,112 $145,112 Labour,
Utilities, Bags. Not including rice paddy, land or equipment
Suggested capacity of gasifier FBG-400 depreciation
Simple payback period months 10.9 11
Potential CO2 saving 506 506

FBG 200 Mill 2 Mill 3 Mill 4 200 kW

Tons Rice Milled per year 8,250 7,392 7,392 7,678
Number Days Operating Per Year 275 308 308 297
liters of diesel saved per month 7,875 5,645 5,645 6,388
Reduced liter of fuel per ton of rice milled 11.5 9.2 9.2 10
Reduced Fuel cost/ton of rice milled $ 10.31 $ 8.25 $ 8.25 $ 8.93
Reduction in Direct Milling Cost/Ton 49% 49% 49% 49%
Estimated cost of gasifier $ 79,546 $ 78,550 $ 78,550 $ 78,882
Suggested capacity for gasifier FBG-200 FBG-200 FBG-200 FBG-200
Simple payback period months 12.0 17.4 17.6 16
Potential CO2 saving 253 181 181 205
Improvement in Operating Costs with Introduction of Biomass Gasification Systems
in Different sized Rice Mills with Different Size Power Plants (based on energy audits of 21 Mills)

FBG 100- FBG 150 Mill 5 Mill 6 Mill 7 Mill 8 Mill 9 Mill10 100 - 150 kW
Tons Rice Milled per year 5,000 3,875 2,640 5,712 4,200 3,176 4,101
Number Days Operating Per Year 250 219 147 280 250 241 231
liters of diesel saved per month 5,250 4,725 2,688 4,704 3,465 3,413 4,041
Reduced ltr Fuel per ton of rice 12.6 14.6 12.2 9.9 9.9 12.9 12
Reduced Fuel cost per ton of rice $ 11.34 $ 13.17 $ 11.00 $ 8.89 $ 8.91 $ 11.60 $ 10.82
Reduction in Direct Milling Cost/Ton 49% 49% 49% 49% 49% 49% 49%
Estimated cost for gasifier $ 69,236 $ 69,236 $ 69,016 $ 83,500 $ 61,695 $ 57,505 $ 68,365
Suggested capacity for gasifier FBG-150 FBG-150 FBG-150 FBG-150 FBG-120 FBG-100
Simple payback period months 16.7 16.7 35.4 17.3 22.7 22.0 21.8
Potential CO2 saving tons/yr 169 152 86 151 111 110 129.8

FBG 60 - FBG 80 Mill 11 Mill 12 Mill 13 Mill 14 Mill 15 Mill 16 Mill 17 Mill 18 60-80 kW
Tons of Rice Milled per year 4,200 2,500 4,200 3,000 5,184 2,160 5,200 2,930 3,672
Number Days Operating Per Year 257 208 200 286 360 180 250 300
liters of diesel saved per month 3,704 1,890 4,032 2,100 3,528 1,890 2,734 2,734 2,827
Reduced ltr Fuel per ton of rice 10.6 9.1 11.5 8.4 8.2 10.5 6.3 11.2 9.5
Reduced Fuel cost per ton of rice $ 9.53 $ 8.16 $ 10.37 $ 7.56 $ 7.35 $ 9.45 $ 5.68 $ 10.08 $ 8.52
Reduction in Direct Milling Cost/Ton 49% 49% 49% 49% 49% 49% 49% 49% 49%
Estimated cost of gasifier $ 43,000 $ 43,000 $ 61,695 $ 50,415 $ 50,915 $ 50,195 $ 43,483 $ 42,983 $ 48,211
Suggested capacity for gasifier FBG-80 FBG-80 FBG-80 FBG-80 FBG-80 FBG-80 FBG-60 FBG-60
Simple payback period months 15.0 32.8 13.6 34.2 18.8 38.4 20.8 20.8 24
Potential CO2 saving tons/year 119 61 130 67 113 61 88 88 91
The Impact of Biomass Gasifier Installation on Rural Electricity Enterprise Fuel Consumption, Fuel
Expenditures and Cost / kWh

FBG 60 REE 1 REE 2 Avg.

Operating Hours per year 1,440 4,500 2,970

kW hrs generated per year 92,160 251,280 171,720
liters of diesel saved per month 2,268 3,203 2,735
Reduced liters of fuel per kWh 0.30 0.15 0.22
Reduced cost per kWh $ 0.27 $ 0.14 $ 0.20
Estimated investment cost for gasifier $ 43,753 $ 43,483 $ 43,618
Capacity for gasifier FBG 60 FBG 60 FBG 60
Simple payback period months 25 17 21
Potential CO2 saving ton/year 73 103 88
Detailed Analysis of Operational Costs of Rice Mills: (Group 2)

Analysis of operating costs was completed on the 9 enterprises for which due diligence
processes were completed. Individual financial models were developed for a 7 year period
beginning in 2005. Projections of operating information supplied by the enterprise owner
were input to a financial model (Excel software file appended to this report), to evaluate the
capacity of operators to generate cash flow and profits sufficient to repay loans required to
finance the purchase of new biomass gasifier equipment. Projecting future costs of
production inputs such as rice paddy and diesel fuel is very difficult at this time. The market
is extremely volatile due to a combination of international conditions. During the 10 month
period of this study the price of diesel fuel has risen from $.75-$.80 per liter during 2007 to
over $1.30 per liter in April 2008. The price of rice paddy rose 200%-300% over same
period. Other production costs are bound to change as well in future. For this reason long
term projections cannot be considered reliable.

A few components of the rice milling operation account for the bulk of all operational
expenses. The two most significant are the price of paddy rice and the price of diesel fuel
necessary to operate the mill. Labor, rents, lubricant, supplies and taxes comprise a
relatively small portion of the total. Analysis of the fuel cost component of the operational
cost reveals that fuel represents about 70% of the total direct operating cost of milling rice.
Savings made in this component therefore a have significant impact on total operating costs
and on net income.

Substituting an alternative fuel such as “producer” gas made from mill waste products (husk)
for 70% of current diesel fuel consumed will reduce overall energy costs by 52%-59%. This
dramatic impact on fuel expenses is a result of the mill utilizing “free” rice husk biomass that
the mill already owns and produces daily as part of the paddy milling process. The over
50% reduction in diesel fuel expenditure results in a 26% to 39% lowering of total mill
operating expenditures Detailed examples are included in the following section.

Financial Analysis and Projected impact of Biomass Gasification Technology on Rice

Mills (Example data collected during loan due diligence process of 3 rice mills)

Example Mill # 112

Rice mill #1 was established in early 2006 and is owned by Mr. XXXXX and his brother in
law Mr. XXXX, who invested equally in the mill. Construction for the mill started in January
2006 and the mill started operations in late 2006. The mill has a milling capacity of about 2.5
ton per hour, and produced around 3,500 tons of milled rice during the first full year of
operation. This is projected to increase in the coming years.

Mr. XXXX is the managing director of the rice mill. Before establishing the new mill, he was a
founding partner in another rice mill in Battambang town from 1991 to 2005. Because of
limited growth potential in the previous mill due to its location in the town, he decided to sell
his stake in the business and establish his own mill at the current location. SME-RE
management has known Mr. XXXX for several years from SME Cambodia’s work on the
formation of provincial rice mill associations. He is a member of the Battambang provincial
rice mill association.

Most rice mills in Cambodia sell rice under their own brand name. Contrary to the other mills,
Mill #1 is a newly established rice mill and is still building up its brand among rice mill
traders. Nevertheless, while the mill is not yet working at full capacity, the rice mill has been
profitable since its the first year of operation. Even at the current lower levels of production

12 Names of Mills and mill owners have been deleted to protect confidentiality of commercial data.

45
the installation of the gasifier would lead to fuel savings twice the value of monthly loan
installments. In addition, Mr. XXXX has extensive experience in rice milling and trading
business.

The installation of the gasifier at rice mill #1 will result in the savings of about 36,000 liters of
diesel per year, equivalent to nearly US$ 26,000 at current production and projected diesel
price levels ($0.90 to $1.20 per liter). CO2 emissions will be reduced by 97 tons per year.
Actual savings and offsets may be higher because of the expected future mill production
increases.

Rice mill #2 was established in 1991, and is owned by Mr. XXXX and his wife Mrs. XXXX.
Originally, the mill had a milling capacity of 0.5 ton per hour. This was upgraded to 1.3 ton
per hour in 2000. From December to August paddy is purchased directly from farmers who
deliver it to the mill. Milling occurs throughout the year. The milled rice is sold to wholesale
traders who come to buy it at the mill. This means the mill incurs minimal transport costs in
both buying paddy and selling transactions. The mill produces around 3,865 tons of milled
rice per year.

Mill #2 owners operate the mill as a family business without a formal management system.
Several family members are involved. SME-RE management has known this family for
several years from SME Cambodia’s work with the formation of provincial rice millers
associations. They are members of the Banteay Meanchey Rice Millers Association.

The installation of the gasifier at Mill #2 this year will result in savings of nearly 33,000 liters
of diesel per year, equivalent to more than US$ 27,000 at current and projected diesel
prices, and will have reduced emissions of 89 tons of CO2 per year.

Rice mill #3 was established in 1996, and is owned by Mr. XXXX and his wife Mrs. XXXXX.
Originally, the mill had a milling capacity of 0.6 ton per hour. It was upgraded to 1.2 ton per
hour capacity in 2004. Currently, the mill has a paddy storage capacity of 5,000 tons and
produces around 3,900 tons of milled rice per year. Paddy is mainly bought during the
harvest season from January to April. The mill operates 9 months from December to August.

Mr. XXXXX and his wife Mrs. XXXXX operate Mill #3 as a family business without a formal
management structure. SME-RE management has known them for several years from SME
Cambodia’s work on the formation of provincial rice mill associations. They are members of
the Battambang rice mill association.

The installation of the gasifier at Mill #3 will result in annual the savings of more than 32,000
liters of diesel per year, equivalent to US$ 26,500 at current and projected diesel prices.
Emission reductions will be an estimated 88 tons of CO2 per year.

46
Financial Analysis of Rice Mill Operations before and after Installation of Biomass Gasifier: Example # 1

Input actuals before gasifier installed Projected inputs after gasifier installation
Sales forecast: 2005 2006 2007 2008 2009 2010 2011
Total Sales ($) $ - $ 152,790 $ 1,132,560 $1,229,342 $1,287,970 $1,313,605 $1,347,515
Cost of Sales
Paddy 129,000 957,000 $ 1,041,975 $1,093,189 $1,115,015 $1,143,808
Bags 6,000 30,000 26,400 $ 26,400 $ 26,400 $ 26,400
Total Cost of sales - 135,000 987,000 1,068,375 1,119,589 1,141,415 1,170,208
Gross profit $ - $ 17,790 $ 145,560 $ 160,967 $168,381 $172,190 $177,307
Gross profit % 11.6% 12.9% 13.1% 13.1% 13.1% 13.2%
Variable Operating Exp.
Diesel Oil 5,040 40,410 27,253 16,653 16,985 17,422
Food for Labor 450 3,600 3,600 3,600 3,600 3,600
Total Var. Oper. Exp. $ - $ 5,490 $ 44,010 $ 30,853 $ 20,253 $ 20,585 $ 21,022
% of Sales 3.6% 3.9% 1.6% 1.6% 1.6%
Reduction in Fuel Costs With Gasifier Equipment 33% 59% 58% 57%
Fixed Operating Exp.
Salaries & related 2,040 8,160 9,280 9,840 9,840 9,840
Equip maintenance 3,000 3,450 3,450 3,450 3,450
Legal & Accounting 250 250 250 250 250 250
Total Fixed Op. Exp - 2,290 11,410 12,980 13,540 13,540 13,540
Total Operating Exp $ $ 7,780 $ 55,420 $ 43,833 $ 33,793 34,125 $ 34,562
Impact on Total Operating Expenses with Gasifier Equipment 21% 38% 38% 39%
EBITDA - 10,010 90,140 117,134 134,588 138,065 142,745
Depreciation 27,000 41,400 41,400 41,400 41,400
EBT - 10,010 63,140 69,453 86,633 91,583 97,940
Tax 1,080 1,080 1,080 1,080 1,080 1,080

Net profit after tax $ - $ 8,930 62,060 $ 68,373 $ 85,553 $ 90,503 $ 96,860

See Notes on next page:

- 2006 was a partial operating year
- The gasifier is projected to be ordered in January 2008 and commissioned in April 2008. The projections assume its operation as of May
2008.
- Diesel expenses are included in the Operating Expenses and currently account for nearly 70% of the operating expenses. After
commissioning of the gasifier the operating expenses are reduced.
- The mill started its operation late 2006 and ran only for a short period that year. Otherwise the mill operates for 11 months per year. In
November/December the mill ceases operation for 1 month for annual maintenance.
- ‘Liabilities‘ refers to the loan for the gasifier.

The mill owners invested about US$ 300,000 in the establishment of the mill.

Rice Mill # 1 Breakeven Analysis

2008 2009 2010 2011 2012

Total Units sold (tons) 4,841 5,080 5,181 5,315 5,431
Average Unit Sales Price $ 254 254 254 254 254
Average Unit Cost $ 221 220 220 220 220
Variable Cost per Unit $ 6.37 3.99 3.97 3.96 3.94
Per unit Contribution to Fixed
26.9 29.2 29.3 29.4 29.5
cost, taxes and debt service
Fixed Cost $ 12,980 13,540 13,540 13,540 13,540
Tax $ 1,080 1,080 1,080 1,080 1,080
Interest and Principal $ 9,543 17,229 17,229 17,229 17,229
Total fixed costs and debt service $ 23,603 31,849 31,849 31,849 31,849

Breakeven units (tons) 878 1,092 1,088 1,083 1,079

Breakeven $ $223,007 $276,925 $275,959 $274,606 $273,590
Financial Analysis of Rice Mill Operations Before and After Installation of Biomass Gasifier: Example # 2

Actual inputs before gasifier installation Projected After Gasifier Installed

Sales forecast: 2005 2006 2007 2008 2009 2010 2011
Total Sales ($) $ 1,170,539 $ 1,184,555 $ 1,237,315 $ 1,237,438 $ 1,236,482 $ 1,236,482 $ 1,236,482
Cost of Sales
Paddy $ 1,060,620 $ 1,073,682 $ 1,122,816 $ 1,118,184 $ 1,114,466 $ 1,114,466 $ 1,114,466
Bags $ 7,975 $ 7,975 $ 7,975 $ 7,975 $ 7,975 $ 7,975 $ 7,975
Total Cost of sales 1,068,595 1,081,657 1,130,791 1,126,159 1,122,441 1,122,441 1,122,441
Gross profit $ 101,944 $ 102,898 $ 106,524 $ 111,279 $114,041 $114,041 $114,041
Gross profit % 8.7% 8.7% 8.6% 9.0% 9.2% 9.2% 9.2%
Variable Oper.Exp.
Diesel 30,083 34,791 41,487 26,407 18,183 18,183 18,183
Food for Labour 5,000 5,000 5,000 5,000 5,000 5,000 5,000
Total Var. Op. Exp $ 35,083 $ 39,791 $ 46,487 $ 31,407 $ 23,183 $ 23,183 $ 23,183
% of Sales 3.0% 3.4% 3.8% 1.9% 1.9% 1.9%
Reduction in Fuel Costs After Gasifier Installed 36% 56% 56% 56%
Fixed Oper.Exp.
Salaries& Rrelated 8,880 8,880 8,880 10,000 10,560 10,560 10,560
Equip maint. 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Legal & Accounts 250 250 250 250 250 250 250
Total Fixed Exp. 19,130 19,130 19,130 20,250 20,810 20,810 20,810
Total Oper.Exp. $ 54,213 $ 58,921 $ 65,617 $ 51,657 $ 43,993 $ 43,993 $ 43,993
Impact on Total Operating Expenses with Gasifier 21% 33% 33% 33%
EBITDA $ 47,731 $ 43,977 $ 40,907 $ 59,622 $ 70,048 $ 70,048 $ 70,048
Interest-E+Co 6,416 6,696 5,191 3,478
Depreciation 16,500 16,500 16,500 31,210 31,210 31,210 31,210
EBT $ 31,231 $ 27,477 $ 24,407 $ 21,996 $ 32,142 $ 33,647 $ 35,360
Tax 1,200 1,200 1,200 1,200 1,200 1,200 1,200
Net profit after tax $ 30,031 $ 26,277 $ 23,207 $ 20,796 $ 30,942 $ 32,447 $ 34,160
NOTE: THE MILL OPERATES FOR 11 MONTHS PER YEAR. IN NOVEMBER/DECEMBER THE MILL CEASES OPERATION FOR 1
MONTH FOR ANNUAL MAINTENANCE.

RICE MILL #2 BREAKEVEN ANALYSIS

2008 2009 2010 2011 2012

Total Units sold (tons) 4,852 4,852 4,852 4,852 4,852
Average Unit Sales Price $ 255 255 255 255 255
Average unit Cost $ 232 231 231 231 231
Variable Cost per Unit $ 5.91 4.02 4.02 4.02 4.02
Per unit Contribution to Fixed $
17.0 19.5 19.5 19.5 19.5
cost, taxes and debt service
Fixed Cost $ 20,250 20,810 20,810 20,810 20,810
Tax $ 1,200 1,200 1,200 1,200 1,200
Interest and Principal $ 9,749 17,600 17,600 17,600 17,600
Total fixed costs and debt service $ 31,199 39,610 39,610 39,610 39,610
Breakeven units (tons) 1,832 2,033 2,033 2,033 2,033
Breakeven $ $467,343 $518,026 $518,026 $518,026 $518,026
Financial Analysis of Rice Mill Operations Before and After Installation of Biomass Gasifier: Example # 3

Actual Inputs before gasifier installation Projected Inputs after gasifier installed
Sales forecast: 2005 2006 2007 2008 2009 2010 2011
Rice 2,957 2,957 2,957 2,957 2,957 2,957 2,957
Total Sales ($) $ 1,177,437 $ 1,211,540 $ 1,239,598 $1,239,537 $ 1,247,290 $ 1,247,290 $ 1,247,290
Cost of Sales
Paddy 1,064,520 1,090,804 1,117,089 $ 1,115,829 1,114,466 1,114,466 1,114,466
Bags 5,000 5,000 5,000 5,005 5,000 5,000 5,000
Total Cost of sales 1,069,520 1,095,804 1,122,089 1,120,834 1,119,466 1,119,466 1,119,466
Gross profit $ 107,917 $ 115,736 $ 117,509 $ 118,703 $127,824 $127,824 $127,824
Gross profit % 9.2% 9.6% 9.5% 9.6% 10.2% 10.2% 10.2%
Variable Oper Exp.
Diesel 30,241 35,281 37,801 27,211 18,143 18,143 18,143
Meals for Laborers 7,200 7,200 7,200 7,200 7,200 7,200 7,200
Total Var. Op. Exp. $ 37,441 $ 42,481 $ 45,001 $ 34,411 $ 25,343 $ 25,343 $ 25,343
% of Sales 3.2% 3.5% 3.6% 2.8% 2.0% 2.0% 2.0%
Reduction in Fuel Costs After Gasifier Installed 28% 52% 52% 52%
Fixed Operating Exp.
Salaries & related 8,400 8,400 8,400 7,800 8,400 8,400 8,400
Equip maintenance 7,500 7,500 7,500 11,375 11,375 11,375 11,375
Legal & Accounting 250 250 250 250 250 250 250
Total Fixed Op. Exp. 16,150 16,150 16,150 19,425 20,025 20,025 20,025
Total Operating Exp. $ 53,591 $ 58,631 $ 61,151 $ 53,836 $ 45,368 $ 45,368 $ 45,368
Reduction in Total Operating Expenses with Gasifier Installed 12% 26% 26% 26%
EBITDA 54,326 57,105 56,358 64,867 82,456 82,456 82,456
Interest-E+Co finance 6,416 6,696 5,191 3,478
Depreciation 14,000 14,000 14,000 28,710 28,710 28,710 28,710
EBT 40,326 43,105 42,358 29,741 47,050 48,555 50,267
Tax 1,200 1,200 1,200 1,200 1,200 1,200 1,200
Net profit after tax $ 39,126 $ 41,905 $ 41,158 $ 28,541 $ 45,850 $ 47,355 $ 49,067
Notes:

The gasifier is projected to be ordered in January 2008 and commissioned in April 2008. The projections assume its operation as of May
2008.

Diesel expenses are included in the Operating Expenses and currently account for nearly 70% of the operating expenses. After
commissioning of the gasifier the operating expenses are reduced.

The mill operates for 11 months per year. In November/December the mill ceases operation for 1 month for annual maintenance.

‘Liabilities‘ refers to the loan for the gasifier.

Rice Mill #3 Breakeven Analysis

2008 2009 2010 2011 2012

Total Units sold (tons) 4,928 4,928 4,928 4,928 4,928
Average Unit Sales Price $ $ 252 $ 253 $ 253 $ 253 $ 253
Average unit Cost $ $ 227 $ 227 $ 227 $ 227 $ 227
Variable Cost per Unit $ $ 7 $ 5 $ 5 $ 5 $ 5
Per unit Contribution to Fixed $
17.1 20.8 20.8 20.8 20.8
cost, taxes and debt service
Fixed Cost $ $ 19,425 $ 20,025 $ 20,025 $ 20,025 $ 20,025
Tax $ $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200
Interest and Principal $ $ 9,749 $ 17,600 $ 17,600 $ 17,600 $ 17,600
Total fixed costs and debt service $ $ 30,374 $ 38,825 $ 38,825 $ 38,825 $ 38,825
Breakeven units (tons) 1,776 1,867 1,867 1,867 1,867
Breakeven $ $ 446,651 $ 472,535 $ 472,535 $ 472,535 $ 472,535
The Impact of the Introduction of Gasification Technology
The three examples provided above are typical for rice mills in the 1.0 to 1.5 tonnes per hour
production range. Assuming that future diesel fuel prices continue to rise from $0.90/liter in
March 2008 to $1.20/liter by mid 2008 and beyond, producer gas substitution will reduce
direct milling costs, (fuel + labor), by 52%-59% of current levels. This will reduce total
operational costs by 26%-39%.

The recent dramatic rise in wholesale and retail milled rice prices has been accompanied by
a similar or greater rise in the price of paddy rice. The margins realized from milling have,
however, not changed substantially even though diesel fuel prices continue to increase. The
result is that rice millers will require more working capital to maintain the same levels of
paddy purchases and also must absorb increased costs in the largest single operating cost
item (diesel oil).

Review and Impact on Profitability

The savings available from utilization of rice husks to reduce fuel costs is both dramatic and
significant. Cambodia rice millers are struggling to attain a level of competitiveness with their
larger and more efficient neighbors Viet Nam and Thailand, the top two rice exporters in the
world. Gasification technology offers an important contribution to reducing milling production
costs and increase competitiveness of their operations.

The Availability of Biomass Sources for Gasifier Fuel

 Rice Husk
Rice husks are an ideal biomass fuel source. Husks are a by product of milling rice
paddy that produces a ready to burn, dry fuel that is available to use in biomass
gasification systems in rice mills, brick factories, ice plants and REEs generating
plants. Rice mill owners have virtually no cost for the husk biomass since the husk is
a component and by product of the paddy rice milling process.

Generally, rice milling results in three component outputs i.e. the outer shell or husk,
the rice bran and the whole white rice kernels eaten daily in every Cambodian meal.
Broken rice is used for making rice noodles and rice flour and small broken or “fines”
rice is used for animal feed.

Milled paddy rice yields: 25%-28% rice husk, 8-12% bran, and 60%-65% white
polished rice. The polished rice is made up of 30-45% head rice (unbroken whole
kernels), 18-35 % (broken) and 2-8% (small broken -fines).

For every tonne of paddy that is milled, about 25% or 250 kg of husk are produced. A
1.5 tonne mill, (1,500 kg milled paddy per hour), operating 10 hrs per day for 25 days
per month for 11 months per year will produce 1,031 tonnes (1,031,000 kgs) of husk
per year. Many mills this size typically operate diesel engines requiring 25-30 liters
per hour or 68,750 liters to 82,500 liters per year. A dual fuel biomass gasifier
system using 30% diesel and 70% gas will produce gas that replaces 70-75% of the
diesel fuel usually consumed (i.e. 48,125 liters to 57,750 liters). One kg of diesel oil
(equal to 1.1 liters) can be substituted by burning 6 kgs of husk. Therefore, 320,000
kg or 320 tonnes of husk will be needed in this example. This represents about 31%
of the husks produced annually by the mill.

There is some variation between mills re: the tonnage of rice output per hour versus
and the diesel fuel (liters per tonne) required. This is because mechanically driven
mills vary in their efficiency, in the size and in the age of engines being used. The

53
 output and fuel consumption per tonne varies also because many mills have been
designed and built by their individual owners not by manufacturing companies.

Based on biomass gasification equipment operating experience in rice mills in India

and in Cambodia, up to 33% of total husk kgs. produced may be required to power
the mill. This means that 70%-75% of husk production will still remain and be
available, for use by other enterprises requiring rice husk biomass (brick factories
and kilns, ice plants, rural electricity enterprises).

Financial Management Capacity of SME Owners

Cambodian rural SME owner’s ability to make rapid arithmetic calculations such as currency
conversions (e.g. Thai Baht to US $ to Cambodian Riel) and to negotiate, buy large amounts
of rice paddy and sell large volumes of milled is impressive. However, their skill levels and
understanding of methods to evaluating and compare projected alternative financial
investment streams and estimating the respective returns on these investments is weak.
Few have formal education and many are not familiar with advanced financial analytical
methods that compare alternative investment streams that include
1. various interest rates, grace periods, different lengths of time (present value),
2. various repayment formula with interest calculated on a declining balance basis
versus fixed interest payment calculations,
3. calculation of opportunity costs.
4. depreciation calculations. Depreciation costs are not usually included in Cambodian
family business calculations.

Unfamiliarity with both basic and advanced financial analysis methods results in SME
owners adopting a simplified approach to determining whether they should make new
investments to expand plant capacity or purchase new equipment to improve productivity or
efficiency. They often base their decisions whether to invest on the behavior of one or more
respected or admired business colleague(s). They observe who has achieved and
demonstrated good judgment in the past and been generally successful and follow their
lead. In the absence of confidence in their own ability to evaluate and assess the new
equipment or new technology investment decisions they copy the success of others.

54
 APPENDIX 4

Pilot trials for Financing Biomass Gasification Technology

in Rice Mills and other SMEs

The TORs of this study included developing and testing financial packages based upon the
findings and analysis of the aforementioned survey (Appendix 3). The financial packages
would be designed to:

a. encourage investment in biomass gasification technology,

b. be suitable for SMEs with limited working capital,
c. fit the operating and cash flow s of Cambodian rice mills and other SMEs
d. include longer loan periods and competitive interest rates,
e. have flexible and lower collateral conditions than typical in Cambodia,
f. be structured to be repaid through the energy savings realized by the enterprise once
the gasification equipment is installed.

SME Renewable Energy Ltd. agreed to identify up to 5 rice mills and/or other SMEs, and
promote sales of biomass gasification systems to the. Further SME-RE agreed to negotiate
contracts with clients to sell and install the systems and provide a financing package to the
buyers. The aim was to create a base of operating projects that would provide a powerful
demonstration of the technology and its commercial benefits to other SME owners and to
test the capacity of SME Renewable Energy Ltd. to promote, technically support and finance
a large scale program that might follow.

Development of a lending mechanism between E+Co Inc and SME Renewable Energy
Ltd. and Cambodian small enterprise owners

Sourcing Loan Funds

E+Co secured funds for the purpose of lending to Cambodia enterprises through SME
Renewable Energy Ltd., a Cambodian biomass gasification technology equipment and
service provider. The money originated from several funds managed by E+Co including fund
from IFC.

Back to Back Loan Agreements

E+Co to SME RE Loans
Comprehensive loan agreements were developed that define loans terms, repayment
schedules, responsibilities and liabilities of E+CO and SME Renewable Ltd. Under these
agreements, loans are granted from E+Co to SME-RE Ltd., to be on-lent to individual clients
purchasing gasification system from SME-RE Ltd.

SME-RE Ltd Loans to Rice Mills and SMEs

Comprehensive loan agreements were developed that define loans terms, repayment
schedules, responsibilities and liabilities of SME Renewable Ltd and the borrowing rice mill
or SME. Under these agreements, loans are granted from SME-RE Ltd. to individual clients.
Due diligence inspection visits were completed by a SME-RE Ltd. and E+Co team. Collateral
and other terms were adjusted to meet the particular needs of the enterprise.

55
Loan Approval Process
Loan application requires a $2,000 deposit to ensure sincerity on the part of the purchaser.
Due diligence reviews were completed. This deposit is refunded if financing is rejected. The
SME-RE Ltd and E& Co team assess due diligence data collected and determine whether to
recommend loan approval. Applications passing this step are sent to E+CO HQ for loan
investment committee review and final approval/rejection.

Client Down Payment

Clients are required to pay a down payment equal to 20%-30% of the total turn-key project
cost. Turn-key costs include; system design, purchase of equipment, import duties, taxes,
transport, installation commissioning, training and after-sales service for 1 year.

Collateral
The newly installed gasification equipment is taken as collateral. Additional collateral is taken
in the form of promissory notes for paddy rice, other products or fixed assets. Total collateral
usually equals 100% of loan amount.

Loan Disbursement
Loans are granted specifically for funding gasification system turn-key projects. Loan funds
are disbursed for this purpose directly from E+Co to SME-RE Ltd. and then deployed to pay
overseas equipment manufacturers, taxes, duties, inspection fees, customs fees, sea and
land transport, installation and commissioning expenses.

Fund Management Fees and Term

There is a small “spread” between the interest rate charged by E+Co to SME-RE Ltd and the
rate charged to enterprise clients. Rates charged during 2007 and 2008 were 10% by E+Co
and 13% by SME-RE Ltd. The 3 % “spread” is designed to cover administration and loan
service and portfolio management expenses.

Loan Payment schedules and terms

Approximately 3-6 months pass between date of initial deposit and application for funding a
gasification project and the completion of installation and commissioning. This delay is
caused by the need to first complete due diligence and loan approval process, place P.O’s
with overseas manufacturers, test equipment, disburse loan funds, complete shipping
inspections, transport/shipping time to Cambodia, preparation of site civil works by client,
and finally installation and commissioning., Since there is a requirement to expend funds to
start the manufacturing process, the loan funds must be disbursed before the equipment
arrives and a delay occurs between the time a loan begins to accumulate interest and the
point at which the borrower begins to realize savings from reduced fuel consumption.
For many rice millers and other SME owners this delay is a significant obstacle in making the
investment decision. The SME owners operate on limited working capital and are not used to
paying for equipment prior to seeing it installed. They are uncomfortable spending a
relatively large amount of money on an item they haven’t yet received nor seen.
To overcome this problem SME-RE Ltd. and E+Co have developed financing packages that
compresses the lag time as much as possible. Down payment date is delayed up till moment
equipment manufacture is complete and ready to ship. Manufacturer’s deposit requirement
has been reduced; loan principal payments are delayed until 6 months after loan
disbursement date.
While interest accumulates from the moment of loan disbursement, the interest payments
are not started until equipment arrives on site approximately 2 months later.

56
Alternative Loan Schedules tested by SME-RE and E+Co (2007-2008)

PROJECT FINANCE STEPS Loan 1 Loan 2 Loan 3 Loan 4

1. Applicant commitment deposit $2,000 $2,000 $2,000 $2,000
2. Due diligence assessment period (wks) 2 2 2 2
3. Loan approval process (wks) 4-6 4-6 4-6 4-6

Down payment % of turn-key price on P.O.

4. 20%-30% 10 % 5% 10%
agreement date
5. 1 month after P.O. - - 5% -
6. 2 months after P.O. - - 5% -
7. 3 months after P.O. - 10% 5% 0%
8. Shipping date after P.O. (months) 3-4 3-4 3-4 3-4
Loan start date: months
9. 3 - 3.5 3 - 3.5 3 - 3.5 3 – 3.5
after P.O. agreement date
Grace period (principal):
10. 6 6 6 6
months after disbursement
11. Shipping-Transport period (months) 1 1 1 1

12. Install-Commissioning period (months) 1 1 1 1

Gasifier system full operation begins:
13. 2-3 2-3 2-3 2-3
(months after shipping)
First loan interest payment
14. 3-4 3-4 3-4 3-4
month after disbursement
First loan principal payment: months after
15. 6 6 6 6
disbursement
Deferred deposit final payment:
16. - - - 10%
6 months after disbursement
17. Loan period (months) 60 60 60 60
18. Loan Amount (Actual Examples) $49,000 $ 55,000 $ 50,000 $54,000

57
 APPENDIX 5

Review of Biomass Gasification Technologies and Suppliers

NOTE:
The review of biomass gasification technology and suppliers as reported here, do not
represent an exhaustive or global or biomass gasification technology review. It is
rather a practical study intended to identify and select technology and technology
suppliers available and appropriate for use by rural Cambodian enterprises. The
information provided in this chapter should be interpreted as such.

A. Background
Biomass
Biomass is a general term to describe all organic carbon-containing material produced by
photosynthesis in plants. Biomass is available in many forms such as residues from
agriculture, forestry, and the agro-industry. Although biomass is the oldest energy source
known to mankind, its current contribution to the primary energy consumption in the Western
world is small. Biomass was gradually substituted after the discovery of huge amounts of
cheap fossil fuels such as coal, oil and natural gas.
The insight that the fossil fuel reserves are limited, together with concerns over security of
supply (i.e. the oil crises), initiated a renewed interest in biomass and all other renewable
energy forms in the 1970s. In the 1980s the concern grew that global warming and the
resulting climate change were enhanced (if not caused) by CO2 emissions resulting from
fossil fuel consumption. By definition, biomass is a renewable material, as during growth of
the plants, crops, and trees, CO2 is withdrawn from the atmosphere and stored in the
biomass as chemical energy. The CO2 cycle is closed again when the CO2 is released
during conversion of the biomass and the use of derived products. The renewable and CO2-
neutral nature of biomass is the major motivation to use the material for the energy
generation (e.g. green electricity and heat).

Biomass conversion technologies

There are two major methods to generate electricity from solid biomass: 1) direct combustion
and 2) gasification. Direct combustion is the most common way of converting biomass to
energy. For generating electricity, a biomass-fired boiler transfers the heat of combustion
into steam which in turn drives a steam turbine-generator to produce electricity. This
conversion technology is a proven technology, however mostly suitable for rather large
applications (e.g. > 1 MW) and therefore less suitable for applications in rural Cambodia.

Gasification is the complete thermal breakdown of biomass into a combustible gas, volatiles,
char, and ash in an enclosed reactor or gasifier. Gasification is a two-step, endothermic (i.e.
heat absorbing) process. In the first reaction, pyrolysis, the volatile components of the fuel
are vaporized at temperatures below 600°C. Char (fixed carbon) and ash are the pyrolysis
by-products, which are not vaporized. In the second step, the char is gasified through
reactions with oxygen, steam, carbon monoxide and hydrogen. The heat needed for the
endothermic gasification reactions is generated by combustion of part of the fuel, char, or
gases, depending on the reactor technology.
The product of gasification is called ‘producer gas’ or ‘syngas’ and contains CO, H2, CH4,
CxHy aliphatic hydrocarbons, benzene, toluene, and tars (besides the combustion products
CO2 and H2O). Raw syngas is very dirty, containing significant quantities of tar, soot, ash
and water, and needs additional gas cleaning and conditioning to achieve the specifications

58
for utilization in an engine. Modified gas engines can run on producer gas with a calorific
value of approx. 5-6 MJ/Nm3. The main technical challenge in the commercial
implementation of biomass gasification plants has been, and still is, the removal of tar from
the product gas.

The advantage of the gasification is the higher overall electric efficiency compared to the
alternative of direct biomass combustion. The composition of the gasification gas is
dependent on the type of gasification process and the gasification temperature.

Types of biomass gasifiers

There are two major types of gasifiers: Fixed bed gasifiers and fluidized bed gasifiers. Fixed
bed gasifiers can be subdivided into the updraft or counter-current type, downdraft or co-
current type and crossdraft type.

Figure A5.1. Three basic types of fixed-bed gasifiers.

59
Updraft gasifiers are characterized by the heating (introduction of air) at the bottom while the
producer gas leaves from the upper part. The major advantages of updraft gasifiers are its
simplicity and acceptability of high moisture content biomass (<60%). But the producer gas
created by updraft type gasifiers contains a high amount of tars. This is not very critical in the
case of thermal applications but extensive gas cleaning is required for power applications.
Downdraft gasifiers are characterized by the introduction of air in middle of the reactor while
the producer gas leaves at the bottom. Producer gas created by a downdraft type gasifier
contains a smaller amount of tars and is therefore more appropriate for power applications.
However, biomass fuel for downdraft gasifiers has to be dried (<20% moisture) and the
sizing of the feedstock has to be relatively uniform. Downdraft type gasifiers are considered
not suitable for up-scaling to large scale (>1 MWe).

Fluidized bed gasifiers (bubbling and circulating) were invented to solve the problems of the
fixed bed type (scaling-up). A fluidized bed gasifier is a vertical reactor vessel filled with sand
having a porous bottom. The tar content of the producer gas is smaller than for updraft
gasifiers while biomass of high moisture content can be used. It is suitable for up-scaling as
well. However, fluidized bed gasifiers are more complicated and expensive, and more
difficult to operate.

B. Comparison of gasifier types

Table A5.1 below provides a summary of the general characteristics of the different types of
gasifiers identified in section A.

Table A5.1 General characteristics of different gasifier types

Fixed bed
Fluidized bed
Updraft Downdraft Crossdraft

Feedstock
Type High density High density, High density Various
rice husks
Uniformity N/A Uniform N/A
Moisture content <60% <20% <50%
Feeding by gravity by gravity by gravity Automated

Producer gas
LCV [MJ/ Nm3] 5.3-6.0 4.5-5.5 4.0-5.2 4.6-6.3
3
Tar level [g/Nm ] 2-10 0.1-3 <0.3

System capacity <500 kWe <500 kWe <500 kWe >200 kWe

Commercial status

Ease of equipment O&M Easy Easy Easy More

complicated

For power applications in rural areas of Cambodia, fixed bed downdraft gasifiers seem to be
the most appropriate type based on their system capacity, price level, tar level in the
producer gas and ease of equipment operation and maintenance. Most of small-scale
gasifier electricity generation systems are downdraft type.

60
C. Power gasifier: 100% gas versus dual fuel
As mentioned in section A5.1 modified gas engines can run on 100% producer gas with a
calorific value of approx. 5-6 MJ/Nm3, eliminating the need for fossil fuel. However, gas
engines are hardly used in Cambodia and therefore not locally available. The investment in
such a gas engine can become a significant part of the investment in a biomass gasification
system. Furthermore, spare parts for replacement of broken parts can be quite expensive as
these will likely need to be imported as well.

An alternative to operation of a modified gas engine running on 100% producer gas to

provide the required (mechanical or electrical) power is the operation of a diesel engine in
‘dual-fuel’ mode. In dual-fuel mode, producer gas is admitted to a diesel engine through the
air inlet of the machine. Consequently, in order to keep the speed of the machine constant,
the amount of diesel fuel consumed by the machine will be reduced. Depending on the
design characteristics and load of the diesel engine, up to 75% of the normal diesel fuel
consumption can be reduced, and replaced by gas from the gasifier. Higher replacement
rates could lead to technical problems regarding lubrication, cooling and ignition. Coupling of
a biomass gasifier to an existing (often second hand) diesel engine, as widely used in
Cambodia, can dramatically reduce the investment costs in the overall biomass gasification
power system, however still requiring 25% of diesel fuel for it operation. An additional
advantage of a dual-fuel system is the presence of a back-up scenario in case the gasifier
system would be unavailable. The diesel engine could be run in diesel mode, increasing the
overall availability of the power system.

Selection of a 100% gas versus dual fuel gasifier system is mainly based on weighing
investment versus operating costs.

D. Commercial operating results of biomass gasifiers in South-East Asia

The renewed interest in biomass gasification technology in the 1970s and 80s led to a
number of initiatives to demonstrate the potential benefits of introducing biomass gasifiers in
developing countries. It was seen that dissemination of gasifiers in developing countries
could reduce fuel costs for small-scale power generation in remote, off-grid areas and that it
could improve the reliability of fuel supply by making isolated rural industries or communities
more self-reliant. In addition, a number of Asian, developing countries such as China, India,
Indonesia, Philippines and Thailand had started gasifier implementation programs, based on
locally developed technologies. In India and Thailand, the technology was promoted largely
by local entrepreneurs and manufacturers.

Although currently a number of equipment manufacturers in Europe and the United States
sell small-scale biomass power gasification systems, only few units have been installed in
developed and developing countries. The situation is somewhat different in India and China,
where manufacturers seem to maintain a certain level of production. At present, only
relatively few commercial small-scale biomass power gasifiers are operating globally, the
majority of which are located in China and in India.

In this section a brief analysis of technical and economical operating performance of

biomass gasifiers operating in the mentioned countries will be given.

China
Fixed bed downdraft gasifiers of specific design, for gasification of rice husks, have been
developed in China. Hundreds of these "open-core" rice husk reactors have been built in
China since the mid-1960s. Later, this reactor-type was further developed in India with the
objective to construct small reactors that can gasify wood and agricultural residues.

61
More recent developments are the economic production of circulating fluidized bed gasifiers
(CFB) ranging from 400 to 2000kW capacity, and downdraft gasifiers for gasification of corn
straw for domestic cooking purposes. Biomass gasification technology in China has focused
on three main applications:
1. Gasification of biomass wastes for process heating,
2. Straw gasification for domestic cooking,
3. Biomass gasification for power generation.

In China’s previous three national plans (7th to 9th Five-year Plan covering the period 1986-
2000), biomass gasification has played an important role in energy development. In order to
promote its application and industrialization, a number of demonstration projects have been
realized.

Table A5.2 Typical biomass gasification demonstration projects in China

Project Material Purpose Capacity Gasifier Location

(a) Gasification for heating

Huairou Wood Equipment Sawdust Drying 200 kWt Down draft Beijing
Zhanjiang Timber Mill Wood Boiler 1000 kWt CFB Guangdong
powder
Lushuihe Timber Mill Wood Boiler 7000 kWt CFB Jilin
powder

(b) Gasification for cooking

Huantai Integrate Gas- Crop Cooking 300 kWt Down draft Shangdong
supply System residues
Dalian Biomass Pyrolysis Wood Cooking 700 kWt Fixed bed Liaoning
and Gas System residues
Dalian Integrate Gas-supply Crop Cooking 300 kWt Down draft Hunan
System residues

(c) Gasification for Power

Generation
Putian Huagang Rice Mill Rice husk Electricity 1000 kWe CFB Fujian
Sanya Timber Mill Wood Electricity 1000 kWe CFB Hainan
powder
Handan Steel Works Corn straw Electricity 600 kWe CFB Hebei

With government support, many companies and factories specialized in biomass gasification
have been set up in recent years. It is estimated that there are more than 40 factories and
companies that provide biomass gasification equipment and facilities in China.
The number of installations estimated to be installed in shown in table A5.3

62
 Table A5.3 Application of biomass gasification technologies in China

Application Capacity No. of applications Volumetric/energy of

gas produced

Domestic cooking 100–1000 kWt 164 sets 45.7 million m3

Wood drying 100–500 kWt 164 sets 560 x 109 kJ
Boiler heating 1000–10,000 kWt 15 sets 15 x 106 kW.h
Electricity generation 200–1500 kWe 150 sets 15 x 106 kW.h
Total ~9 x 1011 kJ (per year)

India
The promotion of Renewable Energy in India was supported by a large and consistent
national program since the early 1970s, including the establishment of an independent full-
fledged ministry (MNES) at the federal level. The technologies of focus included biomass
gasification. The first major national demonstration program of biomass gasification
technology was launched in 1987 and was heavily funded by the federal government. The
main application for the gas was the use in small diesel engines for water pumping.
Subsidies provided did not only cover the total cost of the gasifier system, it also provided for
a part of the cost of the diesel engine pump-set/gen-set to overcome the end-user’s possible
fears about likely damage to the engine because of its coupling to the gasifier. Over a 5-year
timeframe more than 600 small-scale, dual fuel systems were installed for irrigation water
pumping and small power applications. The results of this program were mixed, with many
failures due to misuse. However, the program generated useful feedback from operative field
installations which contributed to the capacity building. In a second phase, the strategy of
biomass gasification technology promotion was changed, reducing subsidies and pushing for
market orientation. Due to both the reduced subsidy, as well as low conventional energy
prices, the growth in the uptake of the technology was slowed down, however, with an
increased success rate.
Currently, the promotion of biomass gasification is increasingly driven by market forces, with
limited financial incentives (see table below). There is a wide range of commercially
available systems with over 10 manufacturers. Application modes include 100% gas based
power systems, dual fuel systems as well as thermal applications which have been
promoted more recently. In 2006, over 600 biomass gasification systems were in operation
with annual production levels of around 200 systems.

63
 Table A5.4 Financial support by the MNES for Biomass Gasifier Projects

Type of application Capital subsidy

Thermal applications including cooking Rsm. 200.000 / 300 kW th on pro-rata basis

(up to 3 MW th) on in multiples thereof
Electrical application through dual fuel Rs. 250.000 / 100 kW e on pro-rata basis on
engines in multiples thereof
Electricity generation with biomass gasifier Rs. 1.000.000 / 100 kW e on pro-rata basis
and 100% producer gas based engines, up on in multiples thereof
to 100 projects
Electricity generation with 100% producer Rs. 800.000 / 100 kW e on pro-rata basis on
gas based engines (for engine only) in multiples thereof

Thailand
The Asian Institute of Technology (AIT), Bangkok, developed a reactor and gas-cleaning
system for gasification of charcoal that is made almost entirely from Ferro-cement. This
design aimed at improving the financial competitiveness of gasification by minimizing the
cost of the gasifier. In Thailand and in Indonesia, gasifiers of this type have been tested for
prolonged periods.
As mentioned, in Thailand biomass gasification technology was promoted largely by local
entrepreneurs and manufacturers. Reportedly, an unidentified company emerged that was
building and selling biomass gasifiers in Thailand, but the company was brought down in a
legal battle over design rights.
The only biomass gasifier reported to be in operation currently, is a 2 x 200 kW rice husk
gasifier installed in a rice mill around 2004. The system is based on fluidized bed technology
from a Chinese manufacturer.
More recently, the Faculty of Engineering of the Kasetsart University, Bangkok, has
developed a small-scale biomass gasifier based on Italian, fixed-bed downdraft technology.
At least two proto types were installed in 2007 for rural village electrification: 1 in Southern
Lao and 1 in Kampong Cham province, Cambodia. Operational experience however is
severely limited.

Cambodia
In Cambodia the experience with biomass gasification technology is relatively young. In
2004 two of the same 9 kWe 100% gas units were independently imported from India. One
unit was installed by the Center for Agricultural Research and Training (CelAgrid) and is
operated mainly for research purposes. At the same time SME Cambodia facilitated the
implementation of a biomass gasification village electrification demonstration project.
Under this project the 9 kWe gasifier and gen-set was commissioned in January 2005,
serving 81 rural households with electricity. In 2006 this village electrification project was
extended with the installation of an additional gasifier and gen-set with a capacity of 22 kWe.
This second unit was commissioned in December 2006 and is currently serving some 250
households. Both the 9 kWe unit and 22 kWe unit are wood gasifiers running on locally
farmed Leucaena trees and corn cobs.
In 2005 SME Renewable Energy Ltd. was established by SME Cambodia in partnership with
the US-based not-for-profit investment company E+Co. SME Renewable Energy Ltd. is a

m
1 US$ = Rs. 39 (December 2007)

64
renewable energy company that markets biomass gasifiers in the lower Mekong sub-region,
currently focusing mostly on Cambodia. SME Renewable Energy Ltd. currently imports
systems from India and has to date installed 4 rice husk gasification units. The first system
was installed at a rice mill in Battambang province in August 2006, and has been in
operation for more than 3500 hours since. SME Renewable Energy Ltd. has currently
n
installed 6 biomass gasification units with a total installed capacity of 781 kWe. One more
unit with a total capacity of 200 kWe is currently under construction.

Picture A5.1. 200kW rice husk gasifier installed in 2006 by SME Renewable Energy Ltd.

In 2005 a Chinese model open-core rice husk gasifier with a capacity of 2 times 100 kWe
was under construction/commissioning at an ice factory in Banteay Meanchey. The system
was purchased second hand and imported from Thailand. Reportedly, the system was not
performing according to the expectations and later decommissioned and sold to another ice
factory in Banteay Meanchey, where only one of the original two lines was installed. Another
such model open-core rice husk gasifier was reportedly installed in 2007 at a Rural
Electricity Enterprise (REE) in Siem Reap province. Details of the performance of this
system are unknown.

n
December 2007

65
 Picture A5.2 and A5.3. Chinese model open-core
rice husk gasifier during commissioning in 2005.

Besides the above-mentioned systems a number of locally built units are in operation. Most
of these systems are backyard fabricates that are either copies of, or derivatives from the 9
kWe unit mentioned above and the Ankur Scientific (India) technology. At least a dozen
systems of unspecified capacity are known to exist in Battambang (2), Siem Reap (2),
Kampong Thom (2), Kampong Cham (3), Kratie, Phnom Penh, Kandal and Kampong
Chhnang provinces. Except for one, all systems are wood gasifiers operating in dual fuel
mode. Most of these systems are known to operate with poor performance (fuel
replacement) and in constant need of repair of either gasifier or engine.

Picture A5.4. Locally fabricated wood gasifier installed at a Rural

Electricity Enterprise in Kampong Thom province.

66
In December 2007, the Faculty of Engineering of the Kasetsart University, Bangkok, in
cooperation with the Ministry of Industry, Mines and Energy installed a 30 kWe biomass
gasifier coupled to a 60 kVA diesel engine in Rokar Ar, Kampong Cham. The system is
connected to a village electricity grid currently serving 120 households. Testing of the
system is scheduled until April 2008.

Picture A5.5. 30kWe wood fuelled gasifier installed in December

2007 in Rokar Ar, Kampong Cham.

67
E. Overview of commercial gasifier suppliers
The following commercial suppliers of biomass gasification equipment were identified and
contacted, with a request to provide company information:

China:
1. Chongqing Fengyu Electric Equipment Co. Ltd.
2. Xuzhou Orient Industry Co. Ltd.
3. Tianjin Universal Machinery I&E Co. Ltd.
4. Chongqing Welluck Trading Co. Ltd.
5. Wuxi Teneng Machinery and Electricity Co. Ltd.
6. Jiangxi Peako Biomass Energy Co. Ltd. (headquarters in Hong Kong)

India:
The Indian Ministry of New and Renewable Energy lists the following approved suppliers of
biomass gasification equipment in India:

7. Ankur Scientific Energy Technologies Pvt. Ltd.

8. Cosmo Powertech Pvt. Ltd.
9. Netpro Renewable Energy (India)
10. Energreen Power Limited
11. Rishipooja Energy & Engineering Company
12. Bioresidue Energy Technology Pvt. Ltd.
13. Associated Engineering Works
14. Grain Processing Industries (I) Pvt. Ltd.
15. Chanderpur Works

The Combustion, Gasification & Propulsion Laboratory (CGPL) of the Indian Institute of
Science (IIST) in Bangalore, has (besides Netpro, Energreen and Bioresidue already listed)
licensed another handful of companies to manufacture biomass gasification equipment,
using IISc technology:

16. Aruna Electrical Works Pvt. Ltd.

17. Synergy Renewable Energy (P) Ltd.
18. OVN Bio Energy Private Ltd.
19. Satake Corporation (Thailand)
20. Arrya Hi-tech Energy

The information provided by the above-mentioned commercial biomass gasification

equipment suppliers is summarized in table A5.5 below:

68
Table A5.5a Company info from commercial biomass gasification equipment suppliers

Chongqing Xuzhou Tianjin Chongqing Wuxi Teneng Jiangxi

Fengyu Orient Universal Welluck Peako

Gasification technology (fixed/fluidized bed) Fluidized bed Fixed bed/ Fluidized bed
fluidized bed
Technology developer/licensee of Fengyu Peako
Factory location Chongqing, Xuzhou, Jiangxi,
China China China
Year in which first gasifier was installed for 2001 2004
commercial operation
Number of systems sold to date 5 4 + 4 under
construction
Number of systems exported 3 -
Number of systems currently in operation 4 4
(for a far as information is available)
Number of systems produced/sold per year
Size range of gasifiers in 100% gas mode (kW) 200-800 200-1500 400-1200
Size range of gasifiers in dual fuel mode (kW) N/A N/A
Use wet gas cleaning system? yes yes yes
Waste water treatment system included? yes no yes
Name of gas engine supplier Chongqing
Hongyan
Table A5.5b Company info from commercial biomass gasification equipment suppliers (continued)

Ankur Cosmo Netpro RE Energreen Rishipooja Bioresidue Assoc. Eng.

Scientific Powertech Power E&E Energy Works

Gasification technology (fixed/fluidized bed) Fixed bed, Updraft/ Fixed bed, Fixed bed, Fixed bed, Fixed bed, Fixed bed,
downdraft downdraft downdraft downdraft downdraft downdraft downdraft
Technology developer/licensee of Ankur Cosmo IISc, IISc, Rishipooja IISc, Assoc. Eng.
Bangalore Bangalore Bangalore Works
Factory location Baroda, India Raipur, India Bangalore, Chennai, Gorakhpur, Bangalore, Andhra
India India (UP), India India Pradesh,
India
Year in which first gasifier was installed for 1986 1998 1996 2002 2000
commercial operation
Number of systems sold to date >750 25 27 >65 25
Number of systems exported 50 5 -
Number of systems currently in operation ~ 400 15 12
(for a far as information is available)
Number of systems produced/sold per year 100-150 2-5
Size range of gasifiers in 100% gas mode (kW) 11-225 40-800 25-600 5-250 N/A
Size range of gasifiers in dual fuel mode (kW) 20-2200 60-1100 1-1000 60-500 N/A
Use wet gas cleaning system? yes yes yes yes no
Waste water treatment system included? no yes yes no N/A
Name of gas engine supplier Cummins/ N/A Cummins N/A
Greaves
Table A5.5c Company info from commercial biomass gasification equipment suppliers (continued)

Grain Chanderpur Aruna Electr Satake

Processing Works Works

Gasification technology (fixed/fluidized bed) Fixed bed, Updraft/ Fixed bed, Fixed bed,
updraft downdraft downdraft downdraft
Technology developer/licensee of Grain TERI IISc, IISc,
processing Bangalore Bangalore
Factory location Kolkata, India Haryana, Tamilnadu, Thailand,
India India Japan,
Malaysia
Year in which first gasifier was installed for 1988 2003
commercial operation
Number of systems sold to date 50 20 3 + 5 under
construction
Number of systems exported 2 1
Number of systems currently in operation 3
(for a far as information is available)
Number of systems produced/sold per year 3
Size range of gasifiers in 100% gas mode (kW) 10-400 30-1900
Size range of gasifiers in dual fuel mode (kW) 15-450 5-600
Use wet gas cleaning system? yes yes
Waste water treatment system included? no yes
Name of gas engine supplier Cummins/ Cummins/
Kohler Wuakesha
Based on the technical requirements as specified in table A5.6 below, budget quotations
were requested from the equipment suppliers mentioned in table A5.5.

Table A5.6 Technical requirements for biomass gasifier system used for RFQs

Application : Captive power for rice mill

Fuel feedstock : Rice husk (loose)
Required capacity : 200 kWe (in dual fuel mode)
Engine : Existing diesel engine
Scope of supply : Complete gasifier system
: Spare parts for the 1st year of operation
: 1 year warranty

Following the requests for quotation, the following quotations were obtained:

Table A5.7a Quotations from biomass gasifier equipment suppliers

Xuzhou Chongqing Jiangxi Ankur Chanderpur

Item Orient Fengyu Peako Scientific Works

Gasifier set 1 system 1 system 1 system 1 system 1 system

Cooling water pond/tower excluded excluded excluded excluded excluded
Export packing included included excluded included included
o p
System price (US$) $ 70,966 $ 50,000 $164,000 $ 46,600 $ 62,150
Delivery Terms FOB CIF SHV, Ex-works, CIF SHV, FOB, India
Shanghai Cambodia Jiangxi CN Cambodia
Installation/commissioning Charged Included Charged Charged
/training separately separately separately

Production time 2 months 3 months 3 months 3 months 4 months

100% gas engine/ $ 101,226 $ 62,500 $ 55,500 $ 101,000

b
generator set (200 kWe) (200 kWe) (200 kWe) (225 kWe)
Delivery Terms FOB CIF SHV, Ex-works, CIF SHV,
Shanghai Cambodia Jiangxi CN Cambodia

o
Indicative budget price, may vary with varying exchange rates
p
Offer is for a 400 kW gasifier, which is the smallest system Peako supplies

72
 Table A5.7b Quotations from biomass gasifier equipment suppliers

Rishipooja
Item E&E

Gasifier set 1 system

Cooling water pond/tower excluded
Export packing excluded
b
System price (US$) $ 46,150
Delivery Terms Ex-works,
UP, India
Installation/commissioning/training Charged
separately
Production time 3-4
months

100% gas engine/generator set b

Delivery Terms

F. Considerations regarding local manufacturing of biomass gasification

equipment
The CIF price for a complete 200 kWe rice husk gasification system, without engine,
delivered to Sihanoukville port, supplied by various international commercial equipment
suppliers, ranges from about $47,000.- to about $75,000.- (see table A5.7 above). In several
cases this does not include installation, commissioning and after sales service expenses.
Since this represents a significant equipment investment it is worth assessing whether
savings or other benefits could be gained from manufacturing the equipment in Cambodia.
Relevant questions to examine with respect to considering local equipment manufacturing
include:
1. How and where can savings be realized through localizing gasifier equipment
manufacture?
2. Would local manufacture of gasifier systems and/or sourcing of component system
parts reduce the retail price of gasifier system to customers?
3. Would locally produced equipment provide reliable, high performance gasification
systems that yield energy savings comparable to imported equipment?
4. What are the capital investments, manufacturing skills, management skills, research
and development activities or other inputs necessary to transfer biomass gasifier
manufacturing technology to Cambodia?
5. What are the product standards required to satisfy financial institutions that provide
loans for equipment purchase.

To determine whether local manufacturing of biomass gasification system (components)

could result in significant reduction in the turnkey system price to the customer, the
components of the various costs of a system have been examined. The % cost breakdown
for: designing, ordering, transporting, importing, installing a 200 kWe rice husk gasifier

73
system including customs duties, taxes, after sales service, profit and training is indicated in
Table A5.8 below:

Table A5.8 Breakdown of the retail price of a turn-key system

Price Components Percentage of Turn-Key Price

1. System manufacturing costs (factory price) 51.0%

2. System shipping/transportation fees 6.0%
3. Shipping inspection and clearance 1.0%
4. Import duties 9.0%
5. VAT (System and transport Costs) 6.7%
6. Local transportation 1.5%
7. Erection and commissioning costs and after sales service 4.0%
8. Design specification, order handling, project supervision 5.0%
and operator training
9. Gross Profit 13.0%
10. VAT on Items 6,7,8,and 9 3.3%
Total 100%

Manufacturing-Fabrication:
From this table it can be seen that the largest single cost item is the cost of manufacturing
the gasifier components (in this example, by a manufacturer based in India). European
manufactured equipment is several times more expensive than equipment available from
Asian sources such as India, China, Taiwan or Korea. Japanese equipment is also more
expensive than other Asian manufacturers.

Since Cambodia does not have a well developed industrial manufacturing sector or
extensive industrial services sector, there are few manufacturing activities in which major
savings can be realized simply by transferring fabrication activities to Cambodia. Raw
materials (mainly mild steel and/or stainless steel) and equipment components (water
pumps, electrical instruments and various sensors and controls) must be imported into
Cambodia. This results in additional transportation costs, custom duties and import taxes.
Steel costs are at least equal or greater when purchased in Cambodia compared to other
Asian sources. India has a major steel industry and therefore enjoys some cost advantages.
International steel prices recently increased about 25%-30%, (during Nov 2007 to March
2008). In Cambodia, steel prices have increased similarly from $800 tonne to $1,200 with
transportation costs also rising. Labor skilled in metal fabrication is available in Cambodia
but labor costs are higher in Cambodia than in China or India. Productivity of Cambodian
labor is currently less than more established industrialized economies.

Comparing estimates received from Cambodian steel fabrication companies for system
components (e.g. filter containers) versus the cost of manufacture in India reveals that
Cambodian costs would be 20%-30% higher.

One Indian gasifier equipment manufacturer has indicated willingness to establish

production facilities in Cambodia, but indicated it would require a minimum scale of operation
to justify the investment costs. They estimate that a least of 20 -25 orders for the each model
design per year would be required to justify the investment needed to set up manufacturing

74
facilities in Cambodia. Another option would be for a Cambodian equipment and service
provider to purchase the designs, drawings and specifications and license the rights to
manufacture in Cambodia through its own production facilities or by subcontracting
fabrication to local workshops. This option would however involve significant investment in
setting up and maintaining sub-contract administration, quality control, procurement and
scheduling and coordination of transportation of raw materials and assembling components.
A minimum volume of sales would therefore also be required to justify establishing such a
local production network. Protection of proprietary designs is an important consideration
when considering manufacturing in Cambodia since product design and intellectual property
laws are very weak or virtually non-existent.

At present, the volume of sales, fabrication capacity and production service network is not
sufficient to realize significant savings. Improvements in manufacturing capacity, quality of
production and labor productivity combined with a steady volume of orders (minimum 20-30
units per year of each system model) is required to make localizing biomass gasification
system fabrication worthwhile.

Quality and Performance Issues:

Since the introduction of modern biomass gasification technology to Cambodia is currently at
an early stage, reducing the manufacturers’ wholesale s price through localizing
manufacture is not the most pressing issue. At this stage, provision of good quality
equipment that consistently meets purchasers’ expectations and standards is the highest
priority. System failures and/ or under performance during this initial period of technology
introduction will jeopardize successful acceptance and adoption of the technology.

The best way to ensure high and consistent system performance will be to gradually develop
local manufacture of systems or system components in cooperation with experienced
system manufacturers rather than attempting to initiate new untested manufacturing
alternatives or “back-yard” designs and production. This will avoid making concessions to
quality and performance and avoid the risk of losing customers confidence in the technology.

Transportation/Shipping Costs:
The transport costs of shipping gasifier systems from India are about 7% of the total project
turnkey cost. Some savings could be realized by reducing transportation of bulky
components that occupy about 50% of the shipping container space. If these components
were fabricated locally the transportation costs would be reduced by 50% or about 3% of
total system costs (Table A5.8). This reduction would, however, be off-set by higher local
system production costs, and additional Cambodian transportation costs.

Import Duties and VAT Taxes:

Imported biomass gasifier systems are currently taxed at a rate of 15% of the declared value
of the system plus a VAT of 10% that is applied to the declared value of the equipment
including the 15% import duty. VAT (10%) is also applied to added value from transportation,
installation, design service, profit, and training costs occurring in Cambodia. These taxes in
total add about 20-25% to the cost of importing renewable energy equipment (see Table
A5.8) and add 6% - 7% to the total installed system price.

There is a strong argument to be made for the Royal Government of Cambodia to reduce or
waive the import duties on renewable energy equipment since this equipment directly
reduces the nation’s requirement for expensive and environmentally damaging fossil fuels
and improves the competitiveness of Cambodia rice millers and other diesel-fuel-dependent
sectors. A waiver of all or part of the import duties would be a simple and direct way to
reduce the cost of these systems to the end user by about 15% (e.g. a $10,500 reduction on
a $70,000 system).

75
Profits:
The gross profit margin on a system supplied by SME Renewable Energy Ltd. is currently
13%. This is a very competitive and modest profit margin relative to rates of profit realized by
most Cambodia trading, manufacturing and service companies. There is no room to reduce
this component of the price structure.

Summary of issues related to introducing system manufacturing to Cambodia:

Arguments in favor of local manufacturing:

• Savings realized on overseas shipping/transportation costs;
• Savings realized through reduced import duties,
• Technology transfer to Cambodia;
Arguments against local manufacturing:
• Cost of materials (e.g. steel, and pumps) in Cambodia are higher than in India/China
resulting in more expensive system (component) production in Cambodia;
• Requirement to purchase proprietary designs and/or royalty payments or system
design fees for technology transfer;
• Additional domestic transportation costs in the case of local production of some
component parts that must then be delivered to installation site;
• Additional costs for management and administration of quality control, procurement,
scheduling and coordination of locally manufactured system components;
• Uncertainty re: system performance and purchaser confidence in locally
manufactured gasifier.

G. Conclusions re: appropriate biomass gasification technologies and suppliers

The requirements for power (either mechanical or electrical) in Cambodian rice mills ice
plants, rural electricity enterprises (REEs) and other rural SMEs are in the range of 100-
300kWe. Although there are some possibilities for thermal applications of gasifiers in for
example the brick and tile manufacturing sector, a detailed evaluation of the feasibility of this
is outside the scope of the current assignment.

For this range of power applications, fixed bed downdraft gasifier systems are the most
appropriate type of gasifiers. Since rural Cambodian rice mills, i.e. plants and REEs currently
own and operate diesel fueled engines to power their operations, the obvious choice seems
to select a gasifier system that can use this existing diesel engine and operate in “dual fuel”
mode. This will result in an immediate reduction of 70%-75% of diesel fuel costs with no
additional power plant investment.

Alternatively, they could choose to purchase a rice husk gasifier system with a 100% gas
fueled engine and eliminate all diesel fuel expenses. This would be efficient and cost
effective in the long term but is a significantly higher option due to the need to replace the
existing diesel engine with a new more expensive pure gas engine. At this initial stage of
technology transfer the dual fuel mode is easiest and preferable because in the event of
problems with the gasifier system the operator can revert temporarily to diesel fuel and
continue operations.

Based on the information provided by the equipment suppliers mentioned in section A5.5,
the listed Chinese gasification equipment manufacturers use mainly fluidized bed

76
gasification technology in larger scale units (>200 kWe) for generation of electricity using
100% gas engines. However, most Chinese manufacturers seem to have only a limited
number of units currently in operation, although the annual production/sales seem to
increase.

On the contrary, the listed Indian gasification equipment manufacturers all use fixed bed
gasification technology, either updraft (mainly for thermal applications) or downdraft (for
power applications). Most manufacturers provide gasifier systems from as small as 10 kWe
to several hundred kWe in a single gasifier unit, operated in either dual fuel or 100% gas
mode. The larger gasifier units might require operation of multiple (gas or diesel) engines in
parallel.
However, some manufacturers such as Associated Engineering Work, only produce gasifiers
for thermal applications while Cosmo Powertech does supply gasifiers for power applications
but does not supply the engine/generator sets. All manufacturers of gasifiers for power
applications use a wet gas cleaning system. The scrubber/cooling water is being recirculated
over a settling tank for most of the designs in order to minimize the disposal of ‘black water’.

Not all suppliers include the settling tank/pond in their scope of supply and not all biomass
gasifier systems are able to handle the same types of feedstock. Cosmo Powertech does not
manufacture gasifiers for gasification of rice husks while the IISc gasification technology can
handle rice husks only in the form of briquettes. From the Indian biomass gasification
equipment manufacturers, only Ankur, Rishipooja and Chanderpur Works are able to supply
systems that can handle loose rice husks.

The number of gasifier systems installed to date by Indian manufacturers is quite

considerable. Especially Ankur Scientific, with some 400 systems in operation and a current
annual production of 100-150 gasifier units, has more than 2 decades of commercial
experience as a manufacturer.

The option to produce biomass gasifier system (components) in Cambodia, in order to

reduce the system costs, needs further investigation. Potential cost reductions could be
realized however, as the introduction of biomass gasification technology to Cambodia is still
at a relatively early and most critical phase, system quality is critical to a successful
introduction of the technology.

Conclusions and recommendations from previous biomass gasifier implementation programs

Findings of the UNDP/World Bank Small-Scale Biomass Gasifier Monitoring Programme
(BGMP), which ran from 1986-1990, concluded that the commercial prospects of small-scale
biomass power gasifiers in developing countries appeared limited at the time. Three major
factors were cited:

1. Unfavorable economics compared with fossil-fuel alternatives. The world market oil
price was $18,- per barrel at the time (current world price is $120 – per barrel);
2. Low quality and reliability of equipment, resulting in operational difficulties;
3. Inherent difficulties in training sufficiently qualified or experienced personnel,
resulting in substandard operation of units.

Longer-term prospects depend on the long-term price developments in world oil markets
(currently over $110,- per barrel) as well as on the progress made in improving the quality of
the equipment and in simplifying operating procedures.

77