INNOVATIVE & SUSTAINABLE WATER INVESTMENT

Today, it is common knowledge that there is a growing water scarcity crisis globally.

Less well known is the fact that there is a current $200bn funding gap for water infrastructure projects that is expected to rise to $1.2trn by 2030. Apart from climate change, this funding gap is one of the key reasons why the crisis is getting worse.

This current $200bn funding gap for water infrastructure projects arises from limited access to water infrastructure expertise among traditional financiers. This, combined with the complex and variable nature of such projects, deters most financiers, leading to either complete disinterest or prolonged due diligence processes that often fail to secure project funding.

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ALPHA ENVIRONMENTAL GROUP (AEG) have joined forces with a number of institutional lenders and innovative private investment firms to address this situation effectively and sustainably with immediate action. Here in Indonesia, Southeast Asia and globally on all five continents, with a focus on emerging and developing geographies and societies in need.

AEG are a group of foreign direct investment companies with regional offices in Indonesia and Vietnam, who develop projects and structure partnerships between the public and private sectors, with the objective of providing clean water everywhere for human, commercial and industrial consumption as well as recycling and polishing of used water resources for dedicated reuse applications in close cooperation with selected international technology partners.

PRIMARY CRITERIA

AEG have defined three primary criteria to enable the appropriate structuring of all stakeholders into the context of each project.

First, the mandate and role of the public sector to control natural resources and to provide essential services to the members of its society must remain in place. This means that water abstraction from natural resources, transportation to designated treatment facility sites and distribution to consumers are to remain under the control of the public sector and thus form an integral part of its scope.

Second, the mandate and role of the private sector is to provide suitable advanced technology, sustainable investment financing and reliable operational services of tailored water treatment facilities. Such systems are preferably as mobile as possible and their battery limits are clearly defined at the permanent infrastructure points as water intake and outlet, on land assigned for the duration of the concessionary cooperation and water purchase agreements with the concerned public sector agencies, and commercial businesses alike.

Third, the project must deliver clean and safe drinking water in places where this is not available today, in both commercial and social environments at feasible and realistic cost and tariff. At the same time, the project must maximize the efficiency of natural water resources treated for its designated application by selecting the most advanced and reliable technologies. As a result, the project must make a positive contribution to the reducing of single use containers and so become an integral part of a sustainable environmental infrastructure framework.

Today, a $100m funding facility has been secured by AEG, enabling the jointly implementation of the first projects developed by AEG, here in Indonesia, in Southeast Asia and globally.

HOW IT WORKS

Working with a leasing FinTech platform that is specifically designed for the water sector, to provide a fast turnaround time to approve water infrastructure projects or components of these projects. In partnership with advanced technology providers, project developers, qualified contractors, and reliable operators, AEG with its local partners combine traditional finance, specialist risk management modelling, blockchain and ‘tokenomics’ to deliver securitized leasing solutions. Such lease terms typically range from 3–5-year arrangements, that can be extended for periods up to 20 years.

This leasing solution is designed to connect equipment manufacturers, project developers, distributors of water treatment equipment and water plant owners and operators such as AEG to credit lines and risk underwriters. This financing structure inter-operates in a way traditional finance methodologies today simply are not able to and provides financing through operating or financial leaseback arrangements. Deals are rapidly auto evaluated through sophisticated algorithms and if approved receive near instant approvals.

This innovative next-generation system generates harmonized investment-grade asset-backed leases for financial institutions, managing those leases throughout the asset's lifecycle. This means leases and credit lines are protected from typical operational and capital risks experienced in water infrastructure assets through A+ grade risk underwriting. This model allows to provide physical equipment maintenance during the lease life cycle that benefits all parties involved in the lease arrangement by strategic development partners such as AEG and its approved advanced technology partners.

PROJECTS IN INDONESIA

The range of projects and applications developed by AEG are naturally wide, from humanitarian emergency aid, via temporary mobile solutions working off-grid in remote geographies to long-term concessionary services as well as most simple and direct EPC services, designing and installing tailormade commercial systems to make a positive environmental impact across public and private sector activities, and training future generations to become familiar with today’s most advanced sustainable technology solutions for property developers and operators in the residential and hospitality industries.

To illustrate some of the successful projects currently under development using this innovative and sustainable water financing system in combination with the most advanced technology solutions, the following highlight examples from the island of Bali, the remote district of Garut in West Java and the prestigious new capital of Indonesia, Ibu Kota Nusantara.

BALI

Bali has reached a level of water distress affecting its ability to sustainably support farming as well as tourism and other activities because of unregulated ground water abstraction and escalating water consumption by growing industries such as commercial hospitality and residential development. Here, AEG has developed two types of solutions.

First, the installation on EPC contract basis of compact water treatment systems that can provide drinking water quality fit for human consumption in commercial hospitality and residential development. A 150m3/d system can save 500,000 plastic bottles per year in a hotel with approximately 200 rooms, as water can be consumed directly from tab or be served in reusable glass bottles to the patrons by the hotel staff, using water from tab anywhere in the building. Not every hotel is able or willing to afford such systems, so AEG offers complete leasing products, including training for staff, infotainment for the neighboring community and marketing to ever more sophisticated visitors.

Second, the invested delivery of municipal waste and lagoon water recycling in combination with desalination downstream in the island’s southern coastal district with a concentration of expat communities, convention centers and luxury hotel resorts. This project was originally planned to be procured as an EPC contract by the concerned government agencies. Budget and technical limitations have allowed AEG to propose a BOO solution, with clear contractual limits and interfaces with the public sector services and control mechanisms. Now, a total 10,000 m3/d facility can achieve contractual and financial close to be realized by receiving notice to proceed for AEG to deliver within less than six months.

GARUT – WEST JAVA

Garut is one of the districts in West Java that albeit being reasonably developed with textile and agricultural industries has one of the poorest water supply connection rates to households, and with abundant natural water resources still one of the worst piped water qualities in the province. Here, AEG has developed one solution, with is exemplary of the two key criteria considerations mentioned above.

Starting with four sub-districts, where operational river intake pumping stations, non-functional filtration utilities and basic intermediate permeate storage and reasonable village level distribution pipe networks are existing. AEG, in cooperation with a local partner, and the concerned authorities and government agencies, is scheduled to deliver 2,000m3/d capacity mobile facilities to produce drinking water quality fit for direct human consumption that will be connected bypassing the existing filtration facility, using a small piece of land available at these facilities, after entering a water purchase agreement with the municipality, who will act as the river water supplier and drinking water off-taker.

The initial contract term of 5 years, renewable, allows the award of such project on a Regent's and PDAM Director's executive decision as per law, and at the same time enables AEG to remove the invested mobile facility in case the contract is not extended. This contractual framework, the executive decision by the authority and the flexible leasing system conjunct with a most advanced and suitable technology can be a blueprint for many more such geographies in Indonesia and the region beyond.

In addition, AEG is cooperating with development banks to support the provision of quality distribution networks in such geographies. Usually too small as a ticket for institutional lenders, the clustering of sub-districts like in Garut increases the total ticket size with a total of 40 sub-district locations identified and optimizes the working radius of the lender’s technical advisors and contract management.

IBU KOTA NUSANTARA

Ibu Kota Nusantara (IKN) is arguably one of the most ambitious and prestigious projects on the global stage. Many environmental infrastructure and impact concerns are being addressed, the critical one being water and its relation to waste and the sustainable utilization of natural resources. In 2024, the first administrative staff, their families and a new human society comprising the variety of services and functions shaping the new capital are scheduled to take residence in homes and offices there. Here again AEG has developed two types of solutions.

First, the invested installation of compact water treatment systems that can provide drinking water quality fit for human consumption in ministerial and other public buildings. A typical of the 50 ministerial office tower is home to ca. 1,000 persons including officers, staff, and visitors per day. A 2-300m3/d system can save 1,000,000 (one million!) plastic bottles per year, as water can be consumed directly from tab or be served in reusable glass bottles to the patrons by the building management staff, using water from tab anywhere in the building. As IKN is open for foreign direct investment as much as for innovative and sustainable technologies supporting the green infrastructure initiative, AEG is a welcome partner to invest and provide water as a service, starting with the true role models of the nation, its elected official representation, the government administration itself.

Second, the invested deployment of mobile water treatment systems producing water in a quality suitable for the immense amount of concrete produced on the vast project site, serving more than 1,000 individual projects currently under construction. Adding to the mobility aspect in this project are tanker trucks that will be the logistics link between suitable raw water intake and filtration locations and the individual project sites, where contractors are operating and require reliable quality and quantity of water to meet their target deadlines, on specification and budget. With the support of the concerned coordinating government agencies, AEG can negotiate direct B2B off-take agreements with the appointed contractors and flexibly relocate the mobile treatment and filling stations to meet demand.

WATER & POWER NEXUS

As we all know, in archipelagos and countries with long coastlines, renewable power is a challenge that today is attempted to be overcome by using solar and wind to generate electricity.

Aside from excessive Capex and land or water surface use, these solutions are highly visible and unpleasantly disturb the beautiful environment for such regions development of hospitality industries and to preserve the traditional and natural environment.

AEG is working with a patented turbine generator manufacturer from Europe that yields a capacity factor of +70%, an IVC factor of +70%, being able to offer the lowest LCOE in the industry.

Contact the AEG team today to learn more, and join us during the 10th World Water Forum in Bali next month.

Figen Keil Cao Tri Nguyen Guillaume Langlois Duc Pham Fakri Karim Jean Luc Stanek Irman Boyle Y Bayu Wirawan Burkhard Hinz

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Coordinating Ministry for Economic Affairs of the Republic of Indonesia Coordinating Ministry for Maritime and Investment Affairs Republic of Indonesia

Ministry of National Development Planning/Bappenas Republic of Indonesia Direktorat Pendanaan Luar Negeri Multilateral Kementerian PPN/Bappenas Kementerian Pekerjaan Umum dan Perumahan Rakyat (PUPR) PT PLN (Persero) PLN Indonesia Power PT PLN Nusantara Power Indonesia Infrastructure Finance PT Penjaminan Infrastruktur Indonesia (Persero) APEKSI - Asosiasi Pemerintah Kota Seluruh Indonesia | Association of Indonesia Municipalities KfW Indonesia Investment Authority (INA) Otorita Ibu Kota Nusantara (Nusantara Capital Authority) Ibu Kota Nusantara Bali Hotels Association 德国国际合作机构 GIZ Indonesia & ASEAN Hace CERAFILTEC Vietnam ALPHA ENVIRONMENTAL GROUP