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8/6/2019 Sanjoy Sanyal - Financing of EE Projects
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World Resources Institute
Review of a financial product
Financing of Energy Efficiency
Projects
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World Resources Institute
Agenda
Why we did what we did?
What did we do?
How did we go about it?
What have we learnt so far?
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We help investments flow in the green space
Research showed that
financing was a key issue
in ESCO growth in India
We do this in two ways:- Showcasing green entrepreneurs
- Developing investor based research
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World Resources Institute
The financing product would target SMEs
SIZE
More than 13.3 million MSME units. Largest employer after agriculture in India. Contributed more than 11% to GDP in FY 2006-07. More than 40% share in export.
FEATURES
A substantial number of units are proprietorship / family ownedconcern.
Has high level of energy consumption. Lack of awareness of cleaner and energy efficient production
options / technology.
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SME Industries with high EE potential
Pulp & paper, textile 25 %
Glass & ceramics, sugar 20 %
Cement, fertilizer, petrochemicals 15% Aluminum, iron & steel, refineries 25-30%
Buildings Sector 10 %
Source: CII and Government of India
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Our objective: Help banks finance clients
It was difficult for the banks to finance ESCOs
But could the banks finance the clients?
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The Product Structure
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Our Pitch to the Banks
1. Client increases profitability
2. Client improves assets/equipment
3. ESCO guarantees energy savings
We talked to a dozen banks
We had detailed discussions with twoWe had partnered with one
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There are SME EE lines available
In particular administered by SIDBI JICA Line of Credit
KfW Lines of Credit
AFD lines of Credit
Green Loan Scheme Green Rating Scheme
SRIJAN scheme (for technology innovation)
The financial disbursements on these lines is over INR 15 billion
However individual loans are smaller capped at INR 250k
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Partner Bank
One of Indiaslargest commercialbanks
Operated as a DFI from 1964 to2004
816 Branches
Very strong in the MSME market
The MOU between WRI and IDBI was signed in October2010
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World Resources Institute
The Product Details
Security
Hypothecation of equipment
Energy Services Agreement with Performance Guarantee
by the ESCO
Special Guarantee for loans less than USD 200k
Inclusion of Soft Costs
Cost of consulting
Cost of Detailed Project Report (DPR) creation Cost of alterations and modifications
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World Resources Institute
Our Engagement Process
IDBI defines
ESCO
Financial
Product
MOU signedwith IDBI
Training of
bank
officials
SMEprojects
identified
by ESCO
Finalizationof financing
Proposals
August 2010
October 2010
December 2010Ongoing
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Marketing Locations
To identify ideal target customers
To facilitate ESCO-Bank-SME
relationship
To fine tune financial product
Bangalore clusterElectronics and autocomponents
Ahmadabad cluster
Engineering
Coimbatore clusterTextiles
ELPRO is ourESCO partner
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Align with Policy Measures
Bureau of Energy Efficiency has identified multiple SMEclusters
Each SME cluster has been assigned to an ESCO
ESCOs are in charge of assessment andrecommendations
And for creation of DPRs and capacity creation
There is opportunity for us to follow ESCOs in these SME clusters