Sidbi presentation

ESCO Financing : Opportunities and ESCO Financing : Opportunities and Road blocksRoad blocksRoad blocksRoad blocks

January 25, 2017 at IIT Madras Research Park

http://prsf.sidbi.in/

Sustainable Initiatives of SIDBI

EE and ESCO Scenario

Partial Risk Sharing Facility for Energy Efficiency

Product Details

Presentation OverviewPresentation Overview

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Product Details

Basic eligibility criteria for PRSF coverage

Schema of PRSF

Role of various stakeholders

SIDBI’s initiatives in Sustainable DevelopmentSIDBI’s initiatives in Sustainable Development

Introduced schemes for financing Energy Efficiency (EE) & Cleaner Production projects in MSME sector.

Entered into strategic partnership with BEE, TIFAC, The World Bank, DFID, JICA, KfW, GIZ & AFD for promoting & financing clean & EE investments in MSME sector.

Created a dedicated team of experts housed at “Energy Efficiency

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Created a dedicated team of experts housed at “Energy Efficiency Centre” for focused approach.

Besides financing, also actively pursuing various developmental initiatives including WB-GEF Project, 4E scheme, PRSF project etc.

Conducted awareness campaigns, focused group meetings, energy audits, pilot interventions in MSME clusters.

SIDBI’s EE assistance/Initiatives: HighlightsSIDBI’s EE assistance/Initiatives: Highlights

Sanctioned Assistance of around Rs.5900 crore to more than 6800 MSME units.

Sanctioned more than Rs. 400 crore in RE Projects

More than 1043 Million units of electricity saved

Thermal energy savings of 650,000 million kCal

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Thermal energy savings of 650,000 million kCal

Resulted in reduction of around 1 million t of CO2 annually

Financed Green Buildings/Energy Efficient buildings aggregating to an amount of more than Rs. 100 crore

Reached more than 100 industrial clusters and have created awareness on EE

Commitment to reduce the CO2 emissions intensity by 33-35% by 2030 from 2005 levels.

Increased thrust on Energy Efficiency, RenewableEnergy, Cleaner Production, etc.

India’s Intended Nationally Determined Contributions (INDCs): Key points

India’s Intended Nationally Determined Contributions (INDCs): Key points

Investment of USD 2.5 trillion required for meeting India’s climate change actions.

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Energy Efficiency Largest & Lowest Source of Emission Reduction

Top priority of Indian Government – initiating various program

Demand Despite huge EE potential most end users unable to implement EE project

because lack of understanding / technical capability to execute the projects

Opportunities for ESCOOpportunities for ESCO

because lack of understanding / technical capability to execute the projects

Role of Intermediary (ESCO) ESCO plays a key role – helps clients overcome key EE market barriers

ESCO – offers EE technologies / services with guaranteed savings

ESCO – establish credibility through ESPC – guarantees the host entity certainlevel of energy savings

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• China’s energy savings are more than half ofthe energy savings worldwide.

• ESCO market in China More than 5,000 registered ESCOs

ESCO Market in ChinaESCO Market in China

Annual business turnover – US$10 billion

Many other countries also have thriving ESCObusiness.

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• ESCO market in India Around 139 registered ESCOs. Only a few are

active. Annual business turnover – very small

Some major barriers are :

ESCO Market in IndiaESCO Market in India

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Some major barriers are : Limited awareness amongst the Host entities Weak financial position of ESCOs Limited access to bank finance due to asset &

security coverage issues M&V disputes No standard templates of ESPC, TRA, etc. Dispute resolution mechanism

What is PRSF

PRSF is a guarantee program (risk sharing mechanism)

Objective

to kick-start market for energy efficiency projects implementedby ESCO through performance contracting

To demonstrate viability of ESPC market for scaling up EEprojects

To reduce the risk perceived by commercial bank in providing

PRSF – Overview PRSF – Overview

To reduce the risk perceived by commercial bank in providingcredit to Energy Efficiency projects / to ESCOs

To address barriers faced by ESCOs in availing finance

Project Components

Component 1 - Risk Sharing Facility (USD 37 Mn)

Component 2 - Technical Assistance (USD 6 Mn)

Project Duration

15 Years

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PRSF – Guarantee product detailsPRSF – Guarantee product details

Eligible Hosts / Sectors

• Large industries (excluding thermal power plants)

• MSMEs • Municipalities• Buildings

Eligible EE Loans

• Loan to ESCO or host entity falling under Micro & Small Category

• Min. 75% of loan towards EE investment

Eligible ESCOs

• BEE-Empanelled ESCO

• JV / Consortium allowed

• Other entities are also eligible subject to grading by rating agency

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agency

Extent of Coverage

• 75% of loan or o/s• Min. loan – Rs.10

Lakh • Max. loan – Rs.15 cr. • Max. exposure to a

single Host / ESCO – Rs. 45 cr. (Grade 5 – Rs. 40 cr.)

Guarantee Tenure

• 5 Years or loan tenure, whichever is lower

Guarantee Fee

• Slab-Wise & based on the grading of ESCO

PRSF – Guarantee Fee StructurePRSF – Guarantee Fee Structure

Guaranteed Loan

Amount or outstanding,

which-ever is lower (INR)

Non-Refundable Annual Guarantee Fee

For Grade 1 to Grade 3

ESCOFor Grade 4 ESCO

For Grade 5

ESCO

Up to Rs. 500 Lakhs 1.00% subject to a

maximum of Rs. 5.00 Lakh

1.00% subject to a

maximum of Rs. 5.00

Lakh

1% subject

to maximum

of Rs. 15.00

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Lakh of Rs. 15.00

lakh

Above Rs. 500 lakhs and

uptoRs. 1000 lakhs

Rs. 5.00 lakhs plus 0.50%

on the amount above 500

Lakhs subject to a

maximum of Rs. 7.50 lakh

Rs. 5.00 lakhs plus

0.75% on the amount

above 500 Lakhs

subject to a maximum of

Rs. 8.75 lakh

Above Rs. 1000 lakhs and

up to Rs. 1500 lakhs

Rs. 7.50 lakhs plus 0.25%

on the amount above 1000

lakhs subject to a

maximum of Rs. 8.75 lakh

Rs. 8.75 lakhs plus

0.50% on the amount

above 1000 lakhs

subject to a maximum of

Rs. 11.25 lakh

• Energy saving project

• EE to be implemented by an ESCO

• ESCO to be empanelled with BEE or graded by

rating agencies

Basic Eligibility Criteria for PRSF CoverageBasic Eligibility Criteria for PRSF Coverage

• Project Beneficiary - i) MSMEs, ii) Buildings, iii)

Municipalities, iv) Large industries (excluding

thermal power plants)

• Borrower should be a Micro / Small Enterprise

• ESPC between host and ESCO12

• Escrow / TRA mechanism

• Key clauses covering to be captured in the Loan

Agreement

Basic Eligibility Criteria for PRSF CoverageBasic Eligibility Criteria for PRSF Coverage

Agreement

• right to access the site,

• ERMF compliance,

• sanctionable practices, etc.,

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PRSF – Overall SchemePRSF – Overall Scheme

ESCO and Host initiate discussion on ESCO project

DEA / Identification of energy saving opportunities

Decision on Shared / Guaranteed Saving

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Decision on Shared / Guaranteed Saving

Contract signing (ESPC)

Borrower approach PFI / SIDBI for loan


Appraisal & loan sanction considering PRSF req.

PFI to submit PRSF guarantee application

Evaluation of guarantee application

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Evaluation of guarantee application

Issuance of PRSF guarantee

Payment of Guarantee fee within 30 days


Effectiveness of the guarantee

Quarterly report by the PFI

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Payment of annual guarantee fee

Loan closure – guarantee coverage comes to an end

Interactions between stakeholdersInteractions between stakeholders

Risk Coverage

PFIFinancing

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SIDBI

PFI

Borrower

Project

ESCO Host

For PRSF SuccessFor PRSF Success

PRSF

PFI

HostPEA PRSF Host

ESCO

PEA

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• Sign MoU with PEA and fulfill preparatory activities

• Sign Master Guarantee Agreement

• Sanction the loan and sign loan agmt. (key clauses)

• Sign TRA / ESCROW Agreement

• Apply for PRSF Guarantee

Role of PFIsRole of PFIs

• Apply for PRSF Guarantee

• Submitting information on periodic basis to PEA

• Monitoring and follow-up of the loan

• M&V exercise through a third party agency hired by PEA

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• Conduct detailed energy audit in the Host facility

• Sign ESPC with the Host

• Approach Bank for loan with required documents

• Sign the Escrow / TRA agreement

• Undertake installation, commissioning, operation, maintenance

Role of ESCOsRole of ESCOs

of energy savings projects

• Undertake training of Host personnel, as necessary

• Resolve the technical underperformance of the implementedenergy savings project, if any

• Conduct Environmental Safeguards Due Diligence (ESDD)

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• Support ESCO for preparation of IGEA, ESPC and M&V Plan

• Sign ESPC with the ESCO

• In case of guaranteed savings, approach Bank for loan withrequired documents

• Sign the Escrow / TRA agreement

• Deposit monetized value of energy savings as per the schedule

Role of HostsRole of Hosts

• Deposit monetized value of energy savings as per the schedule

• Comply with ERMF guidelines & ESDD report

• Extend cooperation to ESCO in resolving technicalunderperformance

• Provide access to lender/ESCO/PEA or their representatives forM&V

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• Act as the nodal agency for the guarantee facility

• Sign MoU and MGA with PFIs

• Develop a common platform in the form of dedicated website forPRSF operation

• Provide guarantee approval for eligible EE projects

Role of PEARole of PEA

• Process the guarantee claim and in eligible cases release theeligible guarantee

• Due diligence / M&V of projects on sample basis

• Conduct of M&V where claims have been lodged

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• Marketing & outreach activities

• Standard documents viz. ESPC, TRA, etc.

• Appraisal / due-diligence tools for EE projects (underdevelopment)

Role of PEA - Support to PFIsRole of PEA - Support to PFIs

development)

• Training of PFIs on EE financing

• E-Learning modules on EE financing (under development)

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• Market development

• Improved availability of finance

• Standard templates of IGDPR, ESPC, TRA, etc.

Role of PEA - Support to ESCOsRole of PEA - Support to ESCOs

• Standard templates of IGDPR, ESPC, TRA, etc.

• Matchmaking and loan syndication support for the initial fewprojects

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PRSF Website - http://prsf.sidbi.in/PRSF Website - http://prsf.sidbi.in/

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• Matchmaking platform in PRSF website

• E-learning module to train Banks/FIs and ESCOs

• Interactive meets with ESCOs/PFIs/Hosts

On going TA Activities for promoting ESCO marketOn going TA Activities for promoting ESCO market

• Training of Banks/ FIs / NBFCs

• Marketing of PRSF

• Due diligence tool for PFIs

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SIDBI & PFI Officials Training ProgramsSIDBI & PFI Officials Training Programs

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Interactive Meet with ESCOs and PFIsInteractive Meet with ESCOs and PFIs

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PRSF Website Up gradationPRSF Website Up gradation

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