Financial Development

Cooperation on Energy Efficiency

Bank aus Verantwortung

Trigeneration Technology – Promotion of Energy Efficiency in

Indian Building Sector

Federation House, New Delhi

26 August 2013

K Usha Rao, Senior Sector Specialist, Energy, KfW New Delhi

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More than 60 years of KfW Financing with a public mission

› Promotional bank of the Federal Republic of Germany

› Founded in 1948 as Kreditanstalt für Wiederaufbau

› Shareholders: 80% Federal Republic,

20% federal states

› Headquarters: Frankfurt am Main

Branches: Berlin, Bonn and Cologne

› Representative offices: around 70 offices and representations worldwide

› Balance sheet total as at September 2012:

EUR 517.9 billion

› Financing volume 2012: EUR 73.4 billion

› 5,440 employees (2012)

› Best rating: AAA/Aaa/AAA

3

KfW Bankengruppe at a glance

We promote

development

Promotion of

developing and

transition countries

International business

We promote Germany

Promotion

construction

of new housing

and modernisation

as well as education

Promotion SMEs,

business founders,

start-ups

Financing municipal

infrastructure projects

and

global loans

Domestic business

We ensure

internationalisation

International

project and

export finance

Promotion of Climate and Enviornmental Protection

Business Area

Mittelstandsbank

Business Area

Privatkundenbank

Business Area

Kommunalbank

Business Area

Export and Project

Finance

Business Area

Promotion of Developing

and Transition Countries

4

KfW‘s Energy portfolio in

India compared to other

countries

1,450

533

514

290

221

207

197

182

178

165

0 200 400 600 800 1,000 1,200 1,400 1,600

India

Egypt

Interregio

nal

Serbia

China

Morocco

Nepal

Brazil

Albania

Pakistan

in mn. EUR

KfW Loan Structure in India

State Government

Government of India

(Borrower)

1 2 3

4

5 n

Pvt / Public Sector Project Developers

State FI

Central

Financial Institutions

(FI - Borrower)

Sovereign

Guarantee

Utilities

Central

PSUs -

Borrower

Overview

EE Finance Schemes supported by KfW in India

Small and Medium-sized

Enterprises

Small Industries Development Bank of India

Residential Housing

National Housing Bank

Public Buildings and

Infrastructure

Energy Efficiency Services Ltd. (EESL)

Efficient and environment

friendly cooling Under planning

Lessons from Energy Efficiency Financing

1 EE in Medium &

Small Enterprises SIDBI

Sub-

Borrowers 50 0.5

2 EE in Buildings NHB Sub-

Borrowers 50 1.5

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3 SIDBI II SIDBI SIDBI 70 1.5

4 EESL EESL EESL 50 1.5

On going

Planned –

lessons from

SIDBI-I

Appraisal

5

Efficient and

Environment

cooling

? ? 40 ? Partner

identification

Study

Objectives

› Reduce emissions of greenhouse gases by Indian SMEs by min. 80.000 tons

p.a.

› Raise SME investments in energy efficient technologies

› Broaden SIDBI´s financial instruments and “institutionalize” EE lending

Approach

› EUR 50 Mio credit line to SIDBI for on-lending to Indian SME

› EUR 0.5 Mio grant for technical assistance (training, marketing, monitoring)

› List of eligible EE measures plus assessment tool for more complex cases

Small and Medium-sized Enterprises: Objectives and

Approach

› EE potential exists and significant but barriers continue – lack of

information, performance guarantee (demonstration), etc.

› Challenges of building a pipeline of projects for financing based

on assessment tool

› Not a mainstreamed activity at the branch levels of the Financial

institutions ( in terms of processes)

› Data availability, monitoring and reporting

› Lack of perceived incentives

› Low priority for borrowing by SME ( capacity expansion,

technology upgradation but retrofit?)

Lesson learnt: (SIDBI): Financing Energy Efficiency in Small

and Medium-sized Enterprises

› Establish a pilot programme for

promoting energy efficient new

residential housing in urban areas

› Transfer successful elements of the

decade-long experience of promoting

energy efficient residential buildings in

Germany to India

› Energy need of refinanced buildings

at least 30% lower than benchmark

building

› Adaptation of robust tool for energy

performance assessment to Indian

conditions (e.g. climate, behaviour),

cooperation Fraunhofer/ TERI

Residential Housing: Project Objectives

› KfW Entwicklungsbank provides

concessional loan of EUR 50 million

to National Housing Bank (NHB)

› NHB refinances local banks and

housing finance companies

› Banks issue loans to the buyers of

energy efficient apartments (1300

loans)

› Complementary technical assistance

for capacity building of stakeholders

(e.g. developers and finance

institutions) ( more than 20,000

homes certified)

Residential Housing:

Project Volume and Financing Mechanism

› EE financing instruments can adopt simple but robust tools

for energy performance assessment

› Adaptation of simple but robust tool for energy

performance assessment to Indian conditions (e.g.

climate) through a Research Cooperation Fraunhofer/

TERI

› Standardization, Labelling and Certification create new

demand for EE loan products

› Energy need of refinanced buildings at least 30% lower

than benchmark building

› Need for incentives for market development

Lesson learnt:Promoting Energy Efficient Residential

Housing

Objectives

EESL created in 2009 to support implementation of the “National Mission for

Enhanced Energy Efficiency” (NMEEE) with the following tasks:

› Super ESCO for implementation of EE projects

› Consultancy for CDM and energy efficiency

› Resource center for capacity building of SDAs, utilities and other players

Approach

› Up to EUR 50 Mio credit line and up to EUR 1.5 Mio grant for technical

assistance

› Currently support to EESL business planning for ESCO investment operations

Public Buildings and Infrastructure:

Energy Efficiency Services Ltd. (EESL)

› ESCO business still at nascent stages

› Significant capacity building requirement – technical and financial for

scale up

› Contracting Issues (risk sharing and revenue collection); performance

guarantees and payment security

› Regulations – Central and State levels

› Monitoring and Verification requirements – capacity and scope

› Others??

Lessons Evolving: EESL

› There are many challenges to adoption of EE measures that financing alone

cannot address them - lack of baselines, technological performance

guarantee, etc.

› Financing is most effective as part of a promotional system including

regulation and information/consulting (incl. labeling), benchmarks/standards)

› Standardization, simple eligibility criteria and user-friendly tools are key to

scaling up EE finance

› Management commitment and staff incentives are critical factors when

working with local financial institution

› EE finance schemes should support innovative business models (e.g.

ESCOs) and related innovative financing products

› Well-designed public EE finance can catalyze private investment

› Any subsidies provided should first focus on supporting institutional learning

of local financial institutions

› Market transformation requires a mix of policy, regulation and incentives

Summary of Lessons learnt

Thank you for your attention

Contact Information:

KfW Office New Delhi 21, Jor Bagh

New Delhi 110003 India

T.: +91 11 24 64 71 13

E.: usha.rao@kfw.de

W.: www.kfw.de

Key Steps

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Project Executing Agency sends the request to line Ministry in a

prescribed format; the line Ministry forwards the request to DEA; KfW

could support preparatory/prefeasibility studies

http://finmin.nic.in/the_ministry/dept_eco_affairs/pmu/DEA_Handbook

_BDA.pdf

DEA forwards the request to the German Embassy; KfW receives the

proposal from the German Embassy

Inter – governmental commitment between DEA and BMZ (Gov of

Germany)

Project Appraisal by KfW; information about results to DEA

Internal governmental requirements to be fulfilled both within GOI and

Govt of Germany

Loan agreements are concluded between KfW and GOI; DEA on lends

the funds to State Govt. to further on lend to PEAs