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Review of a financial product

Financing of Energy Efficiency

Projects

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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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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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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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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