Session 2 - Renewable Energy Financing2

7/29/2019 Session 2 - Renewable Energy Financing2

1/18

Bankers Perspective

Presented By:

Himalayan Bank Ltd.


2/18

Capital Base: Rs 5.04 B (inc. reserves)

Total Asset Size: 55.43 B

Total Loans & Advances: 35.96 B

Total Deposits: Rs 47.73 B

Operating Profit: 1.65 B Net Profit : 1.05 B

NPA: 2.06 %

Number of Branches: 39

Number of Himal Remit Agents : 3,200 Plus

USD 854 Million in Inward Remittances

Note: Provisional figures are as on FY 2011 / 12. (FY 2068/69 BS)


3/18

Nepal at present is experiencing energy crisis of

unprecedented severity

Low rural electrification rate, acute power shortage in

urban areas and high dependency on traditional biomass

fuels, particularly fuel wood.

Dependency on fossil fuel for generators

Renewable Energy (RE) contributes towards reduction of

green house gas emission.


4/18

Two successful stories of HBL in Clean Energy / Renewal

Energy Sector

Cleaner Production Fund (C P Fund)

Micro Hydro Debt Fund (MHDF)


5/18

HBL has been selected for the management of MHDF

under GIZ / AEPC

In the past one year financed 6 MHP amounting Rs 20

Million.

More than 10 MHPs are in the process of being analyzed

for financing.


6/18

Micro Hydro Projects :

Khani Khoka (20 Kw) : Kavre District

Chari Khola (80 Kw ) : Ramechhap District Thulo Khola (50 Kw) : Okhaldhunga District

Swara Tap Khola (30 Kw): Khotang District

Lumju Khola (20) : Khotang District

Midim Khola (100 Kw) : Lamjung District


7/18

Solar Home System :

SHS financing to Indigenous Chepang Community of

Silinge VDC, Makwanpur District.


8/18

Exposure of the bank and its staff to the rural sector

Adds to the Image of the bank

New Area for Investment

Excellent Payback


9/18

Renewable Energy represents significantly largely

untapped opportunity for meeting the dual goals of

financial return and environment protection

Financing for Acquisition of Equipment, Services and

Adopting Measures for Enhancement of Energy /

Conservation of Energy


10/18

Cash Flow should justify cost saving and repaymentcapability

The project should be identified and recommended by

AEPC

Basic Banking Criteria must be fulfilled :

Should not be blacklisted

Should have credibility in the market

Should be profitable and self sustaining

We need to develop required technical manpower at the

bank from concerned agencies.


11/18

Maximum 30 % of the total project cost

Financing will be in Term Loan Only (however the bank

will provide a moratorium period of six months during

which the project will only pay interest) Repayment of Loan will be on EMI Basis

Maximum 5 Years (Including Moratorium Period, If Any)

Interest Rate : 10 % currently for projects under MHDF

and for other projects as per the market condition. (In case

of subsidy, the rate will be as per the contract)


12/18

The entire project land / building, machinery should

be mortgaged / hypothecated in favour of the bank.

Personal guarantee of the members of the committee


13/18

New Avenue for Investment

Socially Responsible Business


14/18

Initial Cost for establishing such units are relatively high

and thus its difficult to arrange for Renewable Energy

Financing

A major factor which will contribute to whether these

projects are viable or not will also depends on the

amount of subsidy from donor / government, built intothe financing structure.

Limited Capital Availability

Loan Administration costs-The cost of monitoring

Transaction costs of small projects are often a key issue

Problem in follow up for repayment, recourse action

Operation and maintenance is a weak link in rural sector


15/18

Partner Agencies to do thorough home work about the

overall viability of the project before recommending

for bank finance

Preferably should have lower D/E. 30/70 is the best D/ERatio for Renewal Energy Financing in Rural Sector

Cash Flow should justify the repayment of the loan

The RE project should be self sustaining and should

also promote/enhance the overall productive activities

of the community instead of just lighting


16/18

Though Renewable Energy Financing is a relativelynew sector for the bank. However we have a

success story of managing C.P. Fund and

financing in renewal energy, namely micro hydro

and solar home system, where all the project s

payment history are excellent.

Energy Sector is one of the most profitable sector

across other sectors Chilime, Bhote Koshi,

Khimti etc.


17/18

Recently Nepal Rastra Bank has made it mandatory for

all commercial banks to invest 10 % of their entire

loan portfolio in energy and / or agriculture sector.

As there is a market, this mandatory requirement by the

central bank and government support, this sector can

achieve attractive returns to all the stake holders,

government, society, investors, financers and

borrowers


18/18

Thank You!!

Documents

Session 2 - Renewable Energy Financing2