financing sustainable energy in asia
DESCRIPTION
Talk given by Clive Mason at Senior Advisor, Asia Sustainable and Alternative Energy ProgramTRANSCRIPT
THE WORLD BANK
Financing Sustainable Energyin Asia
May 30th, 2008
Clive MasonSenior Advisor, Asia Sustainable and Alternative Energy Program (ASTAE)World Bank Group
THE WORLD BANK
Mobilizing Commercial Lending for Sustainable Energy
World Bank and IFC Experience Financing Sustainable Energy Programmatic Carbon Approach Risk Sharing
THE WORLD BANK
What we can do•Mobilize commercial funding for
sustainable energy investments by way of specialized banking instruments
•Enhancement of entrepreneurs creditworthiness through an innovative programmatic carbon credit approach
•Capacity building, market development and targeted technical assistance
•Awareness raising and marketing activities
•Scaling up business: development of financing structures that can be replicated
Working with Banks
THE WORLD BANK Chronology
1997 Hungary Energy Efficiency Co-Financing Program (HEECP): partial credit guarantee plus advisory services
2001 HEECP2: IFC contributes $12 million from its own funds
2003 Commercializing Energy Efficiency Finance Program (CEEF): Czech Republic, Slovakia, Lithuania, Latvia, Estonia
2005 Russia Sustainable Energy Finance program (RSEFP)
credit lines plus extensive advisory program2006 China Utility based Energy Efficiency program
(CHUEE): Risk sharing facility plus advisory program2007 WB signs first Carbon Credit agreement with
Thailand
THE WORLD BANK Program Execution
CEEF Guarantees 1997- 2007 (as of 26 January 2007)
130,583 34,217931,184
154,528 128,7021,541,609
3,650,567
5,842,677
15,267,034
6,367,950
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Year
Gua
rant
ee in
US
$
Cummulative
Per Year
THE WORLD BANK
Overall
Energy commitments over FY06-FY08 to exceed $10 billion, up by 40% as compared to previous three year period. FY06 lending for renewable and energy efficiency: $668 million; more than double the Bonn target (increase 20% per year) and should continue to increase Carbon finance: In collaboration with public and private sector participants, WBG played a critical role in creating the carbon market, With $2 billion of carbon funds under its management
THE WORLD BANK
Mobilizing Finance
Sector often unfamiliar to financial institutions so:
– provision of credit lines coupled with technical assistance
– provision of partial risk guarantees, with TA
Banking sector largely unfamiliar with the sector, or risks, and usually unwilling to provide project debt finance in excess of 30% Increase term of loan Collateral Interest rate
THE WORLD BANK
CHUEE Project China Working with Industrial Bank (May 2006) and
recently Bank of Beijing (June 2007) January 2007 – first deal approved Technical assistance (overcoming the technical
risk barrier):-- training on energy efficiency and EE credit underwriting- due diligence studies, risk assessment and control in EE projects- marketing support- development of new EE financing products
In just 1 year; portfolio of 134 projects, totaling US$700m
THE WORLD BANK
Guarantee Facility Agreement
GEF IFC/GEF
Transaction or Portfolio Guarantees
Grant $
Typical Guarantee Program Structure
IFC
LOCAL FINANCIAL
INSTITUTION
End-user
ESCO
SE Project Loans
Lease Energy ServicesAgreements
End-user
End-userVendor
Investment $
LOCAL FINANCIAL
INSTITUTION Technical Assistance
THE WORLD BANK Global Recognition – Industrial Bank of China nominated by the Financial Times, for 2 sustainable banking awards (2007)
THE WORLD BANK
Proposed Guarantee Structure for Thailand
Creation of a risk sharing facility (RSF) to cover a percentage of loss contingencies.
RSF supports $80m of local bank debt financing for renewable energy investment.
Assuming a prospective 1:1 debt/equity ratio, equates to support for new total project investment of $160m.
Integrated TA to banks to enhance sectoral skills in; credit risk assessment, risk pricing, project design, appropriate technology, selection of bankable projects, and carbon credit documentation.
Prospective generation of $3m/year (for 10 years) of carbon credits produced by renewable energy capacity or EE investments.
THE WORLD BANK Risk Sharing Structure – Guarantee facility to support $80m line of credit
2nd Loss for 90% of
portfolio amount
1st Loss for 10% of portfolio
amount
Local Bank 25%
WB 75%
WB 40% Local Commerci
alBank 60%
In case of guarantee call, repayment from RSF
THE WORLD BANK
Guarantee Agreement
ThaiGovt
WB
Transaction or Portfolio Guarantees
Loan $XXm
Outline Program Structure
GEF/Donors
LOCAL FINANCIAL
INSTITUTION
End-user
ESCO
SE Project Loans
Lease Energy ServicesAgreements
End-user
PPsVendor
LOCAL BANK(s) Technical
Assistance
Repayment
GUARANTEE FUND(RSF)
Held by local FIInterest bearing
CarbonCarbonCreditsCredits
Deposit$XXm
Re-flows
$Xm
$Xm $
THE WORLD BANK Pipeline
Thailand - $80m risk sharing facility. China – CHUEE2, $300m. Cambodia – $6m Renewable energy
financing facility Pacific Islands REFP Vietnam – $100m proposed energy
efficiency and cleaner production financing facility
Philippines and Indonesia – proposed programs
