Leasing companies and Sustainable Energy investment

– a plethora of exciting business opportunities

IFC experience in Europe, Middle East, and North Africa regionsPrague

January 1-3, 2012

IFC

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• Sustainability

• Additionality – advisory with focus on creating own internal capacity

• Member of the World Bank Group – political risks mitigation

• Efficiency - compare to other Development Institutions

• IFC is the largest global development institution (182 member countries), focused on the private sector in developing countries, working in their frontier regions - 20-30% of portfolio, investment portfolio in Russia - $2.24 bln

IFC Sustainable Energy Investments via FIs

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Country: PeruPFI: BBVA Banco ContinentalIFC investment: $30M credit line

Countries: Central/Eastern EuropeFIs: Multiple banksIFC investment: $321M in lines of credit and guarantee facilities

Country: ChinaFIs: Industrial Bank, Bank of Beijing and Shanghai Pudong Development BankIFC investment: $275M risk sharing facilities support SE loans of more than $500M

Country: TurkeyFI: Yapi Kredi LeasingIFC investment: $75M credit line

Country: MexicoPFI: VerticeIFC investment: $20M line of credit for energy efficient housingOngoing: Panama, Costa Rica,

Country: BrazilFIs: Banco Real & UnibancoIFC investment: $80M credit line

Country: Russia, Ukraine, Belarus, FIs: 12 Financial Institutions IFC investment: $185M in credit lines

Key Takeaway from IFC experiencein Europe, Central Asia, and Middle East and North

Africa regions

•There is a HUGE market for Energy Efficiency leasing

finance

•Market is DIVERSE – many niches

•Niche LEADERSHIP possible

•IFC provides funding and/or guarantees + Advisory

Services

•COMPETITIVE EDGE in new markets

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• Achieving 45% energy efficiency potential in Russia would cost USD 320 billion

• Energy Efficiency Potential (WB study):

Manufacturing industry: $37 billion

Housing and utilities sector : $43 billion

Power sector: $106 billion investments annually

• Developing economies need $97 billion in SEF annually *

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Dispersed resource

New business opportunities for banks and leasing companies: financing of energy and resource efficiency projects in SME and corporate sector

* Source: McKinsey Global Institute 2008

A capital investment resulting in improvement against baseline:

• Energy Efficiency (EE): Decrease in per unit (and/or total) energy consumption

• Clean Energy (CE): More access to energy with less impact on the environment (including renewable sources)

• Cleaner Production (CP): Increase in material yield, reduction in emission of waste and hazardous substances

A repair/upgrade,

replacement of equipment units,

expansion of facilities

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Sustainable Energy Finance Project

• Expanded market share through new business line:

• Innovative product/first mover advantage• Sell on value to customer, not pricing• Monetize existing client base, attract quality new clients• New marketing channels through vendor partnerships

• Improved risk profile of portfolio:• Energy cost savings as a part of cash-flow• IFC risk sharing products

• Positive social and environmental impacts:• Enhanced brand reputation, PR opportunities

Key Benefits for Financial Institutions

For Informational Purposes Only7

• 12 partner Financial Institutions

• 250 projects / $213M worth financed

• Annual energy savings over $35M

• Annual energy consumption down by 1674GWh

• Greenhouse gas emission down by 450 000 tСО2 per year

• Median project amount $300K ($900 average)68

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Food Energy and Utilities

Con-struction

Chemical and Plastic

Light Metals and Machinery

Glass Wood Process-ingServices

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Russian experience

Work with Financial Institutions

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Investment + Advisory

Standalone Advisory

EMEN

AR

USS

IA

Regional expansion

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EE/RE Leasing FeaturesAll types of Leasing Companies can benefit from Partnership Opportunities

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Partners can be:

• Equipment Manufacturers

• Product Retailers

• Installation Contractors

• Electric and Heat Distribution

Companies

• Engineering Consultants

• Marketing and Sales

Representatives

• Energy Services Companies

(ESCOs)

Benefits under our terms:• Many types of equipment

may be financed

• No minimum or maximum

size

• Can be utilized in all sectors • Equipment may be reused (co- generation, large boilers,

industrial processes)

• New marketing channel

through new vendor partnerships

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CONFECTIONARY FACTORY

Process equipment: new automatic chocolate line

Investment: $233,000

Energy cost reduced: 33%/unit

Payback: 2 years

Improved product quality, increase in output capacity

CAR MANUFACTURING PLANT

Lighting system retrofit:

new automatic lighting management system

Investment: $300,000

Savings: $100,000/year

Payback: 3 years

Improved quality of lighting

SUNFLOWER OIL

PRODUCER

Renewable energy: boiler fueled by sunflower seed husks

Investment: $1,100,000

Gas savings: 660,000 m3/month of gas per month ($39,000/month)

Payback: ~2.5 years

EXAMPLES

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YAPI KREDI LEASING

Turkey (‘09-10)

Process equipment light industry

Investment: $50M IFC loan

Energy cost reduced: 36%/unit

Projects: 39

Median project amount: $315 ($700 average)

Financed: $28M

Improved product quality, increase in output capacity

BOILERS MANUFACTURING

PLANT

Process equipment: bending machine + plasma cutting system to make gas boilers

Investment (leasing): $194,000

Savings: $235,000/year

Payback: < 1 year

Improved quality

EXAMPLES

CO-GENERATION

Energy equipment: new gas piston cogeneration machine

Investment: $2,4M

Energy consumption per unit of output down: 33%

Annual energy savings: $637 000

Payback: 2 years

Improved product quality, increase in output capacity

Contacts

Europe and Central Asia Region

IFC Advisory services :

Maxim Titov Program Manager

Russia Sustainable Energy Finance Program

Tel: +7 (495) 411 7555 mtitov@ifc.org

For Informational Purposes Only13

Elena Shonya Deputy Program Manager

Russia Sustainable Energy Finance Program

Tel: +7 (495) 411 7555 eshonya@ifc.org

• Eligible transaction must be a project to finance reconstruction, renovation or refurbishment

• Financing may be in the form of sub-loans/leases, aimed at investing into fixed assets and decreasing energy consumption of the borrower or utilizing renewable energy

• Financing for new projects, not refinancing of an existing loan/lease

• Eligible are projects such as:

• Generic equipment (HVAC, lightning, compressors, etc)

Energy savings per unit (ESU) ≥ 15%

• Process equipment

Energy savings per unit (ESU) ≥ 15%

• Cogeneration (CHP)

Heat utilization ≥ 60%

Eligibility Criteria

For Informational Purposes Only14

What are Sustainable Energy Finance Projects?

Sector Potential Borrower Energy Efficient EquipmentIndustrial Industrial companies,

SMEs and MSMEs•Energy efficient production lines•Waste heat recovery devices•Heating systems upgrades•Efficient boilers and heaters•Fuel switching (coal-gas, coal-biomass)•Electricity peak-load control systems•Cogeneration units

Commercial Housing complexes operators, maintenance companies;Housing developers

•Heating and ventilation equipment•Control and metering systems•Electricity peak-load control systems•Air-conditioners•Heat pumps, solar water heaters

Municipal Municipalities, district heating companies, streetlighting operators, public buildings operators

•Boilers for district heating as well as for public/municipal buildings•Heat exchangers, pipes for infrastructure projects•Cogeneration units•Complex EE projects

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