Financing Sustainable Energy 
in Asia

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Talk given by Clive Mason at Senior Advisor, Asia Sustainable and Alternative Energy Program

Talk given by Clive Mason at Senior Advisor, Asia Sustainable and Alternative Energy Program

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  • 1. Financing Sustainable Energy in Asia May 30 th , 2008 Clive Mason Senior Advisor, Asia Sustainable and Alternative Energy Program (ASTAE) World Bank Group
  • 2. Mobilizing Commercial Lending for Sustainable Energy
    • World Bank and IFC Experience
    • Financing Sustainable Energy
    • Programmatic Carbon Approach
    • Risk Sharing
  • 3.
    • 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
  • 4. 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 program 2006 China Utility based Energy Efficiency program (CHUEE): Risk sharing facility plus advisory program 2007 WB signs first Carbon Credit agreement with Thailand
  • 5. Program Execution
  • 6. 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
  • 7. 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
  • 8. 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
  • 9. Typical Guarantee Program Structure Guarantee Facility Agreement Transaction or Portfolio Guarantees Grant $ SE Project Loans Lease Energy Services Agreements Investment $ Technical Assistance GEF IFC/GEF IFC LOCAL FINANCIAL INSTITUTION End-user ESCO End-user End-user Vendor LOCAL FINANCIAL INSTITUTION
  • 10. Global Recognition – Industrial Bank of China nominated by the Financial Times, for 2 sustainable banking awards (2007)
  • 11. 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.
  • 12. Risk Sharing Structure – Guarantee facility to support $80m line of credit 2 nd Loss for 90% of portfolio amount 1 st Loss for 10% of portfolio amount Local Bank 25% WB 75% WB 40% Local CommercialBank 60% In case of guarantee call, repayment from RSF
  • 13. Outline Program Structure Guarantee Agreement Transaction or Portfolio Guarantees Loan $XXm SE Project Loans Lease Energy Services Agreements Technical Assistance Repayment GUARANTEE FUND (RSF) Held by local FI Interest bearing Carbon Credits Deposit $XXm Re-flows $Xm $Xm $ Thai Govt WB GEF/Donors LOCAL FINANCIAL INSTITUTION End-user ESCO End-user PPs Vendor LOCAL BANK(s)
  • 14. 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
  • 15. THANK YOU Further information from [email_address]