ESCO Financing - SIDBI

1. ESCO Financing : Opportunities andESCO Financing : Opportunities and
Road blocksRoad blocksRoad blocksRoad blocks
January 25, 2017 at IIT Madras Research Park
http://prsf.sidbi.in/

2.  Sustainable Initiatives of SIDBI
 EE and ESCO Scenario
 Partial Risk Sharing Facility for Energy Efficiency
 Product Details
Presentation OverviewPresentation Overview
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 Product Details
 Basic eligibility criteria for PRSF coverage
 Schema of PRSF
 Role of various stakeholders

3. SIDBI’s initiatives in Sustainable DevelopmentSIDBI’s initiatives in Sustainable Development
 Introduced schemes for financing Energy Efficiency (EE) & Cleaner
Production projects in MSME sector.
 Entered into strategic partnership with BEE, TIFAC, The World Bank,
DFID, JICA, KfW, GIZ & AFD for promoting & financing clean & EE
investments in MSME sector.
 Created a dedicated team of experts housed at “Energy Efficiency
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 Created a dedicated team of experts housed at “Energy Efficiency
Centre” for focused approach.
 Besides financing, also actively pursuing various developmental
initiatives including WB-GEF Project, 4E scheme, PRSF project etc.
 Conducted awareness campaigns, focused group meetings, energy
audits, pilot interventions in MSME clusters.

4. SIDBI’s EE assistance/Initiatives: HighlightsSIDBI’s EE assistance/Initiatives: Highlights
 Sanctioned Assistance of around Rs.5900 crore to more than 6800
MSME units.
 Sanctioned more than Rs. 400 crore in RE Projects
 More than 1043 Million units of electricity saved
 Thermal energy savings of 650,000 million kCal
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 Thermal energy savings of 650,000 million kCal
 Resulted in reduction of around 1 million t of CO2 annually
 Financed Green Buildings/Energy Efficient buildings aggregating to
an amount of more than Rs. 100 crore
 Reached more than 100 industrial clusters and have created
awareness on EE

5.  Commitment to reduce the CO2 emissions intensity by
33-35% by 2030 from 2005 levels.
 Increased thrust on Energy Efficiency, Renewable
Energy, Cleaner Production, etc.
India’s Intended Nationally Determined
Contributions (INDCs): Key points
India’s Intended Nationally Determined
Contributions (INDCs): Key points
 Investment of USD 2.5 trillion required for meeting
India’s climate change actions.
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6.  Energy Efficiency
 Largest & Lowest Source of Emission Reduction
 Top priority of Indian Government – initiating various program
 Demand
 Despite huge EE potential most end users unable to implement EE project
because lack of understanding / technical capability to execute the projects
Opportunities for ESCOOpportunities for ESCO
because lack of understanding / technical capability to execute the projects
 Role of Intermediary (ESCO)
 ESCO plays a key role – helps clients overcome key EE market barriers
 ESCO – offers EE technologies / services with guaranteed savings
 ESCO – establish credibility through ESPC – guarantees the host entity certain
level of energy savings
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7. • China’s energy savings are more than half of
the energy savings worldwide.
• ESCO market in China
 More than 5,000 registered ESCOs

ESCO Market in ChinaESCO Market in China
 Annual business turnover – US$10 billion
 Many other countries also have thriving ESCO
business.
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8. • ESCO market in India
 Around 139 registered ESCOs. Only a few are
active.
 Annual business turnover – very small
 Some major barriers are :
ESCO Market in IndiaESCO Market in India
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 Some major barriers are :
 Limited awareness amongst the Host entities
 Weak financial position of ESCOs
 Limited access to bank finance due to asset &
security coverage issues
 M&V disputes
 No standard templates of ESPC, TRA, etc.
 Dispute resolution mechanism

9.  What is PRSF
 PRSF is a guarantee program (risk sharing mechanism)
 Objective
 to kick-start market for energy efficiency projects implemented
by ESCO through performance contracting
 To demonstrate viability of ESPC market for scaling up EE
projects
 To reduce the risk perceived by commercial bank in providing
PRSF – OverviewPRSF – Overview
 To reduce the risk perceived by commercial bank in providing
credit to Energy Efficiency projects / to ESCOs
 To address barriers faced by ESCOs in availing finance
 Project Components
 Component 1 - Risk Sharing Facility (USD 37 Mn)
 Component 2 - Technical Assistance (USD 6 Mn)
 Project Duration
 15 Years
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10. PRSF – Guarantee product detailsPRSF – Guarantee product details
Eligible Hosts / Sectors
• Large industries
(excluding thermal
power plants)
• MSMEs
• Municipalities
• Buildings
Eligible EE Loans
• Loan to ESCO or
host entity falling
under Micro & Small
Category
• Min. 75% of loan
towards EE
investment
Eligible ESCOs
• BEE-Empanelled
ESCO
• JV / Consortium
allowed
• Other entities are
also eligible subject
to grading by rating
agency
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agency
Extent of Coverage
• 75% of loan or o/s
• Min. loan – Rs.10
Lakh
• Max. loan – Rs.15 cr.
• Max. exposure to a
single Host / ESCO – Rs.
45 cr. (Grade 5 – Rs.
40 cr.)
Guarantee Tenure
• 5 Years or loan
tenure, whichever
is lower
Guarantee Fee
• Slab-Wise &
based on the
grading of ESCO

11. PRSF – Guarantee Fee StructurePRSF – Guarantee Fee Structure
Guaranteed Loan
Amount or outstanding,
which-ever is lower (INR)
Non-Refundable Annual Guarantee Fee
For Grade 1 to Grade 3
ESCO
For Grade 4 ESCO
For Grade 5
ESCO
Up to Rs. 500 Lakhs 1.00% subject to a
maximum of Rs. 5.00 Lakh
1.00% subject to a
maximum of Rs. 5.00
Lakh
1% subject
to maximum
of Rs. 15.00
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Lakh of Rs. 15.00
lakh
Above Rs. 500 lakhs and
uptoRs. 1000 lakhs
Rs. 5.00 lakhs plus 0.50%
on the amount above 500
Lakhs subject to a
maximum of Rs. 7.50 lakh
Rs. 5.00 lakhs plus
0.75% on the amount
above 500 Lakhs
subject to a maximum of
Rs. 8.75 lakh
Above Rs. 1000 lakhs and
up to Rs. 1500 lakhs
Rs. 7.50 lakhs plus 0.25%
on the amount above 1000
lakhs subject to a
maximum of Rs. 8.75 lakh
Rs. 8.75 lakhs plus
0.50% on the amount
above 1000 lakhs
subject to a maximum of
Rs. 11.25 lakh

12. • Energy saving project
• EE to be implemented by an ESCO
• ESCO to be empanelled with BEE or graded by
rating agencies
Basic Eligibility Criteria for PRSF CoverageBasic Eligibility Criteria for PRSF Coverage
• Project Beneficiary - i) MSMEs, ii) Buildings, iii)
Municipalities, iv) Large industries (excluding
thermal power plants)
• Borrower should be a Micro / Small Enterprise
• ESPC between host and ESCO
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13. • Escrow / TRA mechanism
• Key clauses covering to be captured in the Loan
Agreement
Basic Eligibility Criteria for PRSF CoverageBasic Eligibility Criteria for PRSF Coverage
Agreement
• right to access the site,
• ERMF compliance,
• sanctionable practices, etc.,
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14. PRSF – Overall SchemePRSF – Overall Scheme
ESCO and Host initiate discussion on ESCO
project
DEA / Identification of energy saving
opportunities
Decision on Shared / Guaranteed Saving
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Decision on Shared / Guaranteed Saving
Contract signing (ESPC)
Borrower approach PFI / SIDBI for loan

15. PRSF – Overall SchemePRSF – Overall Scheme
Appraisal & loan sanction considering
PRSF req.
PFI to submit PRSF guarantee
application
Evaluation of guarantee application
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Evaluation of guarantee application
Issuance of PRSF guarantee
Payment of Guarantee fee within 30 days

16. PRSF – Overall SchemePRSF – Overall Scheme
Effectiveness of the guarantee
Quarterly report by the PFI
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Payment of annual guarantee fee
Loan closure – guarantee coverage
comes to an end

17. Interactions between stakeholdersInteractions between stakeholders
Risk Coverage
PFI
Financing
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SIDBI
PFI
Borrower
Project
ESCO Host

18. For PRSF SuccessFor PRSF Success
PRSF
PFI
HostPEA PRSF Host
ESCO
PEA
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19. • Sign MoU with PEA and fulfill preparatory activities
• Sign Master Guarantee Agreement
• Sanction the loan and sign loan agmt. (key clauses)
• Sign TRA / ESCROW Agreement
• Apply for PRSF Guarantee
Role of PFIsRole of PFIs
• Apply for PRSF Guarantee
• Submitting information on periodic basis to PEA
• Monitoring and follow-up of the loan
• M&V exercise through a third party agency hired by PEA
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20. • Conduct detailed energy audit in the Host facility
• Sign ESPC with the Host
• Approach Bank for loan with required documents
• Sign the Escrow / TRA agreement
• Undertake installation, commissioning, operation, maintenance
Role of ESCOsRole of ESCOs
of energy savings projects
• Undertake training of Host personnel, as necessary
• Resolve the technical underperformance of the implemented
energy savings project, if any
• Conduct Environmental Safeguards Due Diligence (ESDD)
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21. • Support ESCO for preparation of IGEA, ESPC and M&V Plan
• Sign ESPC with the ESCO
• In case of guaranteed savings, approach Bank for loan with
required documents
• Sign the Escrow / TRA agreement
• Deposit monetized value of energy savings as per the schedule
Role of HostsRole of Hosts
• Deposit monetized value of energy savings as per the schedule
• Comply with ERMF guidelines & ESDD report
• Extend cooperation to ESCO in resolving technical
underperformance
• Provide access to lender/ESCO/PEA or their representatives for
M&V
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22. • Act as the nodal agency for the guarantee facility
• Sign MoU and MGA with PFIs
• Develop a common platform in the form of dedicated website for
PRSF operation
• Provide guarantee approval for eligible EE projects
Role of PEARole of PEA
• Process the guarantee claim and in eligible cases release the
eligible guarantee
• Due diligence / M&V of projects on sample basis
• Conduct of M&V where claims have been lodged
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23. • Marketing & outreach activities
• Standard documents viz. ESPC, TRA, etc.
• Appraisal / due-diligence tools for EE projects (under
development)
Role of PEA - Support to PFIsRole of PEA - Support to PFIs
development)
• Training of PFIs on EE financing
• E-Learning modules on EE financing (under development)
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24. • Market development
• Improved availability of finance
• Standard templates of IGDPR, ESPC, TRA, etc.
Role of PEA - Support to ESCOsRole of PEA - Support to ESCOs
• Standard templates of IGDPR, ESPC, TRA, etc.
• Matchmaking and loan syndication support for the initial few
projects
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25. PRSF Website - http://prsf.sidbi.in/PRSF Website - http://prsf.sidbi.in/
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26. • Matchmaking platform in PRSF website
• E-learning module to train Banks/FIs and ESCOs
• Interactive meets with ESCOs/PFIs/Hosts
On going TA Activities for promoting ESCO marketOn going TA Activities for promoting ESCO market
• Training of Banks/ FIs / NBFCs
• Marketing of PRSF
• Due diligence tool for PFIs
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27. SIDBI & PFI Officials Training ProgramsSIDBI & PFI Officials Training Programs
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28. SIDBI & PFI Officials Training ProgramsSIDBI & PFI Officials Training Programs
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29. SIDBI & PFI Officials Training ProgramsSIDBI & PFI Officials Training Programs
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30. Interactive Meet with ESCOs and PFIsInteractive Meet with ESCOs and PFIs
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31. PRSF Website Up gradationPRSF Website Up gradation
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