EE Financing Initiatives of BEE

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Transcript EE Financing Initiatives of BEE

11th

September 2014

National Mission on sustainable Habitat National Solar Mission National Mission for strategic knowledge for climate change NAPCC National Mission for a "Green India" National Mission for sustainable Agriculture National Mission on Enhanced Energy Efficiency National Mission for sustaining the Himalayan Ecosystem National Water mission

Perform, Achieve and Trade (PAT) Market Transformation for Energy Efficiency (MTEE) Energy Efficiency Financing Platform (EEFP) NMEEE Framework for Energy Efficiency Economic Development (FEEED) - PRGFEE - VCFEE - Public Procurement Policy - Fiscal incentives policy 2

 PRGFEE is a risk sharing mechanism to provide commercial banks with a partial coverage of risk involved in extending loans for energy efficiency projects. Government of India has approved around Rs. 312 crores for PRGFEE.  PRGFEE will act as a first-loss and subordinated recovery guarantee  Guarantees a maximum 50% of the loan (only principal). In case of default, the fund will: ◦ Cover the first loss subject to maximum of 10% of the total guaranteed amount ◦ Cover the remaining default (outstanding principal) amount on pari-passu basis upto the maximum guaranteed amount  The support under PRGFEE is limited to Government Buildings, Municipalities, SMEs and industries  The guidelines/rules for operationalization of PRGFEE have been approved in April 2012. However, during XII Plan it has been advised to slightly change the operational structure of PRGFEE, and hence, the revision of rules and its notification is under process. 3

100 50

First Loss: 10% of Guaranteed Amount Remaining: Pari Passu Case - I Case - II

2 0 2 5 0 5 50

Case - III

10 2.5

5+2.5

=7.5

Case - IV

20 7.5

5+7.5

=12.5

 PFI shall take guarantee from the PRGFEE before disbursement of loan to the borrower. The Guarantee will not exceed Rs 300 lakhs (proposed for Rs. 1500 lakhs) per project or 50% of loan amount, whichever is less.  Maximum tenure of the guarantee will be 5 years from the date of issue of the guarantee  Eligible projects under the PRGFEE, for which Participating Financial Institution (PFI) can apply for a guarantee, could be credit facilities extended by PFI to ESCO for energy efficiency projects.  Participating Financial Institutions (PFIs) will be empanelled with BEE. BEE has already floated an Expression of Interest on 4 th June 2014 for empanelment of Participating Financial Institutions  BEE will select a Public Financial Institution as the Implementing Agency for implementing all the activities under PRGFEE like approval of proposals and signing of guarantee agreements, regular monitoring of project and appointment of M&V Agency for processing guarantee claims, etc. 5

   BEE has constituted a Supervisory Committee to provide guidance as well as monitoring progress in PRGFEE First meeting of Supervisory Committee (SC) was held on 27 of SC.

th June 2014, where revised rules of PRGFEE were discussed.

These revised rules of PRGFEE shall be notified by the Ministry of Power. Operations Manual for PRGFEE is also under review BEE had initiated the process of hiring Implementing Agency under PRGFEE, which will be a Public Financial Institution 6

Bureau of Energy Efficiency .

(A statutory body under Govt. of India, Ministry of Power) 4 th Floor, Sewa Bhawan, R K Puram, New Delhi-110066 Expression of Interest (EOI).

for Empanelment of Participating Financial Institutions (PFIs) under Partial Risk Guarantee Fund for Energy Efficiency (PRGFEE) Under National Mission for Enhanced Energy Efficiency (NMEEE), Bureau of Energy Efficiency (BEE) has set up a Partial Risk Guarantee Fund for Energy Efficiency to provide commercial banks with a partial coverage of risk involved in extending loans for energy efficiency projects. BEE intends to empanel “Participating Financial Institutions” under PRGFEE for various financial provisions under PRGFEE. The Agency shall be a Scheduled Nationalized Bank or Systematically Important Non-Bank Financial Corporation (NBFC –SI), or Infrastructure Finance Companies Non-Bank Financial Corporation (NBFC-IFC) registered with Reserve Bank of India, Government of India.

This empanelment is an on-going process. The PFI will be empanelled for 5 years from the date of signing of MoU with BEE or till the time PRGFEE is operational, whichever is earlier. The application for the empanelment shall be submitted along with relevant enclosures adhering to the format furnished in the EOI document. Interested bidders may download the EOI document from the website of BEE i.e.

http://www.beeindia.in/ Secretary, Bureau of Energy Efficiency 7

Others PRGFEE Fund BEE GoI Supervisory Committee Implementing Agency

Documents Submission Agreement

Empanelled PFIs

DPR Loan

ESCO

       This project will contribute to the NMEEE initiative of Govt. of India, and will mobilize and leverage large scale commercial financing for EE investments. The total project cost is estimated to be USD 43 million (equivalent to about Rs. 258 crores) It will support energy efficiency projects in mid-tier large industries, MSMEs, street lighting and buildings. The Guarantee will be Rs.1500 lacs per project or 50% of loan amount, whichever is minimum.

The maximum tenure of each sub-guarantee supported by PRSF will be 5 years.

The PRSF shall continue for 15 years, however, it could be extended till 20 years on the request of SIDBI. SIDBI has been selected as Project Execution Agency (PEA) by World Bank and EESL is providing technical support to address broader Energy Efficient market barriers. 9

 This fund is to provide equity capital for energy efficiency projects in Government buildings and Municipalities in the first phase.  The rules/ guidelines for operationalization of VCFEE have been approved in April 2012. However, during XII Plan it has been advised to slightly change the operational structure of VCFEE, and hence, the revision of rules and its notification is under process.  A single investment by the fund shall not exceed INR 2 crores  Fund shall provide last mile equity support to specific energy efficiency projects, limited to a maximum of 15% of total equity required, through Special Purpose Vehicle (SPV) or INR 2 crores, whichever is less 10

 This fund shall be registered with SEBI under SEBI (Alternative Investment Funds) Regulation, 2012  The Board of Trustees for VCFEE has been constituted  The preparation of documentation and evaluation strategy for VCFEE is under process  BEE will select a Public Financial Institution as a Fund Manager for management of the funds of VCFEE and will be primarily responsible for making investment on behalf of VCFEE  Fund Manager will present the quarterly progress reports to the Board of Trustees 11

Illustration: Total capital requirement for EE Project EQUITY VCFEE 4% Equity: Self & from other sources 26% Loan 70% 15% of the equity is approximately 4% of the total capital requirement for any EE project, which may be invested under VCFEE. 12

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 Under Energy Efficiency Financing Platform (EEFP), BEE has signed MoUs with FIs to create financing mechanism for making a commercial and sustainable energy efficiency market  A few training manuals were also developed in 2011 for capacity building of bank staff  It has been planned to organize the capacity building workshops for FIs in different states during FY 2014-15.

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For further information, please contact: Ms. Vineeta Kanwal Assistant Energy Economist Bureau of Energy Efficiency Ministry of Power, 4th Floor, Sewa Bhawan, Sector 1 R. K. Puram, New Delhi -110066 Ph: +91 11 26179699 Fax : +91 11 26178352 Email: [email protected]

; [email protected]; [email protected]

WEB : www.beeindia.in

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