Enhancing Energy Access through Renewable Energy Project Financing Dinesh Dulal Relationship Manager Clean Energy Development Bank Ltd. Kathmandu, Nepal
Presentation Outlines Introduction of CEDB Exposure in Clean Energy Project Financing Community based Renewable Energy Project Financing Exposure Case of Poku Dovan MHP Financing Structure of Poku Dovan MHP Opportunity for Bank to invest in Renewable Energy Sector Challenges in Renewable Energy Project Financing Conclusion
Introduction of CEDB Established in a joint venture with FMO - Dutch Entrepreneurial Development Bank in 2006, Only specialized private sector bank for clean energy financing in Nepal with in-house capacity to do due diligence of energy projects, Provides technical know-how, project financing, pre-investment activities, investment and corporate advisory services to clean energy projects, Mobilizing national and international resources for promoting clean energy projects in Nepal, Offers wide range of corporate and retail banking services with a unique customer oriented approach, Around 25% of credit portfolio in clean energy sector,
Affiliations & Recognitions First Nepalese and third Asian bank to become a member bank of Global Alliance for Banking on Values, an alliance of world s most sustainable banks, Best Development Bank 2010, Best Managed Development Bank 2013, Best Presented Accounts Award 2012 and 2013, Asia s Best Employer Brand Outstanding Leadership Award 2013, Woman Manager Recognition Award 2010.
Exposure in Clean Energy Project Financing Grid Connected Hydropower Project Off-grid Micro Hydro Project Solar Energy Biogas Clean Transport Sustainable Energy Finance Biomass
Community based Project Financing Exposure SN Project Name Location Installed Capacity (kw) Loan Approved 1 Arkhet Khola MHP Gorkha 30 2,500,000 2 Shiba Khola MHP II Panchathar 53 3,000,000 3 Rakula Khola MHP Udayapur 25 1,000,000 4 Sinduredhunga Liding Khola MHP Khotang 70 1,500,000 5 Khorlabesi Lunget Khola MHP Gorkha 26 1,182,000 6 Ghatte Khola MHP Solukhumbu 10 1,000,000 7 Poku Dovan Khola MHP Ramechhap 45 3,000,000 8 Jwalamai Loding Khola MHP Solukhumbu 20 1,200,000 9 Nakham Khola MHP Khotang 60 2,100,000 10 Juke Dovan Likhu Khola MHP Okhaldhunga 88 4,000,000 11 Teshro Hundi Khola MHP Gorkha 22 1,500,000 12 Manglakharka Sisne Phedi MHP Okhaldhunga 26.5 2,000,000 13 Adheri Khola MHP Gorkha 8.2 400,000 14 Jhyalla Khola MHP Gorkha 55 5,000,000 Total 538.7 29,382,000
Case of Poku Dovan Micro Hydro Project Project Name : Poku Dovan MHP Project Developer : Poku Dovan User Committee Project Location : Bijulikot VDC, Ramechhap, 225KM far from Kathmandu 45KM far from nearest road access, Halede Source of River : Poku Dovan Khola/ Likhu Khola Installed Capacity : 45kW No. of Households Benefitted : 623 Productive Energy Uses : 1 Health Post 5 Agro Process Mills 1 Telecom Tower (Proposed) Total Project Cost : NPR 27,270,827 Technical/ Financial Support : RERL, a joint project of Government of Nepal, United Nations Development Programme and the World Bank, implemented under AEPC
Financing Structure of Poku Dovan MHP Bank Loan, 3,000,000 Poverty Alleviation Fund, 7,200,000 Equity, 7,058,327 Subsidy, 6,412,500 Equity Subsidy VDC DDC Poverty Alleviation Fund Bank Loan DDC, 2,000,000 VDC, 1,600,000
Financing Structure of Poku Dovan MHP (2) Project Name : Poku Dovan MHP Financed Amount : NPR 3,000,000 Financing Percentage : 11% of Total Project Cost Project Financed : MHDF Under Interest Rate Charged : 12% p.a. Processing Fee : NIL Loan Tenure : 7 Years, 84 EMI of NPR 52,958.20 Security : - Project Assets - 50% Risk covered by MHDF Cost of MHDF : 4% p.a. Project Insurance : Covered by AEPC Logistic Support : Provided by GIZ Loan O/S : NPR 2,905,095.33,
Photographs of Poku Dovan MHP Head Works
Community Participation
Canal
Forbay Tank
Penstock Alignment
Power House
Electric Pole and Transformer
Household
School Going Children of Beneficiary Households
Opportunity for Bank to Invest in Renewable Energy Sector Tremendous renewable energy potential, New lending avenue for banks to increase their portfolio, Qualify under deprived sector lending, Huge population are still deprived from basic energy needs, Difficult terrain makes off-grid a better solution for enhancing energy access, Access to energy is prerequisite for economic and social prosperity, Best tools for community empowerment and environment protection, Strong support from GoN and development agencies, Prospect of carbon revenue in future
Challenges in Renewable Energy Project Financing Lack of Physical Infrastructure : - No access road in rural area - High administrative cost for bank due to poor infrastructure Credit and Management Risk: - No credit history of rural people - Creditworthiness of people lives at the bottom of the pyramid - Limited technical knowledge - Limited knowledge in project management and profit making Lack of Innovative Financing Products: - Venture Financing - Partial Risk Guarantee Scheme - Carbon based Financing Product
Challenges in Renewable Energy Project Financing (2) Limited Energy use for Productive Purpose: - Mostly used for household electrification - Very low load factor of MHP - Limited sources of revenue Financially Unfeasible Project: - Economically feasible but financially unfeasible Political Instability: - Problem in tariff collection - Dispute in project management/ownership Sustainability of the program without subsidy: - Highly subsidy driven market
Conclusion Promote Productive Energy Uses to increase project load factor and revenue stream Smart Subsidy: - Smart subsidy to make the project financially feasible - Promote credit financing - Promote private sector participation in renewable energy project development Tie up with those companies who are doing business in rural markets - FM Station - Mobile companies for green mobile tower
Conclusion (2) Develop innovative working model by involving all stakeholders for developing 5P Renewable Energy Project: Government Provide Smart Subsidy Develop Conducive Policy Tax Incentives Awareness Raising Development Agencies Equity and Grant Support Partial Risk Guarantee Facility Capacity Building Local Community & NGO Equity Investment and In-Kind Supports Promote Energy Use for Productive Purpose Develop Local Capacity for Project Management Banks Mobilize Commercial Funding with Social Objectives Develop Capacity to Finance Renewable Energy Project Partner with all Stakeholder for Financing Renewable Energy Project
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