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Financing of Energy Efficiency and Conservation IREDAs Experience B.v.rao .rao, , CGM September 09, 2014 New Delhi Energy Efficient & Environmentally Sustainable Technologies EE & RE in Indian context India 4 th largest

  1. Financing of Energy Efficiency and Conservation IREDA’s Experience B.v.rao .rao, , CGM September 09, 2014 New Delhi

  2. Energy Efficient & Environmentally Sustainable Technologies  EE & RE in Indian context India – 4 th largest GHG emitter  40% energy share in GHG emissions  Vulnerability of large sections of population  High dependence upon energy imports, adds to inflation  high cost of energy (30%) in production costs & high SEC  Energy deficit @ 10%  Power usage - Industry – 46%, Buildings – 29%, Agriculture – 18%, Others  – 7%

  4. Multi-pronged strategy Clean-coal technologies – Super-critical boilers - 2% increase in efficiency o Integrated Gasification – efficiency @ 40-45% o Coal quality Improvement - washeries for reduction in ash o Adoption of higher unit size (660/ 800 MW) o Energy Efficiency potential – Annual fuel savings in excess of 23 million toe o Cumulative avoided electricity capacity addition of 19,000 MW o CO2 emission mitigation of 98 million tons per year o EE Mission – PAT scheme covering 8 energy intensive industries (450 industries) o Business models – Leasing, SPV, ESCO o Cheap and quick to implement (module-wise implementation) o Reduction in T&D losses from 29% to 15% – Solar cities programs (54 cities identified) – ECBC code for buildings – Buildings consume 29% of total electricity o 66% of building stock is yet to be constructed o

  5. About IREDA Dedicated FI for Renewable Financing Inception Incorporated under the Companies Act on 11th March, 1987 to promote, develop and extend financial assistance for Renewable Energy and Energy Efficiency/ Conservation Projects. Mission Be a pioneering, participant friendly and competitive institution for financing and promoting self-sustaining investment in energy generation from renewable sources, energy efficiency and environment technologies for sustainable development. MOTTO Energy For Ever

  6. OPERATIONAL AREAS Sectors financed Wind Energy  Hydro Energy  Biomass Power & Cogeneration  Solar Energy  Waste to Energy  Energy Efficiency & Conservation  Infrastructure for Power Evacuation  Schemes/ Services Term Loans  Take-out financing  Securitization of Project Receivables  Non-fund based services – Performance Guarantee  Providing Refinancing to Banks/ FIs under NCEF Funds  Programme Administrator for GBI Schemes – Wind & Solar 

  7. BUSINESS STATISTICS  Loan Sanctions : Rs 26,278 Crore (US $ 4.36 Billion)  Disbursements : Rs 14,497 Crore (US $ 2.41 Billion)  Cumulative figures since inception as on 31.03.2014

  8. International Lines of Credit Lines of Credit availed & utilized Amount (Rs. in Crs.) US$/Million (Approx.) Govt of Netherlands, 1991 : 18 Million Dutch Guilders 75.00 15.00  World Bank (1 st LoC), 1993 : $ 145 Million 394.39 145.00  DANIDA, 1993 : $ 15 Million 74.72 15.00  Asian Development Bank, 1997 : $ 100 Million 464.75 100.00  KfW, Germany (1 st LoC), 1999 : € 61.36 Million 301.55 66.13  World Bank (2 nd LoC), 2000 : $ 109 Million 498.34 109.00  NORDIC Investment Bank,2010 (1 st LoC) : $ 50 Million 228.00  50.00 KfW, Germany(2 nd LoC), 2008 : € 50 Million 329.76 72.32  Total 2366.51 572.45 Ongoing Lines of Credit* KfW, Germany(3 rd LoC),2009 : € 19.97 Million 137.86 22.23  AfD (1 st LoC) , 2010 : € 70.0 Million 526.66 84.94  KfW, Germany (4 th LoC), 2011 : € 200 Million 1682.82 271.42  JICA, Japan (1 st LoC), 2011 : JPY 30 Billion 1869.21 301.49  EIB : Euro 200 million 1700  Total 4216.55 680.08 *As sanctioned amount In the pipeline- US EXIM Bank , ADB and JICA

  9. PERFORMANCE PARAMETERS 4500 4000 3818 3747 3401 3500 3126 3000 2648 2500 2125 2000 1855 1823 1491 1500 1224 890 1000 770 500 0 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Sanctions Disbursements

  10. Financing Offerings Schemes  Project Financing  Equipment Financing  Finance for Equipment Manufacturing Terms  Loan - Upto 70% of Project Cost  Interest - 11.00% onwards*  Repayment - Up to 10 Years New Initiatives  Securitization against future receivables  Structured repayment  Loan syndication under Consortium  Non-recourse financing (*) Based on Credit Rating

  11. Financing Norms for EE&C Sector Interest Repayment Period Term Loan Rate (Max) PROJECT FINANCING EE&C Projects (Incl. DSM) 12.25%- 10 years with 2 years Up to 70% of & Projects implemented in 13.00% moratorium project Cost ESCO EQUIPMENT FINANCING EE&C Projects (Incl. DSM) 13.50% 10 years with 2 Up to 80% of • & Projects years moratorium project Cost 7 years with 1 year • moratorium EQUIPMENT MANUFACTURING Energy Conservation/ 13.50- 10 years with 2 years Up to 70% of Efficiency Systems & 13.75% moratorium project Cost Equipment Source: http://ireda.gov.in/pdf/Financing%20Norms.pdf

  12. Eligibility Criteria Profit making companies  Debt-equity ratio up to 3:1  No erosion of paid-up  No refinancing/second hand project, equipment  and machinery  No default to IREDA, other FIs/ Banks No cost over run financing  Minimum loan amount – Rs 50 Lakhs 

  13. Eligible Projects Projects demonstrating techno commercial  viability Projects incorporating purchase & installation  of EE systems Projects for production of EE Equipment  DSM Programs promoted by utilities 

  14. Eligible Equipment (Indicative) EE Drives, Variable Speed Motors etc.  Vapour Absorption Chillers   Energy Efficient Lighting Energy Efficient Boilers  Control Systems for EE   Waste Heat Recovery Equipment Capacitor Banks for pf improvement  Above list is indicative, any equipment/ system contributing to ENERGY SAVING can be considered

  15. Security Conditions Mortgage of immovables by way of deposit of title  deeds  Hypothecation of movable assets Guarantees by Promoters Companies/ Promoter  Directors Post Dated Cheques  Pledge of FDR, Securities  Escrow/ TRA Account  Additional, as may be required 

  16. EE Project Appraisal  Technical  Energy Audit Reports  DPR  Financial  IRR  DSCR  NPV  Security  Charge on Assets  Performance/ Bank Guarantee

  17. Types of Projects undertaken by IREDA in EEC sector a) Waste heat recovery based power projects b) DSM (installation of capacitor banks) Energy efficiency in sugar mills c) d) LED manufacturing e) Energy efficiency in cement and paper mills

  18. IREDA Financing- EEC SECTOR NO. OF LOANS LOAN amt.(Rs- Cr) steel 7 218 sugar 8 214 cement 4 0.44 DSM 2 5.17 paper 3 178 WHR 2 199 Misc. 8 107

  19. CASE STUDIES Highlights of Energy Efficiency/Conservation Projects Financed by IREDA

  20. THE PROJECT - ORISSA SPONGE IRON LTD. Name of the unit ORISSA SPONGE IRON LTD. Palaspanga, District Keonjhar, Orissa  Activity Manufacture of sponge iron and steel billets  Annual Turnover Rs 995 mn (US$ 22 mn)  Profit after tax Rs 65 mn (US$ 1.4 mn)  Energy Efficiency 10 MW Waste Heat Recovery  Measures Implemented Power Plant commissioned in 2001  * Exchange rate considered US$ 1 = Rs.45

  21.  PRE COMMISSIONING OF  Waste Heat Recovery Power (WHRP) Plant  CREDIBILITY OF THE COMPANY AS VIEWED BY THE BANKERS OPERATION OF BILLET PLANT NOT VIABLE  DUE TO HIGH ELECTRICITY COST LEADING TO SHUT DOWN OF BILLET UNIT COMPANY ABLE TO INFUSE ONLY 15% OF  PROJECT COST EXISTING LENDERS UNWILLING TO  FINANCE THE PROJECT

  22.  POST COMMISSIONING OF WHRP BILLET PLANT BECAME OPERATIONAL  BILLET PLANT CAPACITY NOW BEING DOUBLED  5 MW POWER PLANT BASED ON COAL  CHAR INSTALLED MOBILIZED FINANCES OF Rs. 200 mn (US $ 4.5 mn) AS  TERM LOANS AND Rs. 128 mn (US $ 2.84 mn) AS WORKING CAPITAL LOAN

  23.  MEANS OF FINANCE  Term loan from IREDA : Rs 271 mn (US$ 6.0 mn)  Internal Resources : Rs 55 mn (US$ 1.2 mn)  Deferred payment facility: Rs 36 mn (US$ 0.8 mn)  Total project cost Rs 362 mn (US$ 8.1 mn)  Terms of loan  Repayment : 10 years, Moratorium- 2 years  Rate of interest: 15%  IRR: 22.8%  DSCR 1.68  Pay Back Period 4.5 years Security  Pari-passu charge on movable and immovable properties of the company both existing and future  Personal guarantee of Managing Director  Post dated cheques.

  24.  LESSONS LEARNT

  25. Technology Waste Heat Recovery project completed successfully. * Demonstration effect leading to replication. * Project Structuring Promoter’s contribution - 15% of total project cost * 10% by way of deferred payment (24 months) credit from * equipment supplier. Due to delay in project commissioning, deferred payment * credit became payable before the stabilization of the project. Deferred payment credit to be structured to match the * stabilization of the project

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