session 3 - cedb perspective

7/29/2019 Session 3 - CEDB Perspective

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CEDB's Perspectives on Scaling up

Mini Grid Investments

Barsha Shrestha

General Manager

Clean Energy Development Bank Ltd.


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Outline

Brief Introduction of CEDB

Exposure in Clean Energy Project

Challenges in Mini Grid Project Financing

Opportunities in Scaling up Mini Grid Investments

How to Scaling up Mini Grid Investments?


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National Level Development Bank established in a jointventure with FMO Dutch Entrepreneurial

Development Bank in 2006,

Specialized and dedicated in clean energy and energyefficiency financing,

Already have more than 23% portfolio in clean energy

sector,

Honored by Best Development Bank Award in The

7th Boss Top 10 Business Excellence Awards and

"National Best Presented Accounts Award" by ICAN

Introduction of CEDB


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Grid Connected Hydro Project Financing:

Pioneered Limited Recourse Project Financing in hydropower project, Established separate Energy Division within the Bank to do due diligence

of clean energy project,

Completed financial closure of 10 hydro projects with capacity rangingfrom 600kW to 10MW,

Off-grid Hydro Project Financing: Fund manager of Micro Hydro Debt Fund, a dedicated fund to finance

micro hydro project with capacity ranging from 10kW to 100kW,

Completed financial closure of 9 Micro Hydro projects,

Solar Energy Financing: Pioneered solar home system financing in urban areas,

Pioneered solar home system financing in rural areas throughmicrofinance,

Biogas Financing: Pioneered vendor financing model to finance household biogas plant,

More than 500 household biogas plants are financed under vendorfinancing model,

Exposure in Clean Energy (1)


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Electric Vehicle Financing: Financing electric vehicle for commercial and private uses,

Promoting 'driver owner concept' in commercial electric vehiclefinancing,

Already financed more than 300 electric vehicles plying in Kathmanduvalley

Energy Efficiency Financing:

CEDB in partnership with IFC has launched Sustainable Energy Financeproduct to finance energy efficiency project,

Already financed 1 three star hotel for replacing of diesel boiler withsolar water heater,

Completed financial closures of 1 resort to implement energy efficiencymeasures,

Financing Energy Contractors/Energy Service Companies: Provided financial supports to:

4 hydropower contractors,

8 micro hydro installer companies,

28 solar companies,

6 biogas construction companies

Exposure in Clean Energy (2)


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Challenges in Mini Grid

Project Financing (1) High cost and low energy demanda vicious cycle:

Viability of the mini grid gets severely constrained as a result of itshigh costs and low energy demand

Poor physical infrastructure: No access road in remote areas

Lack of technical manpower in local level

Very limited branch network of banks

Very limited existence of eligible local level MFIs

No appetite for banks to finance mini grid project:

High overhead cost Small loan size

Lower margin

Higher default rate in renewable energy portfolios of other financialinstitutions (ADB/N stopped lending in RETs)


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Challenges in Mini Grid

Project Financing (2)

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

Political Instability:

Problem in tariff collection

Dispute in project management/ownership

Sustainability of the program without subsidy:

Highly subsidy driven market


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Opportunities in Scaling up

Mini Grid Investments

Tremendous clean energy potential,

New lending avenues for banks,

Qualify under deprived sector lending,

Huge population are still deprived from basic energy needs,

Difficult terrain makes mini grid a better solution for ruralelectrification,

Access to energy is prerequisite for economic and socialdevelopment,

Huge energy deficit in the country,

Best tools for community empowerment and environmentprotection,

Strong support from GoN and development agencies,

Prospect of carbon revenue


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How to scaling up mini grid

investments? (1)

Promote productive energy uses to increase financialviability of the mini grid project,

Make mandatory provision for grid connection in case ofnational grid expansion take place in project location,

Tie up with those companies who are trying to expandbusinesses in rural markets,

- Electricity as a platform green mobile tower, FMstation, promotion of bulbs, television, mobile etc.

Develop carbon financing model to increase financialviability of mini grid project,

Promote commercialization and private sector involvement,

Research and development for technological innovation,


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investments? (2)

Develop innovative scaling up model by involving allstakeholders:- Government of Nepal:

- Provide subsidy and refinance facility

-

Develop conducive policy environment for scaling up mini gridinvestments

- Provide tax incentives

- Awareness raising and promotion of productive energy uses

- International Development and Financial Organizations:

-

Equity/ debt/ grant support- Risk guarantee facility

- Capacity building

- Integration of other agenda such as MDGs, Climate etc.


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investments? (3)

- Banks and Financial Institutions:

- Mobilize commercial funding with social objectives

- Develop capacity to assess mini grid project

-Partner with local level MFIs to promote mini gridfinancing

- Local community:

- Equity investment and in-kind supports

- Increase energy use in productive activities

- Develop local capacity to manage mini grid project


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Lets empower

session 3 - cedb perspective

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