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A Three-Way Partnership between Bank, ESCOs and Clients

K-Energy Saving Guarantee Program:

Mek Meksarikul

Vice President - Head of Corporate Credit Solution Management

Corporate Credit Product Management Department

April 24, 2014

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Program Feature: K-Energy Saving Guarantee Program

KBank / KF&EKBank / KF&E ESCOsESCOs

CustomersCustomers

Loan

or

Leasing

Guarantee

Savings

� The K-Energy Saving Guarantee Program features

equipment leasing/hire purchase financing and/or

long-term loan aimed primarily at energy efficiency

projects under management of an Energy Service

Company (ESCO).

� ESCOs are consultancy firms that offer integrated

services for the implementation of energy efficiency

projects and provide a guarantee for energy saving

� The energy savings generated by the project will be

source of loan repayment (a self-financing project).

� Up to 100% loan amount of contract value.

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Program Benefit: K-Energy Saving Guarantee Program

Cost Saving

100%

Performance Guaranteed

G r e e n L o a n s U p T o

Long Term Competitiveness

CSR, CSV, Sustainable

Other Privileges

Privileges Condition & Collateral

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� Credit limit : 100 percent of project investment (inclusive of ESCO service and consultation fees).

� Energy-saving performance guaranteed by ESCO assures customers of loan repayment ability

without affecting business cashflow.

� Energy cost savings ensure enhanced financial status and competitiveness over the long term.

� Energy efficiency projects can be integrated into Corporate Social Responsibility (CSR) activities.

� Other privileges from ESCO

Program Benefit

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Program Feature: K-Energy Saving Guarantee Program

KBank / KF&EKBank / KF&E ESCOsESCOs

CustomersCustomers

Energy-saving

guaranteedLoan or Leasing/

Hire Purchase

100%

Self-Financing Project

Consultancy Firms that

offer integrated services

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Baseline Guarantee 1. Shortfall

Scenario

2. Surplus

ScenarioPost

Retr

ofit

Energ

y C

ost

Post

Retr

ofit

Energ

y C

ost

5%

Actual Performance

Post

Retr

ofit

Energ

y C

ost

Bonus will be depended

upon the agreement of

customer and ESCOs.

ESC O will

guarantee saving = 30%100%

5% ESCO will pay (Penalty) for the gap of 5 %

ESCO Guarantee Performance Scheme

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Electricity expense Energy

Efficiency (EE) Measure

100%

30%

Free cash flow

70%

5 Years onward

Saving Energy from EE

Measure

Electricity Expense after

Energy Efficiency (EE)

Measure

Year 1 � Year 5

70%

25%Pay Bank

(interest + principal)

5% Free cash flow

Energy Efficiency Measure add more cash flow in the future

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Energy Efficiency is the best investment option

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ESCO

BANK

Supplier

CustomerLending

Measurement & Verification

Measurement and Verification (M&V) is key success in ESCO Business

Financial solicitation package

Supplier Contract What are purpose of M&V ?• Accurately assess energy savings for

a project

• Verify savings guarantee is met

• Allocate risks between parties (ESCO

and Customers)

• Reduce uncertainties of projects to

reasonable levels

• Monitor equipment performance

• Find additional savings

• Improve operations & maintenance

• Assist bank evaluating project

feasibility

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ESCO

BANK

Supplier

Customer

Technical Support

Carbon creditCarbon

footprint

Lending

Guarantee performance

Investment type

-Equity Investment-Equipment leasing-Venture capital

Risk mitigationTechnical risk Performance riskOperating risk

ESCO Fund

Selectived ESCOFinancial Support

The Three Triangles of ESCO business model

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Barriers to overcome

Banks Perspective � Lack of Technical Knowledge � Not look at Cash Flow based � ESCO project considers small and risky� ESCO project is too complicated � Clients will use their internal cash flow � High level of collateral required � Not profitable

Clients Perspective� Lack of awareness and information� Lack of expertise for developing ESCO projects� Lack of budget funds� A perceived lack of instructions for ESCO project implementation� Lack of trust on ESCOs� Lack of

ESCOs Perspective� Client lack project development resources� Long term financing is not available � Tender procedures and legal framework are perceived as unclear� Lack of M&V protocols � Unstable customers

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