Dinesh Dulal| Relationship Manager

Clean Energy Development Bank Ltd.Kathmandu, Nepal

Enhancing Energy Access through Renewable Energy Project Financing

• 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

Presentation Outlines

• 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,

Introduction of CEDB

• First Nepalese and third Asian bankto become a member bank of GlobalAlliance for Banking on Values, analliance of world’s most sustainablebanks,

• “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”.

Affiliations & Recognitions

• Grid Connected Hydropower Project

• Off-grid Micro Hydro Project

• Solar Energy

• Biogas

• Clean Transport

• Sustainable Energy Finance

• Biomass

Exposure in Clean Energy Project Financing

Community based Project Financing ExposureSN 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 Kathmandu45KM 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 Post5 Agro Process Mills1 Telecom Tower (Proposed)

Total Project Cost : NPR 27,270,827

Technical/ FinancialSupport

: 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

Equity , 7,058,327

Subsidy, 6,412,500

VDC, 1,600,000

DDC, 2,000,000

Poverty Alleviation

Fund, 7,200,000

Bank Loan, 3,000,000

Equity

Subsidy

VDC

DDC

Poverty Alleviation Fund

Bank Loan

Project Name : Poku Dovan MHP

Financed Amount : NPR 3,000,000

Financing Percentage : 11% of Total Project Cost

Project Financed Under

: MHDF

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, 7 EMI Repaid, 77 EMI Outstanding

Financing Structure of Poku Dovan MHP (2)

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 enhancingenergy access,

• Access to energy is prerequisite for economic and socialprosperity,

• Best tools for community empowerment and environmentprotection,

• 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 thepyramid

- Limited technical knowledge

- Limited knowledge in project management and profitmaking

• 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 projectload factor and revenue stream

• Smart Subsidy:

- Smart subsidy to make the project financiallyfeasible

- Promote credit financing

- Promote private sector participation in renewableenergy

project development

• Tie up with those companies who are doing business inrural markets

- Mobile companies for green mobile tower

- FM Station

- Promotion of bulbs, television, mobile etc.

Conclusion (2)• Develop innovative working model by involving all

stakeholders for developing 5P Renewable EnergyProject:

Government

• Provide Smart Subsidy• Develop Conducive Policy• Tax Incentives• Awareness Raising

Government

• Provide Smart Subsidy• Develop Conducive Policy• Tax Incentives• Awareness Raising

Development Agencies

• Equity and Grant Support• Partial Risk Guarantee Facility• Capacity Building

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

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

Banks

• Mobilize Commercial Funding with Social Objectives

• Develop Capacity to Finance Renewable Energy Project

• Partner with all Stakeholder for Financing Renewable Energy Project

Thank You!