CEDB's Perspectives on Scaling up Mini Grid Investments

Barsha Shrestha General Manager Clean Energy Development Bank Ltd.

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?

Introduction of CEDB
National Level Development Bank established in a joint venture with FMO Dutch Entrepreneurial Development Bank in 2006, Specialized and dedicated in clean energy and energy efficiency 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

Exposure in Clean Energy (1)

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 ranging from 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 through microfinance,

Biogas Financing:
Pioneered vendor financing model to finance household biogas plant, More than 500 household biogas plants are financed under vendor financing model,

Exposure in Clean Energy (2)

Electric Vehicle Financing:
Financing electric vehicle for commercial and private uses, Promoting 'driver owner concept' in commercial electric vehicle financing, Already financed more than 300 electric vehicles plying in Kathmandu valley

Energy Efficiency Financing:

CEDB in partnership with IFC has launched Sustainable Energy Finance product to finance energy efficiency project, Already financed 1 three star hotel for replacing of diesel boiler with solar water heater, Completed financial closures of 1 resort to implement energy efficiency measures,

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

Challenges in Mini Grid Project Financing (1)

High cost and low energy demand a vicious cycle:
Viability of the mini grid gets severely constrained as a result of its high 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 High overhead cost Small loan size Lower margin Higher default rate in renewable energy portfolios of other financial institutions (ADB/N stopped lending in RETs)

No appetite for banks to finance mini grid project:

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

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 rural electrification, Access to energy is prerequisite for economic and social development, Huge energy deficit in the country, Best tools for community empowerment and environment protection, Strong support from GoN and development agencies, Prospect of carbon revenue

How to scaling up mini grid investments? (1)

Promote productive energy uses to increase financial viability of the mini grid project, Make mandatory provision for grid connection in case of national grid expansion take place in project location, Tie up with those companies who are trying to expand businesses in rural markets, - Electricity as a platform green mobile tower, FM station, promotion of bulbs, television, mobile etc. Develop carbon financing model to increase financial viability of mini grid project, Promote commercialization and private sector involvement, Research and development for technological innovation,

How to scaling up mini grid investments? (2)

Develop innovative scaling up model by involving all stakeholders:
- Government of Nepal: - Provide subsidy and refinance facility - Develop conducive policy environment for scaling up mini grid investments - 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.

How to scaling up mini grid 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 grid financing - Local community: - Equity investment and in-kind supports - Increase energy use in productive activities - Develop local capacity to manage mini grid project

Thank You!

Lets empower