Finance and Investment Opportunities in Renewable Energy Projects - Future Market Directions GO GREEN WITH SIDBI

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1 Finance and Investment Opportunities in Renewable Energy Projects - Future Market Directions 1

2 SIDBI towards About sustainable SIDBI financing SIDBI was set up in April, 1990, under an Act of the Parliament to serve as the Principal Financial Institution for Promotion Financing Development of MSME sector & Co-ordinate the functions of similar institutions New Mission Statement: SIDBI shall work towards filling the gaps, both in Financial and Developmental Services, in the MSME Eco-system, to make the MSMEs more vibrant and Globally Competitive. 2

3 SIDBI towards SIDBI - Major sustainable Roles financing Offer niche products to MSME sector complementing the role of Commercial Banks Equity Funding, Mezzanine finance and Risk Capital Financing Sustainable Development - Energy Efficiency projects (EE) & Cleaner Technologies Financing Service Sector Projects Receivable Finance/Promoting Factoring services 3

4 SIDBI- Major Schemes SIDBI towards sustainable financing Venture funds / equity support SIDBI started providing risk capital / quasi equity to MSMEs through a specialized product called Growth Capital & Equity Assistance Scheme for MSMEs (GEMS). Under this scheme, SIDBI provides risk capital assistance to MSMEs by way of Equity, Preference Capital, Sub-Ordinate Debt, Optionally Convertible Debenture, Optionally Convertible Debt, etc. Government of India set up India Opportunity Venture Fund of Rs 5,000 crore with SIDBI. - As on March 31, 2013, total commitment of Rs 404 crore made under the Fund. MoU with NASSCOM to channelize growth capital / equity to the MSMEs in the Information & Communication Technology space. MoU with KfW, Germany for Innovation Finance Programme to foster an environment conducive to the development & diffusion of innovation. 4

5 SIDBI towards SIDBI- Major sustainable Schemes financing Receivable Finance Receivable Finance Scheme addresses the issue of Delayed Payments to MSME suppliers, when supplying to large Cos. /OEMs/Marketing Organizations. Outstanding portfolio under RFS as on March 31, 2013 increased by 63% to Rs crore. More than 5000 vendors have benefited from the scheme. Service Sector Contributes around 60% of GDP. But share in MSE financing by banks at around 50%. Specific schemes being drawn for various segments of the service sector. Signed MOU with select industry associations for mutual cooperation 5

6 SIDBI Sustainable Financing Objectives : Focused lending schemes to improve energy efficiency, protect environment and mitigate adverse impact of climate change by reducing CO 2 emissions and enhance profitability of Indian MSMEs in their long run. Benefits : Concessional Finance Capital subsidy for EE technology up gradation Lower power and fuel bill Quicker and higher return No collateral / third party guarantee upto Rs 1 Crore Equity/ Quasi equity/ Risk Capital assistance as per eligibility 6

7 SIDBI towards sustainable financing ACTIVITIES COVERED Energy Efficiency EE equipments, green building Cleaner Production - Waste Management agro waste, industrial waste Fuel Switching- diesel/petrol to CNG/LPG, coal to oil/gas based furnace CDM- Jodhpur steel rerolling cluster has been registered under UNFCC ESCOs Energy Service Companies Renewable Energy solar, hydro, bio mass, wind power

8 Renewable Energy Renewable Energy any sustainable energy source that comes from natural environment. Some Aspects of Renewable Energy It exists perpetually and in abundant in the environment Ready to be harnessed, inexhaustible It is a clean alternative to fossil fuels Major Renewable Energy Sources Hydro Energy,Wind Energy, Solar Energy, Biomass Energy,Tidal Energy, Geothermal Energy,Wave Energy,Bio-fuel, Bagasse 8

9 Renewable Energy. India s installed capacity in power sector is around 211,766 MW of which around 67% of power has been generated by the thermal energy sources (Coal, Gas & oil) followed by renewable energy sector (hydro, wind, solar, biomass etc) of 31 %. The country faced a huge power deficit of over 12,000 MW during the peak hours in the last financial year, according to a report by the Central Electricity Authority (CEA). To meet the energy demand and to support the country s growing economy there is a need for increased investment in Renewable Energy (RE) sector/technologies. India has been consistently ranked among the top five countries globally in terms of its market potential for RE and the recent rank is 4th after China, the US and Germany. India's growing rate of urbanization, rising per capita energy consumption and widening access to energy, are expected to significantly increase its total demand for energy. 9

10 Renewable Energy. The country s installed RE capacity was around MW as on August 31, 2012 and plans to double its capacity to MW by The total RE investment potential envisaged by 2020 is around US$ 100 billion and an investment amount of US$ 500 million (~Rs crore) has been foreseen in this year The existing / potential regions for harnessing RE are as under: Hydro Energy- Jharkhand, Punjab, Uttrakhand, Karnataka, Uttar Pradesh, Sikkim, Jammu & Kashmir, Gujarat and Andhra Pradesh. Wind Energy Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Madhya Pradesh, Tamil Nadu, Orissa, Rajasthan, Kerala and West Bengal. Solar Energy Being a tropical country, the solar energy potential is throughout India mainly in south/east coast of India. Biomass Energy/ Bagasse Co-generation - Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu, Punjab, and Uttar Pradesh. In view of immense potential for investment in RE sector and favorable government policies/incentives/subsidies available for the promotion of RE 10

11 SIDBI towards sustainable financing Present Installed Capacity of Renewable Energy Sources in India Renewable Energy Source Present Installed Capacity Wind Small Hydro MW 2100 MW Bagasse 750 MW Biomass 620 MW Solar 2 MW Total RE Installed Capacity MW Source: Ministry of New & Renewable Energy Sources (MNRE) 11

12 SIDBI for Renewable Energy Project Guidelines for covering under Concessional funding: A minimum of 50% of the power generated using alternative energy sources may be utilized directly by the MSME units themselves. The use of alternative energy sources to generate power and / or energy may be integral part of MSME s business. The installation or commission of the alternative energy source equipment or appliances may be inside and / or outside the premises of the MSME units 12

13 SIDBI towards Addressing sustainable Non-financial financing Gaps Information Dissemination: Created website named to Promote entrepreneurship among the youth and availability of relevant information to existing MSMEs on various schemes, etc. - Handholding guidance to new entrepreneurs on how to set up a business, access to finance, government schemes, etc. - Also guidance to existing entrepreneurs how to access market, growth finance, and other relevant information to make them grow. - Total hits 13 lakh. Set up Credit Advisory Centres [CACs] - to provide free consultancy services to MSMEs in the areas of how to fill up application form, access to finance, government schemes etc clusters covered and more than 2800 MSMEs interacted with. 13

14 SIDBI towards sustainable financing PRODUCTS JICA scheme for Energy Efficiency KfW scheme for Energy Efficiency Sustainable Finance Scheme RESOURCES Main international lines of credit JPY 30 billion from Japan International Cooperation Agency (JICA). Euro 50 million from KfW, Germany for Energy Efficiency projects in MSME sector. Euro million from KfW, Germany for promoting Cleaner Production Measures. 14

15 SIDBI Associates towards and sustainable Subsidiaries financing Credit Guarantee Fund Trust for MSEs (CGTMSE) Credit guarantee for MSE loans up to Rs. 1 crore without collateral / third-party guarantee. Milestones in FY Over 2,88,000 Guarantee in a single year - Registered 18% growth in number of Credit approvals and 17% growth in amount guaranteed. - Cumulatively, lakh approvals for guarantee coverage for more than Rs 52,600 crore to MSEs. 97% of credit guarantees for loans upto Rs. 25 lakh. 15

16 Associates and Subsidiaries SIDBI towards sustainable financing SME Rating Agency of India Ltd. (SMERA) Set up in FY 2006, along with Banks and D&B. First dedicated, independent, third party rating agency in India for MSMEs. SMERA received accreditation from Reserve Bank of India (RBI) as an External Credit Assessment Institution (ECAI) under Basel - II norms on September 12, 2012 for undertaking bank loan ratings. Cumulative ratings as on March 31, ,342 ratings 98% ratings for MSEs 16

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