A Three-Way Partnership between Bank, ESCOs and Clients K-Energy Saving Guarantee Program:

Transcription

1 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,

2 Program Feature: K-Energy Saving Guarantee Program KBank / KF&E ESCOs 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). Loan or Leasing Customers Guarantee Savings 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. 2

3 Program Benefit: K-Energy Saving Guarantee Program G r e e n L o a n s U p T o Performance Guaranteed Cost Saving Long Term Competitiveness CSR, CSV, Sustainable 100% Privileges Condition & Collateral Other Privileges 3

4 Program Benefit 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 4

5 Program Feature: K-Energy Saving Guarantee Program 100% Loan or Leasing/ Hire Purchase KBank / KF&E Customers ESCOs Energy-saving guaranteed Consultancy Firms that offer integrated services Self-Financing Project 5

6 ESCO Guarantee Performance Scheme Actual Performance Baseline Guarantee 1. Shortfall Scenario 2. Surplus Scenario 100% ESC O will guarantee saving = 30% Post Retrofit Energy Cost 5% ESCO will pay (Penalty) for the gap of 5 % 5% Bonus will be depended upon the agreement of customer and ESCOs. Post Retrofit Energy Cost Post Retrofit Energy Cost 6

7 Energy Efficiency Measure add more cash flow in the future Electricity expense Energy Efficiency (EE) Measure 5% Free cash flow Pay Bank (interest + principal) 25% 30% Free cash flow Saving Energy from EE Measure 100% 70% 70% Electricity Expense after Energy Efficiency (EE) Measure Year 1 Year 5 5 Years onward 7

8 Energy Efficiency is the best investment option 8

9 Measurement and Verification (M&V) is key success in ESCO Business ESCO BANK Lending Financial solicitation package Supplier Contract What are purpose of M&V? Customer Supplier Measurement & Verification 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 9

10 The Three Triangles of ESCO business model Supplier Financial Support ESCO Selectived ESCO Investment type Risk mitigation Technical risk Performance risk Operating risk Guarantee performance ESCO Fund -Equity Investment -Equipment leasing -Venture capital BANK Lending Customer Technical Support Carbon credit Carbon footprint 10

11 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 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 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 11

12 12