1. Bank aus VerantwortungFinancing Industrial Energy EfficiencyProjectsBusso v. AlvenslebenDirector KfW Development Bank Pretoria Office

2. 2Financing Industrial Energy Efficiency ProjectsContent1 KfW: Who We Are2 How to promote Energy Efficiency3 Promoting Energy Efficiency Best practice examples4 Lessons Learnt 3. Bank aus VerantwortungKfW Entwicklungsbank Who We Are 4. 4Financing Industrial Energy Efficiency ProjectsPromotional Bank of the Federal Republic of GermanyFounded in 1948About 2300 employees in Frankfurt, more than 4,763employees in total (2011)More than 70 offices worldwideAAA, Aaa ratingThird largest German Bank by balance sheet(450 bn EUR)100 bn EUR commitments in 2011KfW Headquarters in Frankfurt/Germany 5. 5Financing Industrial Energy Efficiency ProjectsWe Are Part of KfW BankengruppePromotion ofdeveloping andtransition countriesInternational businessPromotionconstructionof new housingand modernisationas well as educationPromotion SMEs,business founders,start-upsFinancing municipalinfrastructure projectsand global loansGermany/Europeagency business forFederal GovernmentDomestic promotionInternationalproject andexport financePromotion of environmental and climate protectionBusiness AreaMittelstandsbankBusiness AreaPrivatkundenbankBusiness AreaKommunalbankBusiness AreaExport and ProjectFinanceBusiness AreaPromotion ofDeveloping andTransition Countries 6. 6Financing Industrial Energy Efficiency Projects 6Our ReputationA strong environmental & climate protection bankpromoting green investments of MSME and private Households KfW is acting on behalf of the German Government andone of the leading environmental and climateprotection banks world-wide. In 2011, approx. EUR 23 billion new commitments forenvironmental and climate protection were made. Thereof EUR 2.75 billion commitments can be attributedto environmental finance in transition and developingcountries by KfW Development Bank. KfW is acting on behalf of the German Government andone of the leading environmental and climateprotection banks world-wide. In 2011, approx. EUR 23 billion new commitments forenvironmental and climate protection were made. Thereof EUR 2.75 billion commitments can be attributedto environmental finance in transition and developingcountries by KfW Development Bank.Broad experience as a leading Environmental Bankin GermanyBroad experience as a leading Environmental Bankin Germany 7. 7Financing Industrial Energy Efficiency ProjectsHow to promote Energy Efficiency 8. 8Financing Industrial Energy Efficiency Projects 8StickTambourine CarrotHow to Promote Energy Efficiency? 9. 9Financing Industrial Energy Efficiency Projects 9Legislation, Rules and Regulations, Technical StandardsEnergy efficiency requirementsfor production, services, new and existing buildingsPromotionalProgrammesInformation andConsultingI N S T R U M E N T I N S T R U M E N TRegulatory Framework Forms the Foundation for Other Instruments 10. 10Financing Industrial Energy Efficiency ProjectsProject Types - Demand Side Energy Efficiency Public Buildings (e.g. schools, administrative buildings), e.g. Turkey Other public infrastructure (e.g. street lighting, water supply, agricultural pumping) Rehabilitation of residential buildings, e.g. ChinaProjects with public sector entities Small and medium-sized enterprises, commercial and industrial sector (incl. buildings) Residential buildings (private households and developers) Approx. 30 credit lines in Eastern Europe, Asia, Latin America and AfricaCredit lines with local financial institutionsStructured Investment Funds Mobilising private capital for EE investments(e.g. Global Climate Partnership Fund)Efficiency programmes through utilities Financing and implementing EE investments through utilities (utility DSM, e.g. Mexico, Croatia) 11. 11Financing Industrial Energy Efficiency ProjectsBilateral cooperation with local Financial InstitutionsTarget Group and Volume Green investments (mainly, in regard to renewable energy and energy efficiencymeasures) for MSMEs and private households Sub-loan volume up to USD 1 million -sub-loan: SME USD 100,000 200,000 / private households up to USD 25,000Instruments Credit lines to financial institutions at close to market conditions(slightly reduced interest rates for green loan product implementation) Technical AssistanceImpact Implementation of a widespread, standardised and established green loan product energy savings and reduction of greenhouse gas (GHG)-emissions Awareness raising within the Partner Institution and sub-borrowers Opening up the market for commercial financing 12. 12Financing Industrial Energy Efficiency ProjectsTailor made Technical Assistance to Financial Institutions1. Screening of existing Loan Portfolio und Clustering Screening of existing loan portfolio to filter already financed green investments Definition of clusters First Impact Analysis2. Analysis and Adaptation of Credit Process Development and Integration of additional questions in application form Efficient integration into the whole credit process3. Training of Loan Officers General Awareness within the Partner Institution Particular technical knowledge in order to enable the Loan Officer to recognize respective investments andsell the advantages (e.g. through cost reduction, payback periods, etc.)3. Support in Marketing Support the set-up marketing activities and promotional material5. Monitoring of energy saving and CO2 reduction Impact Analysis Development of a Monitoring/Reporting Tool tobe applied by the Partner Institution 13. 13Financing Industrial Energy Efficiency ProjectsPromoting Energy Efficiency Best Practice Examples 14. 14Financing Industrial Energy Efficiency ProjectsEnergy Efficiency Promotion in German SMEsA Special Fund for Energy EfficiencySpecial Fund for Energy Efficiency in SMEsJoint Initiative of the Federal Economic Ministry (BMWi) and KfW(Launched February 2008)Consulting Component(Grant for energy consulting)Financing Component(loans for investmentsin energy efficiency)Energy efficiency consulting Energy efficiency programmeKey Results End-2009: 833 sub-loans amounting to EUR 400 millionSince 4/2012: consulting component for companies with minimum energycost of 5.000 EUR p.a. 15. 15Financing Industrial Energy Efficiency ProjectsOur Experience in IndiaEE Finance Schemes supported by KfWSmall and Medium-sized Enterprises Small Industries Development Bank of IndiaResidential HousingNational Housing BankPublic Buildings and Infrastructure Energy Efficiency Services Ltd. (EESL)PPP with private companies(DEG) German mechanical engineering companies 16. 16Financing Industrial Energy Efficiency ProjectsRegulatory Framework for EE Promotion in India (I/II) Bureau for Energy Efficiency (BEE) Mandate: The BEE was set up in 2002 to reduce energy intensity of the Indianeconomy. It assists in developing policies and strategies with a thrust on self-regulationand market principles. Regulatory Framework: Energy Conservation Act (EC Act) Functions: Develop and recommend the Central government processes and energy consumption standards minimum consumption standards and labeling design for equipment andappliances specific energy conversation building codes Creating awareness and disseminate information for efficient use of energy and itsconservation Recommend the Central Government for notifying any user or class of users of energyas designated consumer 17. 17Financing Industrial Energy Efficiency Projects Energy need of refinancedbuildings at least 30% lower thanbenchmark building Adaptation of simple but robusttool for energy performanceassessment to Indian conditions(e.g. climate, behaviour) Research CooperationFrauenhofer/ TERILesson learnt: Scaling up EE finance requires simple butrobust tools for energy performance assessment 18. 18Financing Industrial Energy Efficiency ProjectsObjectives Reduce emissions of greenhouse gases by Indian SMEs by min. 80.000 tons p.a. Raise SME investments in energy efficient technologies Broaden SIDBIs financial instruments and institutionalize EE lendingApproach EUR 50 Mio credit line to SIDBI for on-lending to Indian SME EUR 0.5 Mio grant for technical assistance (training, marketing, monitoring) List of eligible EE measures plus assessment tool for more complex casesKfWs Approach in Financing EE for SMEs (SIDBI) 19. 19Financing Industrial Energy Efficiency ProjectsClient: manufacturer of TNT bars in Raipur, Chhattisgarhapprox. EUR 570,000 term loanInvestment in continuous casting and shearing machinesShutting down the billet reheating furnace (re-rolling mill)eliminating use of fossil fuel (coal)Approx. 15,000 tons CO2 reduction p.a.Support to project development (handholding) throughaccompanying measureReplication potential in clusterExample of SIDBI SME Investments (I/II): Steel Re-Rolling 20. 20Financing Industrial Energy Efficiency ProjectsClient: Yantra Harvest Energy Pvt. Ltd., PuneRs. 10 Crores revolving loan facility (EUR 1.4 Mio) Supplier of Variable Frequency Drives Offers complete retrofit solutions (include i.a. equipment audit,installation of energy saving equipment, maintenance) on ESCObasisYantra recovers investment costs through monthly performance-based payments from clientYantra receivables assigned/hypothecated to SIDBIClient payments routed through Escrow accountMonthly repayments to SIDBI matching cash flows of the individualprojectNo additional hypothecation of equipmentExample of SIDBI SME Investments (II/II):Cash-flow Financing for ESCOs 21. 21Financing Industrial Energy Efficiency ProjectsObjectivesEESL created in 2009 to support implementation of the National Mission for EnhancedEnergy Efficiency (NMEEE) with the following tasks: Super ESCO for implementation of EE projects Consultancy for CDM and energy efficiency Resource center for capacity building of SDAs, utilities and other playersApproach Up to EUR 50 Mio credit line and up to EUR 1.5 Mio grant for technical assistance Currently support to EESL business planning for ESCO investment operationsPublic Buildings and InfrastructureEnergy Efficiency Services Ltd. (EESL) 22. 22Financing Industrial Energy Efficiency ProjectsSupporting Innovative Business and Financing Models:Cash-flow based Financing for ESCOs in India (SIDBI)SIDBISIDBI ESCOESCO ClientClientINR loan facilityDesign, implementationand maintenanceEscrowAccountEscrowAccountMonthly performance-basedpaymentsAssignment ofreceivablesRepaymentRepayment 23. 23Financing Industrial Energy Efficiency ProjectsLessons Learnt 24. 24Financing Industrial Energy Efficiency ProjectsChallenges in Promoting Energy Efficiency Non-conducive policy framework and unfavourable market conditions energy prices, standards, awareness Managing interests of diverse stakeholders e.g. energy agencies, auditors, financial institutions; local content issues; incentives (technology vs. job creation); target groups Adequate definition of EE saving targets and eligibility criteria e.g. demonstration of innovative technologies vs. broad-scaleprogrammes, cost effectiveness) Mainstreaming & Scaling up of new financial products in partner institutions Monitoring of energy savings and CO2-reduction Mobilising private capital 25. 25Financing Industrial Energy Efficiency Projects EE finance is most effective as part of a promotional system including regulation andinformation/consulting (incl. labeling) Well-designed public EE finance can catalyze private investment Any subsidies provided should first focus on supporting institutional learning of localfinancial institutions Standardization, simple eligibility criteria and user-friendly tools are key to scaling up EEfinance Management commitment and staff incentives are critical factors when working with localfinancial institution EE finance schemes should support innovative business models (e.g. ESCOs) and relatedinnovative financing products Scaling up on-lending is crucial to providing incentives in green investments One Size fits all does not work - Tailor-made projects are key to success Branding for Energy Efficiency creates transparency and visibilityLessons learnt 26. Bank aus VerantwortungSIYABONGA!Busso v. AlvenslebenDirector KfW Pretoria OfficeBusso.Alvensleben@kfw.de