Increased awareness on latest policy developments on RE ... · After the inauguration, Jiwan...

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TABLE OF CONTENTS

TABLE OF CONTENTS i

ACRONYMS ii

1. BACKGROUND: 1

1.1 Objectives 1

1.2 Expected Outcomes 1

1.3 Workshop Highlights 2

2. THE WORKSHOP 3

2.2 Proceedings of the 1st day Workshop 3

2.3 Opening Session 3

2.4 Opening remarks by various officials, Special Guests and Chief Guest 5

2.5. Opening remarks by different dignitaries 5

3. Summary of Technical Sessions and Discussions 9

3.1 Session 1: Case Study of Successful Deal Closures. 9

3.2 Session 2: Policy Framework and Programs 11

3. 3 Session 3: Introduction to Central Renewable Energy Fund (CREF). 15

3. 4 Session 4: Regional Experience in Renewable Energy Financing: 17

3. 5 Session 5: Access to Finance: 20

3. 6 Closing Session 6: Moving Forward 23

3. ANNEXURE i ANNEX-1: Workshop Agenda i ANNEX-2: Flyer of the workshop v

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ACRONYMS ADB Asian Development Bank AEPC Alternative Energy Promotion Centre AusAID Australian Agency for International Development BFIs Bank and Financial Institutions CREF Centre Renewable Energy Fund EIA Environmental Impact Assessment GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GoN Government of Nepal HH Households IAP Indoor Air Pollution ICIMOD International Centre for integrated Mountain Development ICS Improved Cook Stoves I/NGOs International/ Non-Government Organizations IOE Institute of Engineering IRR Internal Rate of Return KU Kathmandu University kW Kilowatt LDC Least Developed Country MoSTE Ministry of Science, Technology and Environment MOU Memorandum of Understanding MW Megawatt NAST Nepal Academy of Science and Technology NEA Nepal Electricity Authority NEEP Nepal Energy Efficiency Programme NMHDA Nepal Micro-hydro Developers Association NPC National Planning Commission NRREP National Rural and Renewable Energy Programme PFAN Private Financing Advisory Network PPA Power Purchase Agreement PPP Public Private Partnerships PV Photo Voltaic PVPS Photovoltaic Pumping System R&D Research and Development RESCO Renewable Energy Service Company RETs Renewable Energy Technologies SMEs Small and Medium Enterprises SNV Netherlands Development Organization SREP Scaling up Renewable Energy Programme UN United Nations UNDP United Nations Development Programme USAID United States Agency for International Development USD US Dollar VDCs Village Development Committees WB World Bank

Sustainable Energy for All/Nepal

International Workshop on - Best Practices and Business Opportunities for Energy Access Finance

1. BACKGROUND: Nepal has been heavily dependent on traditional energy sources to meet its energy needs. To confront the challenge of reducing dependency on traditional energy and attain sustainable development through integrating the alternative energy sources, Alternative Energy Promotion Centre (AEPC) has taken numerous initiatives to promote the productive use of available alternative resources in Nepal. The International Energy Agency estimates that USD 45 billion annually is required to achieve universal energy access by 2030.Last 2014, the combined contribution of Government. Development Agencies selected Private Sector organizations only amounted to USD 9 billon-USD 36 billon short to the goal. The Asian Development Bank (ADB) understands that the participation of the Private Sector is essential to bring this investment Gap. In March 2013, the Government of Nepal, through AEPC partnered with the ADB’s Energy for All Program to organize an international workshop that enabled entrepreneurs and investors to become more active in the energy access space. By leveraging development funding to de-risk and catalyse private sector investment, the Energy for All Program believes that it can contribute to closing the investment GAP in Asia and the Pacific. Nepal is one of ADBs priority countries in Asia 85% of Nepal’s total energy consumption is met through traditional biomass. New renewable energy sources such as biogas, micro hydropower and solar energy, accounted for only about 0.7 present of Nepal’s energy mix in 2009. The workshop was jointly organized by Alternative Energy Promotion Centre (AEPC), Nepal and Asian Development Bank (ADB) with the intent to review the success factors of Renewable Energy (RE) financing within and outside Asia and the Pacific, and share knowledge on the development of viable and innovative RE financing models that can be deployed. 1.1 Objectives The key objectives of workshop were: • Discuss and highlight successful policies, incentives, and mechanisms in RE financing in

Nepal and Asia and the Pacific Region; and • Identify and rationalize the services offered by development programs and agencies that

provide capacity building and investment facilitation support for energy access enterprises. • Discuss on financing modalities carried out by Banks, Financial Institutions and Equity

Investors in RE Projects. 1.2 Expected Outcomes

• Increased awareness on latest policy developments on RE financing

• Sharing national and international RE financing business models and their replication • To identify the existing issues & challenges in RE financing • Increased awareness to mobilize private and public sector investment • To introduce new business models for RE financing for effective utilization of RETs at commercial, industrial and domestic scale

1.3 Workshop Highlights Workshop Theme

Workshop on Best Practices and Business Opportunities for Energy Access Financing

Date March 16,2016 Organized by Asian Development Bank (ADB) & Alternative Energy Promotion Centre (AEPC). Supported by UNCDF, UNESCAP, UNDP, Australian Aid, Austrian Development Cooperation,

JICA, Norwegian Ministry of Foreign Affairs, and Swiss Agency for Development and Cooperation

Facilitated by Winrock International Venue: Hotel Annapurna, Kathmandu, Nepal Participating Organizations

Government Organizations: Donors/INGOs/NGOs: Private Sector Organizations/Companies: Academic Institutions & Universities:

Number of Participants

301

Session Themes

Session 1: Case study of Successful Deal Closures Session 2: Policy Framework and Programs Session 3: Introduction to Central Renewable Energy Fund (CREF). Session 4: Regional Experience in Renewable Energy Financing: Session 5: Access to Finance: Closing Session 6: Moving Forward

Resource Persons/ Facilitators

Opening session: Chaired by Dr. Vijay Kumar Mallick, Ministry of Population and Environment Session 1: Mr. Jiwan Acharya, Senior Energy Specialist, Energy Division, South Asia Department, ADB.- Panel member Session 2: Mr. Ram Prasad Dhital, Executive Director, AEPC- PM Session 3: Mr. Vincent Wierda, Programme Manager, Clean Start Programme,

UNCDF Session 4: Mr. Bibek Chapagain, Energy Advisor, Royal Norwegian Embassy Session 5: Mr. Upendra Poudel, CEO of NMB Bank and President Nepal Bankers’

Association. Closing Session 6: Mr. Suman Basnet, Coordinator, SE4ALL Closing remarks : Prof. Dr. Govind Raj Pokharel, Tribhuvan University and former Vice-chair NPC

Methodology Presentations, Panel discussions and Q & A

2. THE WORKSHOP The workshop on “Best Practices and Business Opportunities for Energy Access Financing” was conducted with an objective to share knowledge on the development of viable and innovative RE financing models that can be deployed.

A total of 301 Participants representing various stakeholders such as International/Non-Governmental Organizations (I/NGOs), multilateral agencies, private sectors, banks, academia and government attended the program. The major highlights of the workshop are provided in subsequent session titles.

2.2 Proceedings of the 1st day Workshop

• Chairman: Mr. Vijay Kumar Mallick, Secretary, Ministry of Population and Environment • Chief Guest: Honorable Mr. Vishwendra Paswan, Minister, Ministry of Population and

Environment, Kathmandu • Special Guest – Honorable Yub Raj Khatiwada, Vice-Chairman, National Planning

Commission, Kathmandu, Nepal • Special Guest – His Excellency Glenn White, Ambassador of Australia to Nepal

2.3 Opening Session Mr. Vijay Kumar Mallick, Secretary, Ministry of Population and Environment chaired the session. The rapporteur for the session was Manoj Manandhar, Winrock International. The session was started at 9:00 am after the registration process. The proceedings were facilitated (Master of Ceremony) by Mr. Shekhar Aryal, NRREP/AEPC. He provided a brief introduction of the workshop and welcomed all the participants in International Workshop. Welcome Address: Mr. Ram Prasad Dhital, Executive Director, AEPC Mr. Ram Prasad Dhital, Executive Director, Alternative Energy Promotion Center (AEPC) welcomed distinguished guests and development partners, other participants and Media on behalf of AEPC, ADB, UNCDF and UNDP. He said that this was a very important workshop in energy financing. He shared that the energy debate has been going on for a long time. Despite of huge potential of hydropower, we are still in energy crisis. He said that the current crisis is not only about underutilization of hydropower, but the overuse of traditional fuel in rural areas and over dependent on imported fuel in urban areas. AEPC was thus created for alternative energy and sustainable use. He stressed on renewable energy as one of the mainstream energy solution not only in rural areas but also in urban areas. He said AEPC has been adopting (promoting) Public Private Partnership (PPP) approach in energy delivery. In the past AEPC used to have different projects

and programs, however since 2012, AEPC has been implementing a national program called National Rural Renewable Energy Program. There were 3 major components of this program:

1. Technical Assistance for RE 2. Business Development 3. Central Renewable Energy Fund (CREF), important and critical one

In the past AEPC administered subsidy credit by itself. AEPC has now dedicated fund as Central Renewable Energy Fund (CREF). CREF is being administered by Global IME bank for credit mobilization. AEPC has set ambitious target to install:

1. 25MW electricity from Hydropower 2. 0.6 million of Solar Home Systems 3. 0.5 million of Cook stove 4. 0.13 million of Biogas

He gave a brief introduction about AEPC. AEPC has decades of experience with micro-hydro and biogas as the main success through PPP. PPP is a replicated model for the promotion of clean energy. He further said that the government had launched kind of ambitious campaign of providing clean cooking and lighting solution for all by 2017. Although the progress was hampered by the earthquake disasters and blockades, AEPC was accelerating activities in partnership with banks. He requested the government to accommodate everything under the mainframe that has already been developed and designed. He expressed that AEPC felt privileged to organize this very important workshop focusing on financing of renewable energy techniques. In the past we used to focus more on subsidy, but when we designed the Central Renewable Energy Fund (CREF), we have realized to have the credit component together. He further highlighted this kind of workshop we could share our ideas and share experiences to refine our modality so that the people in very remote and rural areas could get easy access of credit as well as subsidy. He believed that PPP modality can bring all different partners, and we could make a difference if all stakeholders including the government, private sector and civil society work together. He also mentioned that AEPC appreciated the help of ADB in promoting small scale energy projects. Finally, he thanked all the participation and welcomed the participants to the event. After the welcome speech by Mr. Dhital, the workshop was formally inaugurated by Chief Guest, Honorable Vishwendra Paswan, Minister for Population and Environment. After the inauguration, Jiwan Acharya, Senior Energy Specialist, Energy Division, South Asian Department, Asian Development Bank, Manila, Philippines presented a paper on “Bridging the Investment Gap”. He mentioned the role of ADB in promoting of sustainable energy in the Asia pacific region. There is still a lot to be done in developing the energy program areas. The target for achieving Universal Access to Energy is still not achieved. He also stated that there was a role for the State/Public Sector, Development partners, and Financing Institution, private sector and civil society in achieving the goal of energy development. There has been progress in implementing renewable energy programs in the Asia

pacific countries. There is a huge resources gap in attending the goal of Universal Energy Access goal. He also added that ADB is investing substantial amount of resources for the attainment in the Asia/Pacific countries. It was expected that this workshop would help in identifying various sources. There is money available on the whole. How to access the resources is now important aspect for discussion. He further stated that it was clear that there was a large resources gap in fully achieving the goal of Universal Energy Access. He remarked that this workshop would helped in finding ways of getting financial resources including the financial institution. 2.4 Opening remarks by various officials, Special Guests and Chief Guest

• Mr. Vincent Wierda, Program Manager, Clean Start Program, UNCDF, Thailand

• Mr. Kenichi Yokoyama, Country Director, Nepal Resident Mission, Kathmandu, Nepal • Mr. Glenn White Special Guest – His Excellency, Ambassador of Australia to Nepal • Mr. Jiwan Khatiwada Special Guest – Honorable, Vice-Chairman, National Planning

Commission, Kathmandu, Nepal • Mr. Vishwendra Paswan Chief Guest – Honorable, Minister, Ministry of Population and

Environment, Kathmandu • Remarks by Chair Person and Opening of the Sessions

2.5. Opening remarks by different dignitaries Mr. Vincent Wierda, Program Manager, Clean Start Program, UNCDF, Thailand gave opening remarks. He expressed that a great pleasure to participate in the workshop on energy financing and he thanked that organizer. He said that it required a huge cost for energy infrastructure, and we would require cost effective energy solutions. There are many tremendous advantages of energy provisions, and clean cook stove solution can change the life of individuals, including women and children. Sustainable Development Goal is important. There is a large resource gap to meet the goal of energy development. There was a big role for private sector financing to meet the resource gap. There are many private sector investors including social impact investor and other sector investors who can invest their money/resources. There is big scope for private sector nationally and internationally. There is a great market potential for energy that is made available through investment. This market potential is largely untapped. Energy development can help promote other development works and also bring additional opportunity for local economic development which is also very important priority of governments globally. Nepal is recognized as a leader in promoting renewable energy globally. Many countries are watching Nepal’s example and its achievement for inspirations. AEPC has played leading role and many countries have sent missions to Nepal to learn about how alternative energy promotion can be done well. Still, much of renewable energy potentials is unrealized. Recent energy crisis has increased the importance of renewable energy. There is a big demand for

improved clean cooking stove in rural areas of Nepal. The private sector has not been able to meet the demand. It is necessary to involve private sectors, banks in providing finance for energy development. Provision of finance helps in increasing access to energy. For sustainable energy development, both public and private sector financing are essential. There is need of legal system for facilitating the involvement of financing private sector in energy. Mr. Kenichi Yokohama, Country Director, Nepal Resident Mission, ADB, Kathmandu Mr. Kenichi Yokoyama, Country Director, ADB gave opening remarks in which he shared his views about the lack of energy access and energy poverty as a major crisis in developing countries (Asia and Pacific). In Nepal, energy access is still low (74% access, 58% from grid and rest from up grid energy sources). Many of the people who having access of willing who able to pay for energy and currently most of paying a premium for very poor quality energy. ADB is investing investor forum and the active support to entrepreneurs working in energy access based in sustainable businesses that can meet the needs of energy poor through the provision development for providing clean and reliable energy by engaging private sector business. Nepal is taking several measure for promoting energy access. Private sector investment is essential increasing energy access. ADB aims at promoting investment by private entrepreneurs by developing new sources of energy (such as micro hydro, bio gas and solar energy technologies). He expressed that from this type of workshop can be a learning platform for new innovative government initiatives program. The Center Renewable Energy Fund (CREF) is set-up to support renewable energy technology in the rural areas. He also shared about the most recent success story of Local Energy Access Company called Gham power which presented micro grid business model in one of the previous investor forum. The private sector companies are expected to present their business plans for energy development in this workshop. We expect to know about success stories from various business companies. Finally, he concluded the speech saying that ADB is fully committed to promote clean energy sector development in Nepal. He also stated that energy development will help promote development of the country. There are several challenges in energy development. This workshop is expected to indicate new ways of energy development. Mr. Glenn White, Special Guest, His Excellency, Ambassador of Australia to Nepal Mr. Glenn White, Australian Ambassador to Nepal said that he is pleased to provide support to Nepal and South Asian Countries for clean energy development and enhancing energy access. He expressed that AEPC is doing good work in extending energy access in the rural areas of the country and placing new ideas business models to make this a more sustainable venture. There has been an attempt to provide energy development through small hydro projects. The energy model of energy development could be scaled up through for this local communities and private sector investment could be utilized.

Australia is willing to support the energy access program in cooperation with ADB and along with other partners like ICMODE and IFC. He concluded the speech saying Australia is interested in expanding the private sector investment. Mr. Yub Raj Khatiwada, Special Guest, Honorable, Vice- Chairman, National Planning Commission, Kathmandu, Nepal Nepal government has been seriously working for energy promotion in the country. Nepal Government is making efforts to increase the quantity of renewable energy produced and making the energy to assessable and affordable to all to make universal kind of service to all the citizens. In this context, this workshop He highlighted where are the opportunity and how those could be genuine investment and also learning from the best practices from all over the world. There are several challenges in energy development sector. Still Nepal has focused on non-renewable development because of lack of generation of renewable energy and subsidy regimes. Now the subsidy regimes of the non-renewable energy are almost eliminator. There was no distortion coming from the government policy on renewable Vs non-renewable energy sources. There was a mix of energy sources like Hydro, Small Hydro, Bio-Gas, Wind energy, and Geo-Thermal. We have to seek to balance the energy from various sources. We are presently grappling with the problem of under supply. About 75% HHs have electricity connection. But the quality is low. The supply is not regular. Financing was an issues. There is lack of equity/Banks financing. There has been some attempts to provide bank finance. The banks have lot of liquidity but the use of bank finance for energy sector was very low. The utilization of bank financed for energy purposes was very low. So the Workshop could discuss how bank financed could be increased. Besides the issues of generation of power, there was also a problem of increasing household’s connection to electricity (energy). The government has prepared a target based power development program. The target was generation of 10,000 MW of electricity which was mix-up 5,000 MW being storage and another 3,000 MW plus in Urban and some of them also being solar and other energy in ten years’ time. We are also trying to implement sustainable development goals, where energy comes as a cross cutting kind of intervention in several of the goals that from poverty, agriculture to environment and we are also trying to mainstreaming to renewable and clean energy policy in all the sustainable development goals. Our emphasis is also on sustainable energy development. We are engaged in making projection of demand in future. To meet the future demand, we are considering the energy-mix. This is a system of providing subsidiary for renewable energy provisions. This is the present policy we should use the subsidy system in course of time. There are the different donor supports coming to Nepal. Their contribution should be used in a coordinated manner. Our hope is to be increase renewable energy in the future.

Mr. Vishwendra Paswan, Chief Guest, Honorable, Minister, Ministry of Population and Environment, Kathmandu, Nepal: The government of Nepal is presently able to present its clear position on various national issues before its people and world. He said that Nepal adopted a new Constitution to build inclusive state. The Constitution is progressive in many ways however a neighboring country expressed some dissatisfactions and country had to face a hardship due to blockades. The blockade created fuel crisis for months. At this time of challenge, the work of the Ministry of Population and Environment gets important to promote renewable energy in the country. The potential of Nepal is known as second in the world in terms of the hydroelectricity potentials. It is unfortunate that even electricity is not available all the 24 hours a day. The low quantity as well as the irregulars supply of electricity stand as a great challenge for us. The promotion of alternative energy is an option for meeting the growing demand for energy. We must all devote great attention to the development of alternative source of energy. The development energy through utilization of hydroelectric source is a top priority for the government of Nepal. However, utilization of this source is much needed for significant develop of this source. The use of solar energy is being tried in several countries. It is known that about 16% of all energy produced in India is derived from solar energy source. The government of Nepal intends to work with the private sector for the development and use of energy through solar energy sources. Some estimates put the solar energy as a prime source that can supply as much as 35% to 40% of energy demand. The solar energy source will be of particular benefit to the rural people. Solar energy supply could help the rural people to come out of the poverty situation. He assured that the Ministry of population and environment is committed to the development of solar energy source in the country. He said he was personally deeply committed to this work. Finally, he requested all concerned people and institutions, the banking sector, and donor agencies to help the government in this sector. He further added that solar energy is an area which can deliver power to the remote areas. The opening session came to an end with remarks from Session Chair Mr. Vijay Kumar Mallick, Secretary, Ministry of Population and Environment. He addressed all the participants and thanked AEPC and ADB for the invitation. He expressed that despite of huge potential of hydro power and renewable energy sources in Nepal, we are currently facing energy crisis. About 2 million of HHs are still deprived of access to modern electricity supply. In addition, more than 70% of the total primary energy supply of the country is based on fuel. The significantly low level of access to modern energy situation of Nepal is primary due to the lack of access to finance by renewable energy companies and their clients. Renewable energy financing was not fully commercialized in this country. Considering the available resources potentials of renewable energy financing in this Country, Ministry of Population and Environment through Alternative Energy Promotion Center (AEPC). Further, he gave a glimpse of AEPC that has taken a new initiative to reduce the dependency on subsidy and attempt sustainable

development integrating the alternative energy sources by creative financial model. He also added that AEPC has already established and operationalized Central Renewable Fund Center (CREF) as the financial management mechanism for the renewable sector. He stated that Central Renewable Energy Fund (CREF) will be an instrumental to minimize the existing gap in financing for renewable energy. Further he added, with the effective financial mechanism for the sector, it is expected that further fund will increase renewable energy in protecting the environment and contributing to rural livelihood and development. Finally, he concluded the speech saying this renewable energy financing workshop will be good a good platform for learning and sharing success factors, and discussing renewable energy financing business model to provide inputs for national policy. 3. Summary of Technical Sessions and Discussions The workshop was divided into five technical sessions and one concluding session over the one-day workshop. Each session dealt with varied aspects of existing technologies and viable business models for mini/micro hydro of renewable energy systems that could be imperative to scaling up such systems in the country and provide an overview of the policy framework in RE financing in Nepal and Asia and the Pacific Region, each session ended with the distribution of token of love for the moderator and presenters. 3.1 Session 1: Case Study of Successful Deal Closures. The session was chaired by Mr. Jiwan Acharya and rapporteur for the session was Mr. Manoj Manandhar Winrock International. It comprised of 3 presentations intended towards discussing various issues, challenges faced and how the project overcome yet and how micro hydro can be used for tourism promotion and sector development and how the such project can be implemented and banking prospective what are challenge Presentation 1: Solar Micro-grid in Nepal – Mr. Kishor Rimal, General Manager, Gham Power Pvt. Ltd. First presentation was done by Gham Power: Solar Project Developer, by Mr. Kishor Rimal, General Manager of Gham Power Pvt. Ltd. He briefly informed about this company and development on the company’s micro grid project. The company was established on 2015 which focused on Solar PV system for business and productive use. Their target for 2016 is 5MW of solar projects. The company started with support of ADB and their project started with rural solar micro grid in Khotang and Okhaldhunga. The project was implemented in 2 phases in which phase 1 was project of 35 KW and funded by Local Community Investors, ADB, & DOEN, it powered 25 businesses, 83 households and total installation costs was $239k. Phase 2 added 37 kW to power mobile towers and additional households and it was funded by GSMA M4D Grant award and partnered with Ncell. It provided electricity to 2 mobile towers, 146 households and 20 and more businesses. He explained the benefit to the community as there was electrification the area and provided reliable power. He further explained the benefit of phase 2 to the local communities as they could provide mobile signal to 5 VDCs, it also enabled mobile Pay-as-you-go (PAYG) option for electricity through eSewa and mobile connectivity enabled new business and connects markets. He also informed about the benefits to Telecom Company and Micro grid companies through Solar PV. He briefly explained the challenges faced and future plans of the company.

Open Floor Discussion:

1. Mr. Basanta gave the comment about the need for policy regarding distribution licensing or registering in the DDC since in future if there is dispute with distribution with current utility and new one, it can be resolved properly. Mr. Risal replied to the distribution licensing, he said that there is need to be clear policy regarding it. He also shared some of his experiences of difficulty for licensing and stressed need for policy regarding distribution licensing.

Presentation 2 Innovative Business Models in Microhydro– Mr. Mahabir Pun, Annapurna Dhaulagiri Community Eco-tourism Development and Promotion Organization Second presentation was conducted by Mr. Mahabir Pun, Chairperson of Annapurna Dhaulagiri Community Eco-tourism Development and Promotion Organization on Dhoskekhore Microhydro Project in Myagdi. He informed about the micro hydro project which will focus towards promoting community based eco-tourism in Annapurna Region. The project was pitched in 2013 with technical support from ADB, Winrock and AEPC, however the project faced some delay due to the Earthquake. He explained the history of the organization, which dates back to 1994 and start of eco-tourism in that region. In 2010-2013, they built 6 community owned lodges and started Home Stays in 4 villages. Since it is a tourist area, the micro hydro project will help the community and the area and increase the tourism. He further presented the investments, cost and operational plans of the project. Open Floor Discussion: Question raised by Mr. Suman Basnet, Coordinator, SE4ALL to Mr. Mahabir Pun. 1. How did the community raise the fund and the profit that come out radar than come back to

at deviance that community was big challenge tomorrow in social causes, share the experience on the investment raised by the community?

Mr. Mahabir Pun replied that this was not the first project that the community raised the funds for a project. The previous community projects build 6 lodges and 4 home stays which raised cost of Rs 200,000 from the local community. Some grants were provided from other organizations and donors and 50% was raised by the community. He mentioned that Income Generating Programs was beneficial for the community to raise funds. They did have to convenience a little to the community to invest towards the project as it was beneficial to the tourism and their area. So the community already had experience of equity investment in cash and kind, they were also willing to invest in this program.

Presentation 3 Investor Perspective in Financing Renewable Energy Projects in Nepal– Mr. Dinesh Dulal, Head Renewable Energy and Micro Finance, NMB Bank Third presentation was in Investor Perspective in Mini Grid Project by Dinesh Dulal, Head of Renewable Energy and Micro Finance of NMB Bank. He briefly introduced the NMB Bank. He shared NMB Banks’ experience on Mini Grid Project, which has financed 20 Mini Grid Based Micro Hydro Project Owned by Community and Private Develop. NMB has also financed first Solar Micro Grid Project in the Country supported by ADB under Energy for ALL Investor Forum and completed financial closure of first Micro Hydro Project based on anchor load customers

supported by ADB under Energy for All Investor Forum. He informed about the mini grid based access to Energy projects that NMB Banks is currently running. He gave brief information on Bank’s concern over Mini Grid Project like Risk Return Profile, Tariff collection, Repair and Maintenance and etc. He shared Banks experience and support provided towards project like Mr Mahabir’s project and Gham Power projects which is related with Micr Hyrdo projects. Open Floor Discussion: 1. Mr. Madhusudan asked the questions to NMB Bank regarding how they solved the issue of collateral in the case of Mr. Mahabir Pun? Mr. Dinesh answered to query of collateral. He said that both the project till now has been financed under limited request finance project where project acts as collateral along with personal guarantee from the individual. 2. Vincent queried about the some of the models where you have the different investors and shareholders coming in but still there is very valuable element of local government, ADB coming up with the big share of cost and what do you think from business sustainability perspective? Also he queried about things that needed to be done for upscaling through business perspective. Mr. Jiwan added to the discussion that there is need to regulate all of the distribution companies, and assist the financial institutions and also project developers. He also stated that there should be good balance between regulative and innovation. He added that grant should be given in sustainable way and move from process of giving grant to more into financing phase. He also added we should slowly move to new technologies which will increase the quality though will increase the project cost and in this investor will come into picture. Finally, the session ended by giving token of appreciation to all the presenter 3.2 Session 2: Policy Framework and Programs The session was chaired by Mr. Ram Prasad Dhital, Executive Director, AEPC and rapporteur for the session was Mr. Manoj Manandhar Winrock International. It comprised of 5 presentations intended towards discussing various policy frameworks, current initiative, existing models and technical and financial barriers. Presentation 1: Perspectives of a Development Partner on Energy Access – Mr. Pushkar Manandhar, Project Officer (Energy), Nepal Resident Mission, Asian Development Bank Mr. Manandhar shared about the Energy Access Situation in Asia- Pacific ADB key development partner in Asia- Pacific in 4.2 billion in Asia. About 1.8 billion people without access to clean energy and 526 million people without access to electricity. More than 500 million population is relying on various form of energy to meet their demand and on top of that population are increasing in Asia pacific region and also demand is also increasing. He informed that ADB is going to increase investment in energy access projects and enterprises. Adapted by bank in 2009

• Promoting energy efficiency & renewable components energy. • Maximizing energy access to energy for all, especially the unserved rural poor people.

• Promoting energy sector reforms, capacity building and governance.

ADB strategies: 2020 Meeting growing energy demand in sustainable manner

• To help expand supply of energy • Promote energy efficiency • Support clean energy • Facilitate removal of policy, institutional, regulatory, technological and legal constraints.

Country Partnership Strategy for Nepal (2015-2017) • Energy sector – Priority sector • Achieving energy security at home and promote energy expert

Open Floor Discussion: Question raised from floor, to Mr. Pushkar Manandhar.

1. What type of renewable energy ADB is working with? Mr. Pushkar Manandhar replied that the energy security on household label based on three aspects

• Having diversification in the energy resources • Less dependence on the imported energy fuel. • Political stability

He further added, this has been recognized by well-known scholars from all over the world, which is also applicable for household level as well. He further added that intervention was mainly focused on larger infrastructure development but now, due to the new need of our country, we are slowly focusing on other form of energy i.e Like locally generated energy form solar, mini-hydro, etc. We can have diversification on same form of energy also, so we are working on storage based hydro-power system.

2. In terms of financial support, what ADB have to suffix the energy demand for private and different sector with examples? It’s true that ADB is mainly engaged on large infrastructure development, like hydropower, as it will continue also. But at the same time, ADB is working other sector, like for the first time working with AEPC having major program.

3. Do you have planned in extend working other sector like climate smart for cooking stove? Have you made plan to extend your working sector rather than what you are doing? He answered to query of cooking. He said that ADB don’t have any strong intervention in this area. As we are part of the sustainable energy for all initiative as ADB being the regional hubs on these things. As in Nepal without addressing fuel need, we will not be able to get our target of energy efficiency. We look forward to work with government to work and address these sectors.

Presentation 2 & 3: Regulations on RE Financing– Mr. Dirgha Raj Rawal, and Mr. Subash Acharya, Deputy Director, Nepal Rastra Bank. Second presentation was conducted by, Mr. Dirgha Raj Rawal, and Mr. Subash Acharya Deputy Director, Nepal Rastra Bank. He shared regarding the NRB regulations on RE financing. Productive sector lending includes the loan extended to agriculture, energy, tourism, cottage and small industry sector. He stated that commercial banks required to lend at least 20% of their total loan in the productive sector. Similarly, development banks & finance companies should lend at least 15% & 10% of their total loan resp. He continued his presentation mentioning the A, B & C class institution are required to lend at least 5%, 4.5% & 4% of their total loan rasp in the deprived sector. He informed that, if foreign investment in foreign country or foreign investors making investment in Nepal is subject to notices published by NRB. Receiving & disbursing of loan in FCY except is not allowed by Law % Provisions mentioned in public notices of NRB. He added further, foreign investment must bring-in convertible FCY Indian nationals can bring Indian Rs. as well. Foreign investors can open bank account in Nepalese BFIS either in NRR or FCY or both. He mentioned that the application from the company to NRB requesting for FDI approval with a copy of acknowledgement to NRB is needed. And requirements for share repatriation are:

• Attested share & register book • CIB information of purchaser • Share valuation report on the basis of fair value amount if company is not listed in

NEPSE • Project completion certificate, if grant is taken from any authority

Open Floor Discussion: (Q & A) Question raised to Dirgha Raj Rawal, Deputy Director, Nepal Rastra Bank.

1. What is the interest rate of NRB? Mr. Rawal answered to query of interest rate. He said that the NRB have determined rate for different banks, CREF, etc. Such rates are determined on the basic of regular research. He further added that such rate are announced annually, during the announcement of monitory policy. Some they are revised & sometimes they remain same.

Presentation 4: Initiatives of Winrock International for Energy Financing Policy Intervention, Ms. Resha Piya, Winrock International Ms. Shrestha Piya introduced Winrock International which was established in 1998 with a focus and core expertise in renewable energy, energy financing, environment, forestry, climate change and carbon credit etc. She shared the RESPO Nepal is country office and successfully completed more than 100 projects. She also shared about the RESPO Nepal involvement is about 1.8 million are deprived from clean lighting solution & 3.3 million are using smoky traditional cook stove. She continued her presentation mentioning the commercial & industrial sectors heavily depends upon fossil fuels. Further she state that access to energy in Nepal about 110,000 plus HHs through RET. Access to electricity like SHS- 40,000 HHs, MHP-4500 HHs, Rural electrification- 2700 HHs and Biomass Gasifier -100 HHs.

Access to clean cooking: Productive Energy use, IWM- 4,000 HHs, Solar PV pumping – 150 HHs and Safa Tamp & others. Have facilitated in establishing a national level bank dedicated to energy financing. Have mobilized 10 BFIs & 500 LFIs for credit financing of RETs. Presentation 5: Development Partner’s perspective on RE financing in Nepal – Mr. Prem Sagar Subedi, Clean Start Project Coordinator, United Nation’s Capital Development Fund. The final presentation for the session was “Development Partner’s perspective on RE financing in Nepal” by Mr. Prem Sagar Subei. He informed about the target of NRREP remaining is 15 MW, MHP, 1,364 IWM, 220K SHS, 48K Biogas. He further added that the total plants investment is about 150 million US dollar. Potential for credit is about 75 million US dollar. He also state that the clean cooking and lighting Solar for all by 2017 financing need of RET’s installation would be even higher. He also shared that system are being installed outside NRREP and huge demand is existing outside NRREP as well. Most of the RETs are financially attractive. MFIS can be effective last mile delivery channels for promoting RETs. He mentioned about the goal of creating commercially viable in RET sector. He further stressed that if, parallel initiatives to provide additional subsidy like 50% for urban solar from MOFALD, proposed is about 90% subsidy for Dalits & poor in train. Working on specialized awareness to create demand and Innovative approaches like challenge fund reverse auctioning for last mile coverage. Open Floor Discussion: (Q & A)

1. What steps have taken for the coverage of Microfinance Company? Mr. Subedi replied that, Microfinance are not presence coverage in all over the country. He further added Micro finance bank, financial intermediate, NGO’s and rural cooperatives who are in financing business are high in coverage and with the establishment of micro finance banks in recent years, their coverage is being extended so, we can advantage from them. And also 100% areas can be coverage by the micro finance, in such case we can approach to vendor financing, energy service companies as well.

2. Micro finance interest rate is very high for poor people, what you have to say about it? Mr. subedi answered to query of micro finance interest rate. He said that for poor people, micro finance excess is more important than, interest rates for them. He also added if, we see their business, their volume of business and how they handle business, we found that cost of doing is relatively high.

3. What are the micro finance responsibility towards their clients? Micro finance institutions generally have very large outrange, they deal with abut 1000’s clients, if they do not provide good services to their initial few clients, then they will lose their business reaching to other (100-1000) probable clients. He further added that AEPC have rule of giving guarantee by company and if company is not giving, there is a provision of penalty. SO, we need to advantage of existing rules in AEPC and government as well.

3. 3 Session 3: Introduction to Central Renewable Energy Fund (CREF). The session was chaired by Mr. Vincent Wierda and the rapporteur for the session was Ms. Anuja Sthapit, Winrock International. It comprised two presentations intended towards giving introduction to CREF and CREF initiative and perspective of handling banks under CREF. 1. Introduction to CREF and CREF Initiative, Mr. Prithvi Gyawali, Head of CREF

Secretariat. Mr. Prithvi Gyawali gave introduction to CREF. Under this he explained about ADB’s Financial Intermediation Lending Policy, Financial Management Mechanism (FMM), Funds Flow Mechanism and Investment Committee and Secretariat of CREF. He also gave a brief introduction of its Investment Committee & Secretariat. Current Status of CREF is, its Investment Committee and Secretariat are in place and functional and 22 CREF Investment Committee meetings already been held. CREF’s Financial Management Mechanism, Legal Status, Operational Guidelines are approved by Government of Nepal, Ministry of Population and Environment. CREF Secretariat office is established at handling bank. One handling bank (GIBL) and seven partner banks (BOK, CEDB, CIVIL, NIBL, SBL, HBL & TDBL) selected through GoN’s Public Procurement Act and Rules. Handling bank has already processed about 75,000 subsidy application forms amounting to about NPR 2 billion. Investment management is being done by bank’s Treasury Department, and wholesale credit fund disbursed to seven partner banks. Partner banks are already utilizing CREF’s credit funds for investment in the RE sector. Government of Nepal’s Urban Solar Program is being initiated through the seven partner banks. CREF business plan and vendor financing models being developed with assistance from UNCDF. Various financial instruments for RET developers, banks, end-users and community is being designed and developed in conjunction with Rural Energy Rural Livelihood (RERL), UNDP/GEF. For capacity building activity – Partner Banks Outreach is under process and will be undertaken in 10 districts of Nepal over the next 2 years. CREF’s technical review is planned for June 2016. GoN’s new budget for FY 2015/16 has top priority for RE sector with over 5 billion to be channeled in this sector. The budget speech has specifically mentioned AEPC and CREF. With the government’s priority in the RE sector, donors and development partners are more committed. It is emphasizing on providing funds for credit lending through CREF’s partner banks. Subsidy Policy and Subsidy Delivery Mechanism being revised and approved to accommodate both subsidy and credit mix in funding RETs. Regarding Implementation of Financial Management Mechanism (FMM), he also explained about implementation process of CREF in general, in Handling Bank and Partner Banks.

2. Perspectives of Handling Bank under CREF, Ms. Shanta Siwakoti, Project Head- Handling Bank Unit, Global IME Bank Ms. Shanta Siwakoti presented about Perspectives of the Handling Bank under CREF. Global IME Bank Ltd is the Handling Bank. It is a national level ‘A’ Class Commercial Bank established in January, 2007 with the vision of becoming “The Bank for All”. She gave a brief highlight about its paid Up Capital and Reserves, Total Assets, Branch Coverage, ATM Coverage, Staff force and Customer Base. And showed us how bank had flourished its branch all over the country. She explained The CREF Financial Intermediation Mechanism and the timeline of the Competitive Bidding Process and the structure of the handling bank. The Handling Bank’s Mandate is to management investment, administer subsidy and look

after wholesale lending to partner banks. Whereas it does not incur Credit Risks, Houses the CREF Secretariat, Provides Investment Return as mentioned in the Financial Proposal, deputes specialized bank staff for executing the mandate as above, Makes periodic reports as per the ToR. Regarding credit and investment management Lending at 0 % interest to the “Urban Solar Programme” to the tune of Rs. 8 Million till date, Full-fledged function has not been initiated yet, Most Partner banks seem reluctant to invest on the RET sector as most of them are new to the sector and those with experience have several issues. Investment being managed through specialized unit in lower risk assets, Investment Yield of 2.54% on CREF Funds till date, the Investment Yield is high considering the current liquidity situation in the domestic market. However, in the end she discussed about the challenges of the handling bank and recommended to digitize the documents establish a credit guard funs and meetings between AEPC, CREF Secretariat and the Handling Bank to be regularized. Her recommendation to SE4all was to make interest tax free, install mini grids, Evacuate Energy through Nation Grid Connectivity

Open Floor Discussion: 2. About the policy of NRP.

Ans. NRP give certain mandates or percentage of loans on different priority sector. 12% in the agriculture and energy. Working in to increase the mandate percentage of investment. We are working on team to discuss with banks to know their requirements and benefits by having this in their portfolio in different sectors. Working on this before approaching for further discussion.

3. What are the NRP is to reach last mile customers of Nepal which will necessarily means you that have to work very closely with local financial institutions and partner banks? Ans. Partners banks outreach program will come to play role in this part. We cannot go directly to LFI’s and MFI’s, we have to go through certain partner banks that how the whole design has been done. If we increase the partner bank’s outreach and take from their comfort zone by providing them guarantee funds that is where they link up with LFI’s and MFI’s who can axis their credit funds. We are in the process to develop small function to discuss with partner banks to how we can manage together.

4. How much guarantee you are providing to banks and would capacity building concepts will change the ongoing practice? Ans. Capacity building and training awareness plays the vital role because there is a market and problem is not the fund, presently we are having supply driven market and in order to have the demand driven market we need to create awareness among the financial institutions and among other stakeholders also. As long as private sectors do not see business opportunity they won’t do to the market and invest because they will definitely look for the returns wherever they invest, so capacity building programs is very necessary in order to develop the marker. Problem is not the source of investment but is the recovery from the market.

5. View on the credit mechanism. Ans. CF lending mechanism only talks about the renewable energy sectors and different types of products that can be offered to the market. Only restriction of CF mechanism is that should be from the renewable energy sector.

6. How the partner banks are supposed to provide the credits for the renewable energy fir

the clients in the rural areas? (Credit & Security) Ans. Yes, definitely reaching to the rural areas by the partner banks is one of the challenge for them. They may not be physically present on those areas but can work with other local financial institutions to reach particular place. We also have the option of vendor financing which can be done through the branch outlets of partner banks as well.

7. How will they develop awareness creating and training programs? Ans. We have the separate unit of CF and capacity building and head of CF unit will put more light on this topic. We have capacity building specialist to create capacity building awareness trainings. We take the whole responsibility of building capacity building programs of our partner banks.

8. Challenge about the paper works? Ans. We have processed about 75,000 of subsidy papers till date. Some are about few pages like seven pages and some about the large technology are about the 100 pages. We have been receiving those papers physically from AEPC and there is also risk as it is also government property as well. We do keep soft copy as well.

3. 4 Session 4: Regional Experience in Renewable Energy Financing: The session was chaired by Mr. Bibek Chapagain and the rapporteur for the session was Ms. Anuja Sthapit, Winrock International. It comprised four presentations intended towards organizations in the region that have successfully implemented RE financing models to share their strategies and experiences, with a view to discuss with local financing players in Nepal how such models can be adapted to Nepal’s specific barriers and risks. 1. Pro Poor Public Private Partnership Initiatives, Mr. Anirudh Prasad Sah, UNESCAP

Mr. Anirudh Prasad Sah presented on Pro-Poor Public-Private-Partnership (5P) Approach. He explained AEPC Mandate Reduce dependency on traditional energy & conserve environment by increasing access to RETs, increase employment and productivity through RETs, increase living standard of rural population by integrating RETs with social and economic activities. This program is aligned with the Secretary General’s Sustainable Energy For All (SE4All) initiative. Specifically, by working towards: “providing universal access to modern energy services” through the use of PPPs. Project objective it to build the capacity of policy makers, civil society and the private sector for engaging in public-private partnerships to enhance the application of renewable energy and improve access to energy services. Additionally, to use the 5P approach to enhance rural productivity and create income generating opportunities. The program developed based on ESCAP’s flagship project in Cinta Mekar, Indonesia which focused on providing basic services to the poor through public-private partnership. The project successfully developed a 120 kW micro-hydro power utility. The utility has been successfully running for more than 10 years. He explained the 5P market segmentation. Based on the success of the Cinta Mekar experience ESCAP developed the Pro-Poor Public Private Partnership (5P) business model

it works to establish multi-level stakeholder partnerships, including PPPs, in which community mobilization and co-ownership of the energy utility has proven to be key to 5P project sustainability. He gave a brief highlight on Baidi solar microgrid, Tanahun. It has 121 Households in Dubung, Baidi VDC, Tanahun District with currently 100% connection. Total project investment: 133,745 USD (80% grant and 20% Invest. There is light will be on since 18 OCT, 2016. He explained how the project works with Energy utility 60% owned by the private sector and 40% owned by the community and explained that the Revenues are used by the community mechanism for community development activities and/or to further subsidize the tariff rates. The project’s technologies and sizing were determined based on resource assessment, environmental and socioeconomic impact assessment, technology and financial assessment, based on quality, cost per household, transmission factors, etc. At its core, the 5P approach is focused on developing a sustainable and replicable model. He gave the overview on project cycle. Regarding institutional capacity building partnership and counterpart, capacity building has been a major component to effective project implementation and scalability that include NGO, Private sector and technical advisors. The model’s financing has fixed components, specifically the tariff rate, resulting in an 80% grant component to meet required ROI and cash flows. Economies of scale and village clusters are necessary to ensure financial viability for scale-up and to reduce the grant ratio. Key lesson learned from the project is Rural electrification does not necessarily lead to economic development and must be linked with enterprise development activities and access to financing for pro-poor development to be achieved, strong linkages must be made between the ground and policy level for effective PPP and electrification policy development. Communication across ministries for in energy planning and policy development is necessary to prevent overlap and ineffective field implementing activities.

2. Capacity building and Investment facilitation support for RE financing, Mr. Charles Navarro, ADB Mr. Charles Navarro presented on Capacity building and Investment facilitation support for RE financing. He tries to find the investment companies in the Asia pacific countries try to help them bankable and appealing to investors. Focusing energy access there is need of 49 billion per year only 9 billons has been invested to bridge this gap private investing companies has to come up. He further discussed on his theories on how to minimize this investment gaps. According to study of IEA, the energy access of USD 49 Billion per year is distributed as 30% on On-Grid, 47% on Mini Grid and 23% on Isolated off- Grid. Large corporates invest on On- Grid Electrification, SMEs invest on Mini-grids whereas SMEs and NGOs invest on Isolated off-grid solutions. So his focus is on bringing SMEs that are willing to invest on Mini- grids and Isolated off-grid solutions. He explained about the three model for commercial investors i.e. Retail Model, energy service model and asset management model and how to build their capacity by adding portfolio as it rises from retail model to asset management model. Side by side he explained the case study of Ghampower about its customer segments, core process, value proposition, partner relationship, subcontractor process customer relationship, revenue streams and its cost centers. Also he explained different investors’ interest as you go from retail model to asset management model. He ended his presentation by saying that Development Funding is best used to help clean energy companies move up the Ladder and improve their bankability to attract commercial investment.

3. Financing Electrification Projects – An experience of GIZ’s Micro Hydro Debt Fund, Ms. Pooja Sharma, Senior Program Officer, GiZ Ms. Pooja Sharma presented on Financing Electrification Projects to share experience of GIZ’s Micro Hydro Debt Fund. Regarding this a brief introduction of EnDev was give. Energising Development (EnDev) is a partnership for energy access currently financed by seven donor countries. Till December 2015, EnDev worked in 26 countries in Africa, Asia and Latin America. Since 2005, EnDev has taken a leading role in facilitating access to sustainable energy and has reached 14.8 million people to date. Endev technology basically includes solar, micro hydro, biogas, stoves and grid extension. Its intervention in MHP development is to give financial assistance by giving initial investment cost. Also it gives technical assistance by providing capacity building support to banks and AEPC and field visit. She explained the rationale of debt fund. Approach of Micro hydro debt fund is it was established which worked with GIZ EnDev and AEPC and partner banks for implementation functions.

4. Accelerating Energy Supply through Financing, Mr. Bishal Thapa, Saral Urja Pvt. Ltd. Mr. Bishal Thapa presented on Accelerating Energy Supply through Financing. Where he describes the perspective of Accelerating Energy Supply through Financing, shared his experience on the sector and cleared on how to enable financing in Nepal. He shared his regional experience in energy lending as financing model ranges from asset financing from the left to end user financing on the right. Saral Urja has been working in partners with wholesale lending institution, microfinance institutions and energy companies. Under PACE- D, $3 Million credit leveraged through 3MFI in last 3 quarters and Investment outreach is $30 million over 3 years of MFI energy lending. Distributed renewable energy technologies have achieved the point of inflection and 3 energy lending enablers are the reach customers, providing excellent service reliability after sales and provide financing. He also highlighted that energy financing could unlock Nepal’s potential. Scale of opportunity for distributed RE systems in Nepal within the next 5 – 10 year. With financing, distributed RE systems could exceed total grid connected MW within the next 5 -10 years. Subsidies and energy financing cannot co-exist. Nepali consumer will end up paying less if subsidies and associated entry barriers are removed. In order to kill subsidy capital and credit need to be created. For this transformation of RETS from gate-keeper to agent for innovation, particularly on deployment need to be done. A stronger partnership is required between suppliers, integrators and connector and financing is required. Energy companies need to help a value chain emerge for this. Also, government and donors must offer better clarity of vision. To separate and isolate credit- risk, end-user financing must be distinct from standard consumer or business financing, energy financing must not crowd out balance sheet of the borrowers, separate third-party that can isolate and hold underlying business credit-risk of borrower. Also he emphasized that the distributed energy sector has a greater scope if it is given room to get on with it.

Open Floor Discussion: 1. What the official 5P represents?

Ans. This is not the new model. The most essential part of 5P is to bring the private sector and community sector together to make a separate company. The most essential part of this 5P approach is to bring private sector and community sector together and

empower the community sectors. The core of 5P approach is that community can learn from the private sectors and bale to manage and transfer the knowledge from the core to the community.

2. About the state of the micro hydro and credit fund itself. Ans. We are not in the state of upscaling the micro hydro credit fund in the present context. But we are thinking of aligning with the CF as there is some difference between the micro hydro fund and CF.

3. How you address subsidy? Ans. From around the world there is news that subsidy has not worked well. Subsidy have challenge of being targeted. There is no problem going to certain communication with the government about this matter. The problem is being over ranked to certain level.

3. 5 Session 5: Access to Finance: The session was chaired by Mr. Upendra Poudel and the rapporteur for the session was Ms. Anuja Sthapit, Winrock International. It comprised five presentations intended towards discussion on how CREF and other green financing programs address the barriers limiting private sector funding in the energy access sector. Additionally, this session highlighted the challenges and barriers that persist, despite these interventions and discuss what additional development support is required. 5. Insurance policy in RE financing, Mr. Sushil Bajracharya, Assistant General Manager,

Himalayan General Insurance Co. Mr. Sushil Bajracharya presented on Insurance policy in RE financing. He gave a brief background of HGI. Highlighted strength of HGI as a team of professionals dedicated to providing personalized service, a highly efficient claims service, Market leader in Hydropower Project Insurance, pioneer in Travel Medical Insurance, strong Reinsurance Support and advisory service to clients in structuring Insurance Program. Experience of HGI in RE is it operated 15HPP, 5 HPP under construction, 29 MHPs and Solar Home System and Wind Power. Journey of HGIin to Insurance of MHP. MOU was signed with ESAP/ AEPC on 5thDecember 2010.Opportunities to participate in; talk programs, workshops, site visit to MHP –Syaure Bhumi MHP. HGI has opportunities to exchange knowledge with ESAP, MHP Developers and Finance Company. 30 MHP has been insured by HGI in 2014-15. Challenges in Insuring MHP are geographically remote location, geological and meteorological variations, exposure to different kind of risks, low value and unattractive premium, lack of proper design and construction supervision, constructed by inexperienced contractors, poor quality of power house building and other works / structures and lack of knowledge about insurance in developers. Insurance Policies in re financing are for fire and allied perils insurance, fire and lightning, earthquake, flood & inundation, storm & hurricane, landslide / rock slide, and riot strike, malicious act, terrorism and sabotage. So far insured properties are civil works, hydro mechanical works and electro mechanical works. Other Insurance Policies in RE financing are third party legal liability insurance and group personal accident insurance. Also he mentioned about the claim process of HGI and issues that has been raised during the time of claims. At last he

emphasized that the insurance companies must be involved in the operations of RE with visits and observations and interaction is must for project data and information.

1. Energy Financing Experience of Civil Bank , Mr. Yuvraj Guragain, CREF Focal Person, Civil Bank Mr. Yuvraj Guragain presented on Energy Financing Experience of Civil Bank. He started with the brief introduction with corporate values, vision, mission, goal and objectives of the bank. He mentioned about the branches that bank had inside and outside Kathmandu valley. About their experience in RE sector they have launched a new product Civil Solar Power Loan (SouryaShakti Karja) in 2013 and have been implementing successfully, partnered with CREF and AEPC for implementation of Urban Solar Program. He explained how banks met market in RE sector operates. Challenges faces by the bank in micro hydro sector are difficult terrain, high cost of production in comparison to large hydro projects, not competent management, multiple ownership, higher D/E ratio, client’s dependency attitude toward the government, limited market and social and political interference –difficulties on tariff collection. Challenges faced in solar PV sector is its high cost, small loan and high maintenance and operational costs. Finally, he mentioned that subsidy in mini hydro, solar PV and other similar micro RE sectors need to be continued. There should be focus on market development to ensure regular cash flow of the project through value chain, capacity building of the local producer’s cooperatives, mechanism of credit guarantee to be designed and implemented and implementation of net metering system need to be done.

2. Energy Financing Experience of Ace Bank, Mr. Suyog Shrestha, CEO, Ace Development Bank Mr. Suyog Shrestha presented on Energy Financing Experience of Ace Bank. He started with the introduction, their mission statement and product and services. He shared their experience in RE financing as they have financed for solar Tuki, Solar home systems working with Alternative Energy Promotion Centre /Energy Sector Assistance Program’s (AEPC/ESAP) and credit financing in SHS. Ace bank entered into an agreement with The United Nations Capital Development Fund and Winrock International to work together in a three-year project for clean energy (SHS, ICS, Biogas plant) lending. Ace Development Bank has also ventured into Bio gas financing under CleanStart project. Ace has been involved in various hydropower financing ranging from 4MW Sabhakhola Hydropower to 42 MW Mistri Khola Hydropower. He also discussed the strategies of RET financing as they have consortium financing. They work through the local LFIs rather than with the rural client/households - tri-party agreement model for win-win benefits of bank, LFI and RE company. The bank has assign dedicated staff (loan officers) to focus RE financing. It works closely with Winrock, AEPC, LFI, energy suppliers and other stakeholders. They conduct regular monitoring and field visits. Exiting M and E system consists of disburse loan based on EMI & upload detail on bank software, RET installation and transfer loan to company and monthly recovery, field visit, collect loan data etc. He also presented the major challenges and issues of the bank like equity management, natural disaster contingency plan, improper policy etc. Looking in to future the bank has expansion plans in RE financing. They will look for more areas of RE and tie up with potential partners to expand the sectors.

3. Microfinance in the Clean Energy Sector, Mr. Damodar Regmi, Senior Manager/ ISD Chief, Jeevan Bikash Samaj, Morang Mr. Damodar Regmi presented on Microfinance in the Clean Energy Sector. He gave a brief introduction of Jeevan Bikas Samaj as FINGO. Its major focus is micro finance and credit plus program. He presented the organizational structure of JBS and cleared the working area of JBS around country. He also presented current status of JB in numbers. Major services of JBS is saving, Loan, Insurance and remittance. It has credit plus services in health services, education, agriculture and completing housing. It is working in partnership with UNCDF, cleanstart for solar, biaogas and ICS. The working modality of JBS in energy financing includes JBS MF branches working with JBS urja company’s members and having centre meeting for repayment, loan demand, awareness raising and execute meetings. Experiences in energy financing includes 100% Loan Recovery on Energy Loan. It has high demand of 20-watt solar system among pro-poor. Positive impact seen on child education/ security/income generation activities. Employment raised by installation and after sales services. Use of Kerosene oil is fall down by the use of Solar and Biogas which is cost effective too. After-sales services is quite effective. Less acceptance of existing ICS model by community. He finally ended the presentation highlighting future action of JBS in energy financing that it will work on solar water for irrigation and safe drinking water. It will Build Clean Model Village and Install minimum one energy product on each JBS member house.

4. Subsidized Mini Hydro: Bankability Perspective and Policy Challenges, Mr. Anand Pradhan, Hydro Power Specialist Mr. Anand Pradhan presented on Subsidized Mini Hydro: Bankability Perspective and Policy Challenges. In his presentation he introduced hydropower development in Nepal. He also highlighted the financial constraints in speedy development of hydro power as equity and debt financing and adequate financial resources. He displayed some pictures of the current project construction sites. He briefed about the present construction typical problems in hydropower operations. The off grid system is costly affair and had operational loss. This kind of Project analysis will then have to compute what subsidy is required to make the scheme economically feasible. Linking with this he presented the case study of middle Phawa for off grid. The Bank shall endeavour to provide financing to ‘Projects’ against security in project cash flow and project assets with limited recourse to any Project Company. This means that Bank thereby takes on a commercial/credit risk on the Project. Security arrangement for this is Mortgage on land and all other assets owned or leased by the Borrowers, present and future, created with or without financing of the borrower banks /FIs owned by the burrower, irrevocable charge over the PPA and licenses to the satisfaction of the bank with a duration of at least the term loan, Pledge of Accounts and DSRA and pledge of shares of major promoters. He further demonstrated the case study of Chhote Khola mini hydro. He concluded the presentation with the remark that there should be clarity on scheme development objective (On/Off Grid), Continue and implement smart subsidy policy in off grid scheme and willingness to pay for energy.

Open Floor Discussion:

1. Please tell us about housing loan products and your general experience about its acceptance and scaling up.

Ans. We have good experience in working with the housing loan. There is no default in the housing loan like we get in other loan we deal with. Other loan may be default but housing lean is excellent. It is also proving income generation platform for many people as well.

2. How you analyze the issue of energy financing considering artificial behavior. What would be your best suggestion for other financial institutions regarding this. Ans. When we get the files for accessing it we look at the managerial efficiency. Whether they are committed and able to run the project properly or not. We see from which source they come from, like how they come or invest. Usually major component come from AEPC as subsidy and another major component from other banks. We see apart from their source, if they seek other sources like VDC which is one of the subjective judgement. We also see whether they are projected to very remote area or not they are susceptible to political changes or not. These are some subjective judgement we have to make.

3. While doing the insurance of mini hydro for 4- 5 years from insurance prospective is it necessary to go to the location and see all the vales and do the insurance? Ans. Specifically for mini hydro power projects going to the sites is not possible as the cost for doing so is high. For that we depend on the client’s provision fund. Basically in the insurance normally the deceleration of values is the responsibility of the clients because that is value for the insurance.

3. 6 Closing Session 6: Moving Forward The closing session intended to review the overall experiences of the workshop assess the key messages and possible way forward after the workshop on best practices and business opportunities for energy access financing. The session was chaired by Mr. Suman Basnet, Coordinator, SE4ALL, Moderated panel discussion to discuss take away from the workshop and way forward. 1. Chair of Session 1 - Mr. Jiwan Acharya, ADB

Mr. Jiwan Acharya mentioned that through this workshop all got to see good business models and coming forward. There has to be clarity in the policy and recognition in mini gird. Banks role that are willing to invest in such projects need to be made clear.

2. Chair of Session 2 - Mr. Ram Prasad Dhital, Executive Director, AEPC His conclusion from the session was we are trying to reduce subsidy and increase access to RE fund. But key concern is how to make such fund available in rural sector. Also another major point to pay attention is the linkage between private sector and financial sector. At present the policy made so far at community based. Therefore, private sector based policies are to be focused too. Encourage the investors that are willing to invest in RE sector. There should be trust among the government sector and private sector.

3. Chair of Session3 – Mr. Vincent Wierda, First Secretary, Embassy of Denmark Private sector need to attain sustainability and skills in terms of energy access in Nepal. There sould be policy reforms and clarity regarding energy lending. Then only private sector

will involve in RE sector. Also lastly he mentioned that CREF must work as the catalyst or enabler in involving partner bank with the private sector.

4. Chair of Session 4 – Mr. Bibek Chapagain, Energy Advisor, Royal Norwegian Embassy He started with the phrase that development assistance should not only be based on subsidy but an enabler for pushing business model that can be sustainable. He mentioned that the retail model mentioned by Mr. Coy can be relevant in asset management. Also there need to be involvement of Government in development of energy sector.

5. Chair of Session 5 – Mr. Upendra Poudel, CEO of NMB Bank and President Nepal Bankers’ Association He mentioned that the according to his banking experience private sector is not being able to become very transparent. Bank need to be provided with the information that are reliable. There is also policy irregularity from the government side which puts bank in dilemma. Finally, he found presentation from Jiwan bikas bank’s (micro finance) very impressive as it focuses in rural sector in a very impressive way. Also people and business need to be made aware of insurance companies and its policies. Closing remarks – Prof. Dr. Govind Raj Pokharel, Tribhuvan University and former Vice-chair NPC He thanked ADB and AEPC for providing such good platform to present all the business and other firms ideas. He also said that the political imbalances have created great disturbance in entrepreneurship spirit of the nation especially in the rural area. However, the trade deficit is supported by the remittance. So this is the right time to use RE to support entrepreneurship in rural areas. So different types of business model are required and also some subsidy to support it. Just like other companies like mobile companies, television companies and other commercial company’s energy sector need to practice innovation supported by subsidy to support entrepreneurship in rural areas. By promoting entrepreneurship government burden can also be reduced in development of the country. He also requested all the sector to focus more on business plan development, entrepreneurship development and utilize the government fund for development. Also Research and development is required.

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3. ANNEXURE ANNEX-1: Workshop Agenda

Sustainable Energy for All | NEPAL International Workshop on Best Practices and Business

Opportunities for Energy Access Financing

OBJECTIVES The workshop will review the success factors of Renewable Energy (RE) financing within and outside Asia and the Pacific, and share knowledge on the development of viable and innovative RE financing models that can be deployed. The key objectives are to:

a. Discuss and highlight successful policies, incentives, and mechanisms in RE financing in Nepal and Asia and the Pacific Region; and

b. Identify and rationalize the services offered by development programs and agencies that provide capacity building and investment facilitation support for energy access enterprises.

c. Discuss on financing modalities carried out by Banks, Financial Institutions and Equity Investors in RE Projects

DAY 1 -16thMarch 2016, Kathmandu

09:00 - 09:30 Registration 09:30-10:45 Opening Session

MC: Shekhar Aryal, NRREP/AEPC Chair: Mr. Vijay Kumar Mallick, Secretary, Ministry of Population and Environment 1. Welcome Address – Mr. Ram Prasad Dhital, Executive Director, Alternative Energy

Promotion Centre (AEPC) 2. Bridging the Investment Gap – Mr. Jiwan Acharya, Senior Energy Specialist, Energy

Division, South Asia Department, Asian Development Bank, Manila, Philippines 3. Opening Remarks – Mr. Vincent Wierda, Programme Manager, Clean Start

Programme, UNCDF, Thailand 4. Opening Remarks – Mr. Renaud Meyer, Country Director, UNDP 5. Opening Remarks – Mr. Kenichi Yokoyama, Country Director, Nepal Resident Mission,

Kathmandu, Nepal 6. Remarks by Special Guest – His Excellency Glenn White, Ambassador of Australia to

Nepal 7. Remarks by Special Guest – Honorable Yub Raj Khatiwada, Vice-Chairman, National

Planning Commission, Kathmandu, Nepal 8. Remarks by Chief Guest – Honourable Mr. Vishwendra Paswan, Minister, Ministry of

Population and Environment, Kathmandu 9. Remarks by Chair Person and Opening of the Sessions Rapporteurs: Mr. Manoj Manandhar, Winrock International

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10:45 – 11:15 Tea/Coffee Break 11:15 –12:00 Session 1: Case Study of Successful Deal Closures. This session will identify the

existing players in the micro/mini hydro ecosystem, and how they can come together to systematically reduce risk and attract private sector investment. Chair: Mr. Jiwan Acharya, Senior Energy Specialist, Energy Division, South Asia Department, Asian Development Bank 1. Solar Micro-grid in Nepal – Mr. Kishor Rimal, General Manager, Gham Power Pvt.

Ltd. 2. Innovative Business Models in Microhydro– Mr. Mahabir Pun, Annapurna

Dhaulagiri Community Eco-tourism Development and Promotion Organization 3. Investor Perspective in Financing Renewable Energy Projects in Nepal– Mr.

Dinesh Dulal, Head Renewable Energy and Micro Finance, NMB Bank

Q&A Rapporteurs: Mr. Manoj Manandhar, Winrock International

12:00 –13:00 Session 2: Policy Framework and Programs. This session will provide an overview of

the policy framework in RE financing in Nepal and Asia and the Pacific Region, its targets in achieving universal energy access, instruments that have been used in achieving the target. Such instruments include government-initiated programs such as the Central Renewable Energy Fund (CREF) as well as policies and regulatory mechanisms geared towards promoting private investments in RE projects. Government, Development Partners, multilateral institutions, will likewise present their own initiatives, providing analysis on the learning in financing RE projects. Chair: Mr. Ram Prasad Dhital, Executive Director, AEPC 1. Perspectives of a Development Partner on Energy Access – Mr. Pushkar

Manandhar, Project Officer (Energy), Nepal Resident Mission, Asian Development Bank

2. Regulations on RE Financing– Mr. Dirgha Raj Rawal, Deputy Director, Nepal Rastra Bank.

3. Repatriation of Capital in Nepal - Mr. Subash Acharya, Deputy Director, Nepal Rastra Bank.

4. Initiatives of Winrock International for Energy Financing Policy Intervention, Ms. Resha Piya, Winrock International

5. Development Partner’s perspective on RE financing in Nepal – Mr. Prem Sagar Subedi, Clean Start Project Coordinator, United Nation’s Capital Development Fund.

Q&A Rapporteurs: Mr. Manoj Manandhar, Winrock International

13 :00 - 14:00 Lunch

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14:00 -15:00 Session 3: Introduction to Central Renewable Energy Fund (CREF).

Chair: Ms. Ingrid Dahl Madsen, First Secretary, Embassy of Denmark Co-chair: Mr. Vincent Wierda, Programme Manager, Clean Start Programme, UNCDF 3. Introduction to CREF and CREF Initiative –Mr. Prithvi Gyawali, Head of CREF

Secretariat. 4. Perspectives of Handling Bank under CREF – Ms. Shanta Siwakoti, Project Head-

Handling Bank Unit, Global IME Bank Q&A Rapporteurs: Ms. Anuja Sthapit, Winrock International

15:00 -16:00 Session 4: Regional Experience in Renewable Energy Financing: Organizations in the

region that have successfully implemented RE financing models will share their strategies and experiences, with a view to discuss with local financing players in Nepal how such models can be adapted to Nepal’s specific barriers and risks. Chair: Bibek Chapagain, Energy Advisor, Royal Norwegian Embassy 1. Challenges for promotion of Solar Energy in Nepal- A private sector perspectives

– Mr. Nabin Bhujel, Director, Suryodaya Urja Pvt. Ltd. 2. Pro Poor Public Private Partnership Initiatives –Mr. Anirudh Prasad Sah,

UNESCAP 3. Capacity building and Investment facilitation support for RE financing – Mr.

Charles Navarro, ADB 4. Financing Electrification Projects – An experience of GIZ’s Micro Hydro Debt

Fund- Ms. Pooja Sharma, Senior Program Officer, GiZ 5. Accelerating Energy Supply through Financing – Mr. Bishal Thapa, Saral Urja Pvt.

Ltd.

Q&A Rapporteurs: Ms. Anuja Sthapit, Winrock International

16:00 - 16:30 Tea/Coffee Break 16:30 -17:30 Session 5: Access to Finance: This session will discuss how CREF and other green

financing programs address the barriers limiting private sector funding in the energy access sector. Additionally, this session will highlight the challenges and barriers that persist, despite these interventions and discuss what additional development support is required. Chair: Mr. Upendra Poudel, CEO of NMB Bank and President Nepal Bankers’ Association. 1. Insurance policy in RE financing- Mr. Sushil Bajracharya, Assistant General

Manager, Himalayan General Insurance Co. 2. Energy Financing Experience of Civil Bank – Mr. Yuvraj Guragain, CREF Focal

Person, Civil Bank

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3. Energy Financing Experience of Ace Bank – Mr. Suyog Shrestha, CEO, Ace Development Bank

4. Microfinance in the Clean Energy Sector Mr. Damodar Regmi, Senior Manager/ ISD Chief, Jeevan Bikash Samaj, Morang

5. Subsidized Mini Hydro: Bankability Perspective and Policy Challenges – Mr. Anand Pradhan, Hydro Power Specialist

Panel discussion and Q&A Rapporteurs: Ms. Anuja Sthapit, Winrock International

17:30 - 18:00 Closing Session 6: Moving Forward – Moderated panel discussion to discuss take away

from the workshop and way forward. Chair: Mr. Suman Basnet, Coordinator, SE4ALL Panel members 6. Chair of Session 1 - Mr. Jiwan Acharya, ADB 7. Chair of Session 2 - Mr. Ram Prasad Dhital, Executive Director, AEPC 8. Chair of Session3 - Ms. Ingrid Dahl Madsen, First Secretary, Embassy of Denmark 9. Chair of Session 4 – Mr. Bibek Chapagain, Energy Advisor, Royal Norwegian Embassy 10. Chair of Session 5 – Mr. Upendra Poudel, CEO of NMB Bank and President Nepal

Bankers’ Association Closing remarks – Prof. Dr. Govind Raj Pokharel, Tribhuvan University and former Vice-chair NPC

Rapporteur: Ms. Anuja Sthapit, Winrock International

18:00 - 20:00 Reception and Networking Dinner

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ANNEX-2: Flyer of the workshop

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Increased awareness on latest policy developments on RE ... · After the inauguration, Jiwan...

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