Financing firms sign up for schemes

Financing firms sign up for schemes

New Delhi: Energy efficiency projects may find it easier to raise funds with three lenders signing up for a programme meant to boost such ventures.

Small Industries Development Bank of India (Sidbi), HSBC India and Power Finance Corp. Ltd have registered with the Bureau of Energy Efficiency (BEE) for its energy efficiency financing platform.

The platform is meant to create a mechanism that allows mainstream financing of energy efficiency projects by providing instruments such as bankable project reports and other risk-mitigation measures to enhance comfort for lenders towards these projects.

Such projects and energy service companies often find it hard to source funding, according to BEE secretary Saurabh Kumar.

“Essentially, banks have a high risk perception about such unsecure lending. More than a mindset, it requires a skill-set to understand such project reports, which is missing," said Kumar. “But just to give you a signal on how this is gaining importance, last year the Japan International Cooperation Agency loaned Rs1,500 crore to Sidbi exclusively for energy efficiency in the small and medium enterprise sector."

BEE has estimated the near- and medium-term energy efficiency market potential to be around Rs74,000 crore, with investments in such programmes recouped in less than five years while increasing productivity.

Energy service firms provide solutions for improved energy efficiency in buildings, utilities and offices, with profits tied to the savings achieved.

Rakesh Rewari, deputy managing director, Sidbi, said that while the small and medium enterprise sector holds huge potential for savings through energy efficiency, it needs role models and financial concessions to take off.

“We are already providing concessions on loans for units which rate high on our green rating," Rewari said. “We are also in talks with energy service companies on how to reduce risk and ensure cash flow."

An amendment to the Energy Conservation Act has also been introduced in this session of Parliament to permit trading in energy savings certificates in nine key industry sectors. Experts believe that the implementation of the energy efficiency mission under the national action plan on climate change will provide a further boost to the sector.

The perform, achieve and trade scheme will make a huge difference in the business of energy service firms as well as small and medium enterprises, according to V. Raghuraman, principal adviser at industry lobby group Confederation of Indian Industry, and chairman of the World Energy Efficiency Association.