ESCO Operating Model

1
Overcoming International Financing Barriers By
Thomas K. Dreessen Efficient Energy for
Sustainable Development US Department of Energy
Forum Washington, DC November 10, 2003
Phone [phone] Fax [phone] Email
tkd_at_epscc.com
2
One of the most significant barriers to
implementing clean and modern energy efficient
technologies and projects (EEPs) in
International Markets is a lack of commercially
viable and sustainable project financing.

• Traditional local bank lending not applicable
• - Corporate Lending
• - Rates too high
• - Repayment Term too Short
• International MDB lending not applicable
• - Size of EEPs is too small
• - Due diligence too cumbersome
• - Require hard currency repayment

3
No immediate solution because international
energy efficiency markets are not developed
enough to motivate local banks to invest in a new
EEP lending infrastructure.

• Problem is NOT a lack of available funds!
• Problem is an inability of EEPs to access
  funding - a Disconnect with established
  methods
• - Traditional lending is Corporate Asset
  Based
• - EEP financing is Project Cash-Flow Based

4
Proposed Solution 1 Develop an International
Energy Efficiency Project Financing Protocol
(IEEFP) that becomes the blue print for local
and regional financial institutions to finance
EEPs in international markets.

5
IEEFP - Standardization Tailored to each local
Market

• Credit Criteria Analysis
• Loan and Security Agreements
• Training Manuals for Loan Officers
• EEP Risk Assessment and Investment Criteria
• Training Workshops with EEP Case Studies
• Must follow the International Performance
• Measurement and Verification Protocol IPMVP

6
Proposed Solution 2 Establish an EEP Financing
Fund national fund in each country to drive the
energy efficiency market through incentives
provided for implementing and financing EEPs.

7
EEP Financing Fund

• Supplements but does not Finance EEPs
• Funding provided from Ratepayer Fees
• U.S. Public Benefit Charge
• Brazil through 1 ANEEL Fund
• Thailand through the ECF ( 250 Million)

8
EEP Fund Market Drivers

• Funding Applied to
• Buy-Down Interest Rate to Below Market Rates
  Customer Incentive
• Increase Return to Local Banks that utilize
  IEEFP Bank Incentive
• Guarantee Portion of Loan Losses to Local Banks
  Bank Incentive
• Fund Extended Repayment Terms to Local Banks
  Bank Incentive

9
EEP Financing Fund Profile

• No Government access or intervention
• Repayment in Local Currency
• Managed by individuals who have previous private
  sector project financing experience
• Provides Fast Loan Approval - IEEFP
• Requires use of IPMVP

10
Benefits of IEEFP EEP Fund

• Creates a Commercial Lending Sector for
  financing EEPs that will be sustained!
• Trains Local/Regional Banking Staff to finance
  EEPs - Capacity Building
• Eliminates Currency Devaluation Risk barrier
• Permits Aggregated Financing of EEPs
• Delivers long term Energy GHG reductions