How to develop proposals for bankable cleaner production projects

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How to develop proposals for bankable cleaner
production projects
Presentation 10
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What will we learn here?
Cleaner Production Projects and Finance
Requirements Mechanisms for financing cleaner
production Services offered by CPCs on
financing cleaner production Assistance to
Borrowers Writing a loan proposal for externally
bankable projects Assistance to Financial
Institutions
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Cleaner production and finance requirements
Cleaner production options that are best financed
internally by organizations - housekeeping,
direct reuse/recovery/recycle, process
rationalization and optimization, material
substitution, upkeep of equipment maintenance
etc. Cleaner Production options requiring
moderate investment category where a mix of
internal and external finance is sought -
indirect reuse/recovery/recycle (requiring pre-
treatment), process/equipment modification
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Cleaner production and finance requirements
Cleaner Production options requiring moderate to
high investments principally from external
finance - equipment/process change,
installation of automated systems, product
redesign etc
To maximize benefits and comply with financial
institutional requirements use the right mix of
all three option categories
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Mechanisms for financing cleaner production

• Seeking loans - Normal commercial lending
  Suitable for low risk and moderate benefit
  interventions. IRR should be higher than the
  prime lending rate
• Seeking loans - Accessing soft or concessional
  loans Appropriate for medium risk, moderate to
  high benefit interventions. Relevant for projects
  with objectives in line with that of the special
  fund

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Mechanisms for financing cleaner production

• Seeking equity in the form of venture capital
  Appropriate for medium to high risk but high
  benefit interventions. High investment oriented
  demonstration projects fall in this category.
• Seeking equity in the form of a joint venture
  Typically entails participation of a technology
  provider in the form of equity. Perhaps relevant
  where high capital and moderate risks are
  involved and there are restrictions on the
  transfer of technology.

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Services offered by CPCs related to financing
cleaner production
Borrower enterprise
CPC
Technology provider or supplier
Financial institutions
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Assistance to the borrower enterprises

• For the enterprises, the Centre can provide
  following assistance
• - Identify, appraise and prepare cleaner
  production investment projects for possible
  funding from financial institution and/or
  technology providers
• - Assist in the implementation and evaluation of
  cleaner production projects
• For the technology provider, the Centre can
  assist to
• - Identify, appraise and prepare cleaner
  production investment projects for possible
  funding

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Writing a loan proposal for externally bankable
projects
Past credit history and references Purpose of the
loan Expected cash flows from the
project Expected profitability of the project
(e.g. NPV, IRR) Assessment of the risks of the
project, risk management measures How the project
relates to the companys business. Past financial
statements (balance sheet, profit and loss
statements) Forecasted cash flows Information on
the companys management
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Assistance to the financial institutions
For the financing institutions, the Centre can
help in the following ways Reform the project
appraisal process to incorporate the cleaner
production approach in loan application forms and
risks related to environmental liabilities
Accompany the representatives of financing
institution on field visits for technical advice
(e.g. de-bottlenecking) during project
implementation Conduct monitoring after the
implementation of projects to assess extent of
benefits Advise on setting up and operating
special purpose environmental funds that are
designed to promote cleaner production
investments
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Dos and Donts on Interfacing with financial
institutions
Before approaching the financing institution,
ensure that the feasibility analysis of the
cleaner production project indicates that the
project is bankable Ensure that the loan
covenants and other conditions of the financial
institution are clearly understood and apply
The Centre should not enter into negotiations
or be party to loan terms and conditions. This is
to be kept between the stakeholders and the
financial institution.